Sinclair Warns Of Competition From Web, Impact Of New Weblets

Sinclair Broadcast Group offered further evidence Wednesday that the local station business is mired in what may be a long-term slowdown due to competition from the Internet and other sources. And it suggested that affiliates of the new MyNetworkTV and CW could be losing prime-time dollars as those networks try to build an audience. Revenues (minus commissions paid to agencies) increased only 2.2% for the third quarter versus a year ago, even as the company projects political spending to boom versus 2002--the last time there was a Congressional off-year election.

In addition to a slowdown in spending in the auto category, the company cited issues with this fall's two new networks, MyNetworkTV and The CW, as a drag on sales.

Automotive--accounting for a big chunk of revenues--saw a 1.6% drop in same-station sales, although the company said that could be due to Detroit marketers losing spots in its Fox/ABC duopoly in Columbus, Ohio, where hot political races are driving costs up. Sinclair's 17 stations now affiliated with MNTV posted a 6.2% decline over last year in September, the month when the network launched on Sept. 5. It offers back-to-back telenovelas in prime time and Sinclair MNTV stations include leading markets Tampa, Pittsburgh, Las Vegas and Milwaukee.

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MNTV gives stations a much larger amount of prime-time avails to sell themselves versus other networks, indicating that Sinclair is struggling to garner ad revenues at those affiliates. "We expect the MyNetworkTV stations to continue to trail our expectations, as ad buyers become comfortable with the new network's program genre," said Sinclair Executive Vice President and CFO David Amy.

The nine stations now affiliated with the CW showed a year-over-year decline of 3.6% in the September launch month. All are in top-50 markets led by Minneapolis and Baltimore.

Sinclair is particularly exposed by both networks' slow launch: It has five top-50 stations where it owns both affiliates. Amy said the company is forecasting $29.4 million in full-year political revenues--an 18% jump over 2002. The company has stations in politically competitive states such as Florida (Tampa and Pensacola), Missouri (St. Louis and Cape Girardeau), Pennsylvania (Pittsburgh), Tennessee (Nashville), and two others in Ohio (Cincinnati and Dayton).

Showing that local stations may be going through a fallow period as they compete with the Internet audience boom, Sinclair said local ad dollars--stripping out political revenues--were down 2% compared to a year ago. Local revenues without the political category are crucial, representing 64% of sales.

National ad dollars dropped 1.9% versus a year ago. The company said spending was up in the telecom category, but slower in entertainment and soft drinks.

Sinclair is also in the midst of a standoff with cable operator Mediacom over retransmission consent payments. Sinclair is asking for what's known as "cash for carriage," while the MSO is balking--spurring Sinclair to signal that it intends to pull stations off the Mediacom systems on Dec. 1.

Charter Communications, another MSO, said Tuesday that it "does not pay for content" and is monitoring the retrans issue as stations try to extract dollars from MSOs for allowing them to offer their signals. Sinclair reaches approximately 22% of U.S. homes via 58 stations. Its largest affiliation is with Fox, where it has 19 stations. Revenues for Fox stations rose 8.4% in the quarter.

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