Bear Stearns
17th Annual Media, Entertainment and Information Conference
March 8, 2004
Dennis FitzSimons/President
and Chief Executive Officer
Thank you, Kevin. At this time of year, we don’t
refuse invitations to come down to Palm Beach. With me today
are Don Grenesko, our CFO, Jack Fuller and David Hiller from
publishing, and Pat Mullen, who heads up broadcasting.
As most of you know, we publish 14 daily newspapers,
own 26 television stations and operate a growing interactive
business. Our baseball team is on a roll, too.
Kevin asked that we keep our opening remarks
brief and leave plenty of time for questions. So I’m
going to focus on why Tribune is uniquely positioned to compete,
then update you on several strategies that we have for accelerating
growth.
Let me start with two simple reasons why Tribune
is well-positioned to compete in today’s fragmented
media environment. First, we have great businesses in major
markets and advertisers have to be there. Second, there are
more ways than ever before for advertisers to reach consumers
on a national network level. But there are far fewer effective
ways for advertisers to reach consumers on a local
level. At Tribune -- we can do both. You’ve heard us
refer to this as "national reach, local touch."
Overall, Tribune’s media businesses reach
80% of U.S. consumers with a significant concentration in
the top markets. This scale pays off in a number of ways --
-
It provides opportunities to offer viewers and readers
broader and deeper news coverage. Our print journalists
provide depth to TV news that would otherwise be cost-prohibitive.
- Scale, in network television gives us access to the best
syndicated and off-network programming.
- For advertising clients, we can offer customized solutions
nationally as well as locally.
In an environment where marketers are all looking
for an edge, and better ways to reach consumers, we have an
advantage -- a local advantage. In what’s a crowded
media marketplace, we view ourselves as competing against
all media. And by bringing together multiple media
in key markets, and re-aggregating audiences for advertisers
we give ourselves an edge.
Most of you are familiar with our collection
of assets in Chicago. The Chicago Tribune is a strong
foundation, with circulation of 700,000 daily and over 1 million
on Sunday. In-depth local journalism and a great array of
local media choices for consumers are deepening our market
penetration and helping to improve our overall market share.
For example:
-
WGN-TV, one of the strongest WB affiliates
in the country
- WGN-Radio, Chicago’s #1 rated station
- CLTV, our local cable news channel
- RedEye, with an average weekly
readership of 500,000, with a heavy concentration in the
18-34 demographic
- Chicago magazine
- Our recently launched Chicago edition
of Hoy
Add to that our ability to cross-sell advertising, share content
and cross-promote and we really give ourselves an edge over our competitors.
WGN-TV is a key factor in our Chicago model.
Probably nowhere is it better illustrated that local news
is what viewers want, than at WGN. Morning television in Chicago
is a great example.
- Look at how this time period has evolved in
Chicago. Twenty years ago there was no local morning news
-- and the television viewing audience in the early morning
was very small.
- Today by 6 am, all five Chicago stations have already been
on the air for an hour with local news, and the total number
of viewers from 6 am to 7 am has tripled. Sets in use have
gone from 8% to 26% of the market. All five Chicago stations
now carry local news from 5 am to 7 am, and WGN is one of
two stations that carry local news for four hours, all the
way to 9 am.
- And local wins. In November, WGN’s Morning News beat
everyone in adults 18-49. That includes NBC’s "Today
Show," CBS’s "Morning News," and ABC’s
"Good Morning America." And not by a small amount.
The numbers here were really impressive and it shows the power
of local. WGN’s delivery also dwarfs all the national
news shows on the cable networks. Viewers want local news,
and that’s our edge.
- We also use this edge to promote other
products like RedEye and Chicago magazine.
A similar strategy is playing out right here
in South Florida.
Around the core of the Sun-Sentinel,
that serves Broward and Palm Beach counties, and WB39, which
serves all of South Florida, we have built a group of other
media options for consumers and advertisers.
- Sun-Sentinel.com, a breaking news and information website,
generates 20 million page views per month.
- Forum Publishing Group, which produces 26 local community
publications with distribution of more than 500,000 weekly
throughout South Florida.
- El Sentinel, a weekly Spanish
language newspaper, in just over a year has grown more than
50% to 95,000 copies in Broward and Palm Beach counties.
