• by David Goetzl  @dgoetzl, August 2, 2007

Station operators from NBC Universal to the smaller Gray Television hope to persuade investors that bolstering Web sites linked with their local channels can lead to a potential windfall. But the chief of a top-15 station group threw cold water on the projections Wednesday.

"My sense is right now it just isn't that big a business," says Sinclair CEO David Smith, citing modest traffic. "A local television station's Web site does not have that many people coming to it on a daily basis--it's not Google or one of 3,000 other Web sites," he added on a conference call to announce second-quarter results.

Even 10,000 visitors a day, Smith said, is an "immaterial number" and not "salable." He indicated that stations having success in sales are doing so in large part through added-value, in which an Internet presence is an enticement in a standard on-air deal.

"As of yet, we have not been able to crack the code, if you will, as to how to make money specifically on the Internet," Smith said. "We're just not positive ... that the amount of money being made on the Internet is really Internet. We think there is some linkage between Internet and spot."

He was quick to say, however, that an added-value sales approach can bring in new business, which is a positive.

Still, while Sinclair may have a dour view of, say, Fox17.com's revenue potential--a site affiliated with its Nashville Fox affiliate with a video player--stations have been banking on online video as a growth engine. And rival station groups have been more positive.

Hearst-Argyle recently reported that in the second quarter, digital revenue rose 48% over a year ago to $5 million--partly on the backs of 14.3 million video streams. The figure marked about 3% of total revenues. Belo, in turn, reported similar figures--with ad revenue at its sites also jumping 48% to $7 million, for 4% of revenues.

Sinclair did not offer any breakout of its digital dollars.

While Smith was subdued on Internet prospects as a new revenue stream, he was bullish on the company's success at generating non-traditional dollars via retransmission consent agreements with cable, satellite and telcoTV operators.

In the second quarter, agreements were made with Cox and Charter on the cable front, and the company said deals are now in place with all major multichannel distributors in its footprint. In 2007, Sinclair said retrans fees would yield $60.5 million in revenues--up 138% versus a year ago--and that will jump to some $66 million next year. The company indicated that about 80% of the intake would come in cash, while the remainder would be via operators agreeing to purchase time on its channels.

On Wednesday, 57-station Sinclair--with a portfolio that includes the ABC station in St. Louis, the Fox affiliates in Pittsburgh and Baltimore and a slew of struggling MyNetworkTV affiliates--said it agreed to sell its ABC station in Springfield, Mass. for $21.2 million.

Overall, the company reported second-quarter revenues for its broadcast operations of $161.4 million, down 1.4% versus the same period a year ago. Reasons for the decline include a poor performance at its top-billing Columbus, Ohio market, weakness in the auto category and the MNTV-related hurdles.