Hearst-Argyle Station Group CEO Uses The 'R' Word

The plainspoken CEO of the Hearst-Argyle station group became pretty frank on Friday. The climate is "recessionary-like for ad-driven businesses," he said, adding that it "feels as bad as it's been in my business experience."

Speaking on a conference call to discuss second-quarter results, David Barrett joined other local broadcasters in citing cutbacks in spending in the automotive and retail categories as trouble spots, but also mentioned usual stalwarts in movies and telecommunications.

His reasons were manifold:

"Category data is revealing, and speaks to how businesses have responded in recent months to the macro challenges of high energy costs, $4-plus-per-gallon gasoline costs, the ongoing housing slump, credit crisis, continuing job losses and some declining consumer confidence levels," he said. "Quite simply, we're seeing that advertisers are reducing expenditures to alleviate pressures in their own businesses."

His prognosis going forward:

"At the moment, there does not appear to be a near-term catalyst that would reignite meaningful economic recovery," (although recent slight drops in energy are a positive).



In the second quarter, H-A's revenues dropped 5.6%. It operates 26 local stations, including the ABC affiliate in Boston and NBC outlets in Baltimore and Cincinnati, as well as NBC-led duopolies in Orlando and Sacramento. Its portfolio reaches 18% of the country.

The local station business generally operates on a two-year cycle, in which even years with national elections and Olympic Games lead to revenue increases--which are then followed by declines. But Barrett said this is "turning out to be a very atypical even year."

Although NBC Universal recently said it is 96% sold for the Olympics that begin Friday, Barrett said sales at H-A's 10 NBC affiliates have "been a bit softer than expected, due to overall economic factors and limited automotive participation."

Barrett said that inventory remains, and selling will continue through the Games. He expects the 10 stations to bring in about $17 million in revenues, which is below the 2006 Torino Games two years ago (NBCU lost $70 million then).

For the quarter, H-A posted $182.1 million in revenues, down 5.6%. Four years ago, in 2004--the last time there was a Presidential election and Summer Games--H-A posted a 10% gain in 2Q revenues.

Barrett cited some positives on the call, notably a 13% increase in revenues from digital media--although that represents only 3% of the company's overall total--and a 26% jump in dollars from retransmission consent deals, another small portion of the total.

Political spending could be helpful over the next three months, Barrett said. Conventional wisdom holds that 12 states will decide the electoral college race for the presidency. And heavy spending by both campaigns should come over the next 92 days.

H-A has stations in eight of those states, including three in Florida (two in the hyper-competitive Orlando area), two in Missouri (where it has the top-rated late news in Kansas City) and one in Ohio.

Barrett did say that he is pleased with the on-air performance and product at the stations. The company said its Midwest, mid-size-market affiliates, in areas where the economy is less volatile, are faring better than its operations on the coasts.

Barrett cited strong results at the ABC affiliates in Oklahoma City, Omaha and Albuquerque and the CBS outlet in Des Moines.

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