And it’s profitable.
Together, our properties in South Florida reach
six out of 10 adults at least once a week. We also have an
interesting management structure here in South Florida, where
our publisher, who was an ex-broadcasting general manager,
is also in charge of our TV station in Miami, WB39.
In 2003, Sun-Sentinel advertising revenue grew
twice as fast as the Miami Herald: 6.6 % year-over-year,
compared to the Herald’s 2.8%. The Sun-Sentinel
gained one percentage point of ad share at the expense of
the Herald.
At the core, our performance is driven by strong execution
in newspapers and TV. But this multimedia approach in South
Florida provides an edge. This edge helped the
Sun-Sentinel and its family of products achieve the highest
operating cash flow margin of all Tribune newspapers.
And, in an essentially flat South Florida TV market, WB39’s
revenue grew almost 14% year-over-year and gained close to
2 percentage points in market revenue share. It’s a
good story for us.
Let’s turn now to some other areas.
Kevin Gruneich, as usual, is on top of things
and recently wrote about a couple of issues impacting our
TV group -- competition for programming and The WB Network’s
recent performance.
In our top markets, we recently elected not
to renew "Everybody Loves Raymond," which we own
the syndication rights for until September 2008. Fox elected
to pay a very high price for the second cycle of this show.
We saw this as a reaction to some fairly dramatic aggregate
rating declines Fox has suffered in the top three markets,
particularly New York. You will recall, Fox purchased the
Chris-Craft stations in 2001, establishing duopolies in New
York and Los Angeles. Here’s what their audience share
looked like then in New York. Here’s what it looks like
now. As you can see, there’s been a significant decline
of about one-third.
Fox’s approach to programming their duopolies has been
to move their stronger shows to the Fox station at the expense
of the UPN station. As a result, their combined audience share
has declined dramatically.
With regard to "Raymond," we were
looking to renew it, but only if it made financial sense.
We’ll likely renew this in some other markets, where
it should be more reasonably priced.
As a reminder, 40% of our revenue is generated
in the early- and late-fringe time periods. We have a double
run of "Friends," and a double run of "Raymond"
that will likely go until 2008. So we’ll get a lot of
usage out of "Raymond," which is a real strong part
of our schedule. We’ll also add an artfully edited "Sex
and the City" to our late-fringe lineup. So we think
we are well positioned to go forward in these key day parts.
In prime time, which contributes about 17% of revenue, The
WB Network household ratings are down about 7% year to date.
Everyone in the network television world has been hit in the
younger demographic ratings and we’ve been no exception.
However, the Tribune station group is down just 4% and in
our major markets double the delivery of the network on a
local basis because of the strong, mature VHF stations we
have in the top markets. But the WB brand has still built
great value for the network and certainly for our stations.
We’re optimistic about the future. They still have a
terrific staff there. We’ve had a growth ramp-up over
the last several years and now we’ve plateaued a bit.
Our 22% stake in The WB Network is a real valuable asset for
us.
That brings me to another network asset on
the cable side -- our 31% interest in the Food Network. Our
partner, Scripps, has done a great job of growing the value
of the network. It’s now in over 80 million homes and
has become a part of the cable landscape. We’re very
pleased with our ownership in the network.
A new growth opportunity is a multi-level agreement with
Comcast for the launch of a regional sports channel in Chicago.
That will launch in September. We’re in partnership
with Chicago’s other professional sports teams. We’ll
receive significant rights fees for the 72 Cubs’ games
that will air on the channel, plus a percentage of the network’s
profits. We’re coming out of a deal with Fox Sports
Net Chicago that also gave us significant rights fees, but
this one gives us an ownership piece.
Another part of the agreement is an increase of about 4 million
WGN homes on Comcast cable systems across the country. One
million of those will be added this month in anticipation
of a great Cubs season. In addition, we’ve recently
concluded DBS and cable agreements with other operators that
will bring our distribution to 65 million homes over the next
couple of years. We’ll be at about 60 million this year.
Turning to publishing, our Hispanic strategy
has accelerated in recent months with the rollout of Hoy.
As many of you know, Hoy launched in New York five
years ago and quickly became the largest Spanish language
daily in that market -- with cash flow margins in the 20%
range. Hoy recognized that New York’s Spanish
population was itself diverse with not only Puerto Ricans
but also Columbians, Mexicans, Dominicans, Cubans and Central
Americans. Hoy includes news from all of their homelands.
