• by David Goetzl  @dgoetzl, May 3, 2007

While MyNetworkTV has contributed to a decline in national spot revenue at leading affiliate group Sinclair, a top executive believes the worst is over for the News Corp.-owned network's drag on the station operator.

"I believe we've hit pretty much the bottom in terms of MyNetwork in [the] second quarter, and we'll be able to build this back up. It will be a work in progress," said Steve Marks, COO of the television operations.

Marks, who spoke on a conference call Wednesday to announce first-quarter earnings, said he is comforted by the tinkered lineup this spring, in which MNTV went from all-telenovelas to a mix that includes movies and a mixed martial arts league. He is confident the network is aggressively working to upgrade programming this fall, information that should be available in advance of the upfronts.

In the recently completed first quarter, overall broadcast revenues increased a mere 1.5% to $150.2 million, compared to the same period a year ago. Local ad dollars, which account for 67% of revenues for the company's 58 stations, were flat, while national spot revenues dropped 5%, partly due to "few agency buys for the MyNetworkTV programming." Overall, revenues at the 17 MNTV stations were down 14.3%.

Other factors for Sinclair's national spot decline in 1Q, the company said, were $2 million less in Super Bowl revenues as the game moved from ABC, where it has eight stations, to CBS, where it has two. It also cited a softness in the auto category.

In the first quarter, Sinclair had success in generating revenue from retransmission consent deals, and it predicts 2007 revenue will jump to $59 million from $25 million. The company, which has fought aggressively to get cable operators and others to pay for its programming, has long-term deals covering about 80% of the audience that receives its channels in some form besides free TV.

Sinclair offered a somewhat bearish forecast for its second-quarter performance, after which it expects MNTV to begin an ascent. With a likely decline in political dollars, the company said second-quarter revenues ($163.8 million last year) would be somewhere between down 1.5% to up.3%.

Sinclair CEO David Smith said the company continues to work with the Open Mobile Video Coalition, a group of station operators such as Gannett and Belo, to speed the deployment of content to mobile devices. Revenue potential rests in deals with automakers that want to pay to offer content on systems in their new vehicles, a la satellite radio, and telecom companies wanting the same for their handheld devices.

As Sinclair and other station groups experience new revenue streams from retrans agreements and possibly mobile distribution, networks such as ABC and Fox, which supply them with programming, could ask for payment in turn. So far, Sinclair said it has been given no indication that would be the case.

A test could come as soon as 2009, however, when Sinclair's carriage deal with ABC expires; its Fox deal extends till 2012. By then, Fox could make a move to capture some dollars Sinclair receives via new deals with Comcast and Charter, which expire in 2011 and 2010, respectively.