Sunshine Synergies: Wash Po Co. Buys NBC's Miami TV Station

WTVJ building in Miami, FLThe Washington Post Co.--even with its newspaper business in flux--gave a decided endorsement to the future of "traditional media" last week with a deal to acquire the local NBC station in Miami. The deal, however, does have two potential upsides: Its station group will now have a duopoly in the country's 16th-largest market, plus four stations in Florida--providing some opportunities for bundled ad sales and other synergies.

The Post-Newsweek group's purchase agreement is with NBC Universal, which was seeking to sell two of its 10 owned-and-operated stations in order to concentrate on top-10 markets. But while the prospective sale of its Hartford station wasn't much of a surprise, the sale of South Florida's WTVJ was more curious, considering the potential growth in Miami--even with the real estate market's uncertain future there.

NBCU also had its own duopoly there--albeit a multilanguage one, with a Telemundo station. While ad sales may have been hard to bundle, there were some back-office and news-gathering cost synergies. The WTVJ deal--first reported by the Miami Herald--is expected to close before the end of 2008, the parties said. Terms were not disclosed, but station values--riding high a year ago--have declined sharply due to the troubled debt markets.

Four mostly pure-play local station groups have stocks trading at a notable discount to their 52-week highs: Hearst-Argyle, Sinclair, Belo and Gray. All but Gray have stations in DMAs larger than Miami. Sinclair, Belo and Gray's shares are priced at about half of the 52-week highs. H-A is down a lesser 38%, perhaps because investors are hopeful that Hearst will make another bid to take it private, as it did unsuccessfully last summer.

Despite the would-be decreased price NBCU may have gotten for WTVJ, The company seemed determined to sell, even as other station groups have pulled themselves off the market. Simply put, its executives have considerable questions about the businesses' future.

Group head John Wallace ruminated on the topic at an industry event in the spring, where his apparent uncertainty was encapsulated in one comment: For many young people, the first major home electronics purchase they make is a laptop, not a TV.

NBCU has tried to build out Web sites affiliated with its stations and add a palate of other advertising offerings in its markets, looking to bundle avails with TV sales. But so far, while station groups report that growth rates for their Web sites is impressive, actual revenue pales beside the traditional business. And that is challenged by a lackluster national spot market and the struggling domestic auto business, although foreign automakers are faring better.

In addition to its coming Miami duopoly, Post-Newsweek owns Florida stations in the growing Orlando market (the CBS affiliate in DMA 18) and Jacksonville (an independent in DMA 49). It also has the NBC stations in Houston and Detroit and the ABC affiliate in San Antonio.

If the Miami station purchase closes by mid-fall, then Post-Newsweek could reap benefits from political advertising, since Florida is a possible swing state on the road to the White House.

Purchasing a local TV station seems curious for the modest-sized Post-Newsweek and Post Co. at-large. The Washington Post recently cut its work force at its flagship newspaper through buyouts, and is trying to turn its Web site into a big-time profit generator. Also, Newsweek appears to be retrenching and altering strategy. The Post Co. does have the strong Kaplan education service provider, and the ninth-largest cable operator, Cable One, with some 700,000-plus subscribers.

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