• by David Goetzl , March 20, 2007

Like most station groups, Gray Television saw a boom in political ad dollars last year--and next year's presidential race is already filling its coffers. Republican candidate Mitt Romney's campaign has started spending on Gray stations in Florida, Georgia and Michigan, the company said. It expects another flood in the fourth quarter, as strong candidates gear up for early primaries in 2008.

In 2006, small- to mid-market operator Gray--with 36 stations in 30 markets, including the NBC station in Omaha and ABC affiliate in Reno--saw political spending hit $42.8 million, its best performance in the category ever in a non-presidential year. The company said the spending could have been higher, had the governor's race in Texas (where it has the CBS affiliate in Waco) and Senate race in Florida (where it has the CBS station in Tallahassee) been more competitive.

Overall, net revenue jumped 13% to $334.7 million for 2006 at Gray.

Going forward, the company says it expects to follow the trend of receiving significant retransmission consent dollars from cable operators--likely starting in 2009, since the bulk of its current deals are expiring next year. Unlike some station operators, which look for ad avails or other tradeoffs from MSOs in exchange for carriage, Gray says it wants "cash."

"We plan to have a strategy to get paid in all our markets," said Bob Prather, President-COO on a conference call with investors Thursday to announce performance results.

There has been some speculation that once station groups bring in retrans revenues, networks would look to recoup some of it via reverse compensation. But Prather said Gray's network deals expire in eight to 10 years, insulating it in the short term. Also, the company said it could receive some additional retrans dollars from satellite operators DirecTV and Dish Network, which are not available in several markets it serves.

Other new revenue streams include multicast digital channels; the company has 30 in operation and expects to have 40 by the end of the year. Among other things, those stations can add revenue by repurposing newscasts and charging advertisers more for the double-run. Internet sites affiliated with its stations, along with mobile operations, are expected to see revenues double this year, Prather said. Internet operations are delivering at a 60% profit rate.

Auto category dollars were down 2% for the year, but the company attributed that to wealthy political campaigns crowding out the bread-and-butter business. Will Gray, which has acquired two stations over the past 18 months, look to purchase others? Prather said that the high prices driven by private-equity firms would be a deterrent, and there's "nothing in the pipeline."