• by David Goetzl  @dgoetzl, August 12, 2010

Gray Television, which operates 36 stations in mid- and small-sized markets, rode a recovery in the local-TV ad market to a 16% revenue jump in the April-May quarter.

The company did say that Verizon's acquisition of Alltel hurt sales. Verizon yanked just about all advertising for its former competitor, which had spent notably in Gray markets. The communications category dropped 19% in the quarter.

But COO Bob Prather said he does expect Verizon to restart advertising. Auto advertising was up 48%, a major boost.

Prather also said on an earnings call that Gray is investing in upgrading many of its local newscasts to an HD feed. Advertisers are hungry to run ads in the more pristine format, and Prather said he expects "continued demand" there.

As streaming of network shows continues on the Web, Prather's aim is to make Gray stations more "local centric." About 19% of its inventory comes from prime-time sales across its portfolio, which includes 17 CBS stations and 10 NBC affiliates. More successful local programming can insulate a station group from the vicissitudes of network ratings.

Gray focuses on markets that are state capitals, such as Lansing, Mich., and have large universities, such as Tallahassee, Fla., where there is a demand for local political and sports news.

In the second quarter, Gray's overall revenues were $76 million. The company did post a loss of $6 million.

Gray continued to receive $600,000 per quarter for a consulting agreement with multiple stations owned by Young Broadcasting, which is emerging from bankruptcy.

Prather also offered an endorsement of the proposed Comcast-NBU Universal joint venture, saying that Comcast appears to be more committed to developing successful programming for the NBC network than General Electric has been.