One-third of all U.S. Hispanics live in the
New York, Chicago and Los Angeles metropolitan areas and Hoy
is the only Spanish language daily published in all three
of these markets. Using a network/affiliate model, Hoy
has templated national and international content which eliminate
duplication of effort. Then, local editors determine front-page
emphasis that’s unique to each of the markets. We have
the best of both worlds, with a strong, local flavor.
In September, Hoy launched in Chicago, the
nation’s 4th-largest Hispanic market. It’s already
exceeded our expectations -- with paid circulation and advertising
revenue significantly ahead of plan.
And last week, Hoy started up in LA -- the
largest Hispanic market in the U.S. -- with an initial print
run of 200,000 copies. Let me note here, that as part of the
Times Mirror merger, we picked up 50% interest in the largest
Spanish daily -- La Opinión. We reached an
agreement with the Lozano family in January to sell our stake.
The payment we received is paying for the launch of Hoy
in LA.
In L.A. we’re especially well-positioned
with Hoy against our competition because they have
only one edition for the entire area. We’re going to
have four zoned editions with network content, international
and national news coupled with content for LA, Orange County/Long
Beach, San Gabriel/Inland Empire and San Fernando.
And now that Hoy is in the Top 3
markets, it will have several other advantages:
- An exclusive content-sharing and cross-promotional
partnership with Telemundo, which has stations in all of
Hoy’s markets. Telemundo will partner with
the newspaper’s journalists to share news stories
and produce special features that will be jointly promoted.
- A new exclusive section under The
Wall Street Journal banner will provide news and features
on finance, technology, careers and small business to Hoy
readers.
- Tribune Media Net, which represents
all of our newspapers for national sales, is bringing its
expertise and national relationships with advertisers to
Hoy as well.
While there’s been lots of hand-wringing
about declining newspaper circulation, Hoy is selling
more than 100,000 copies every day and offering clients an
advertising vehicle that reaches one of the fastest growing
demographic groups in the nation.
But probably our most important growth driver in publishing
right now is help wanted advertising. At its peak in 2000,
the print and online recruitment category accounted for $620
million in high-margin revenue. In 2003, that number dropped
to about $290 million.
We think there is significant upside in this category, and
our print-and-online strategy has excellent traction. CareerBuilder
is now the exclusive job listings provider on both AOL and
MSN. As a result, CareerBuilder’s unique visitors increased
to more than 16 million in January, surpassing Monster.com
in careers site traffic.
In addition, overall help wanted trends continue to improve.
In February, we saw revenue growth in the mid-teens, and we
think this is a broad-based pick-up that is gaining momentum.
Beyond help wanted, we are very focused on
the other classified categories of real estate, auto and "other,"
where our print and online strategies are also converging.
This is so important that we recently announced the integration
of Tribune Interactive and Tribune Classified Services under
the leadership of Tim Landon, who was running Classified only.
With over 80% of interactive revenues from classified, the
move makes sense and will ensure the vitality of classifieds
and the growth of that piece of our business.
All these moves are designed to improve our position by giving
us a competitive edge. It comes down to this: to show growth
as a media company today and into the future, we must acquire
complementary businesses, launch new products, or expand existing
ones in order to add new viewers and readers.
At Tribune, we’re doing all this and
generating excellent returns for our shareholders. In fact,
over the last 10 years, we’ve outperformed. These numbers
are surprising to a lot of people. During this period, $100
invested in Tribune would be worth $389 today -- more than
many of the large-cap media companies.
We think our performance can continue—largely
due to the strength of our local mass media businesses.
:: :: ::
This document contains certain comments
or forward-looking statements that are based largely on the
company's current expectations and are subject to certain
risks, trends and uncertainties. Such comments and statements
should be understood in the context of Tribune's publicly
available reports filed with the SEC, including the most current
annual report, 10-K and 10-Q, which contain a discussion of
various factors that may affect the company's business. These
factors could cause actual future performance to differ materially
from current expectations. Tribune Company is not responsible
for updating the information contained in this press release
beyond the published date, or for changes made to this document
by wire services or Internet service providers. |
