Gray TV to Negotiate 45% of its Distribution in 2011
Gray TV is set for a watershed retransmission consent season, as about 45 percent of multichannel video programming distributor agreements expire at the end of the year, executives said on its Q2 earnings call Monday. “We'll be actively negotiating through the fourth quarter and we've got over 200 cable systems” to reach deals with, said President Bob Prather. In 2012 and the following years, Gray will have to reach new affiliation agreements with its major broadcast network partners, he said.
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Having already renewed its Fox affiliations for the four multicast stations where Gray runs such an affiliate, Gray’s next major network to be renewed is NBC in 2012, Prather said. “Our goal is to keep what we've got now and add to it in our negotiations both on the cable side and the network side,” he said. “To do that we've got to negotiate some increases from the cable guys, and I think we're in a position to convince them they need to be paying us more."
For better or worse, Gray will let its peers set the market for reverse compensation to the broadcast networks, Prather said. “We've got some time to see what’s going on in the marketplace and what some of the other groups do.” That could play to Gray’s advantage, but on the other hand “once the market is kind of set, it’s hard to be an outlier from what the other people have agreed to,” he said.
Despite the stock market turmoil following Standard & Poor’s Friday night downgrade of U.S. sovereign debt, Gray executives remained positive on the outlook for ad sales for the rest of 2011. “We've seen no evidence yet of an advertising pullback,” said CEO Hilton Howell. However, based on past recessions it could be months before the headlines of the past few weeks affect local ad spending, if it even does, Prather said. Some advertisers seem to have “a little more sense of caution,” going into Q3 than they did heading into Q2, said Chief Financial Officer James Ryan. And Gray doesn’t expect the FCC to act on its pending license renewals until the indecency litigation holding them up has run its course, Ryan said. “We don’t expect the commission will actually, finally proceed with the ordinary renewals, whether it’s our stations or anyone else’s in the business until the court makes the decision in the indecency fine."
On the move to repurpose some of the TV band spectrum, Prather said Gray’s use of digital multicast stations and its investment in mobile give it a strong case to make to lawmakers about why it should keep its spectrum. “I think we're kind of immune to whatever is going on in Congress and I don’t think they can ever take it away from us,” he said. Gray Q2 sales gained 1 percent from a year earlier to $76.2 million. Profit jumped to $2.56 million from $534,000 on lower interest expenses. Its shares fell 16.59 percent as major U.S. stock indexes also declined.