Merrill Lynch Media & Entertainment
Conference
September 11, 2003
Pat Mullen, President/Tribune Broadcasting
Thank you Jessica and Good morning everyone.
Presenting with me today is John Reardon, Tribune Broadcasting’s
Vice President for West Coast Operations. In the front row
is Dick Askin, President & CEO of Tribune Entertainment,
John Puerner, Publisher of the LA Times and Ruthellyn Musil,
Tribune’s Vice President of Corporate Relations.
John and I are going to talk with you about
Tribune Broadcasting, and specifically, how our commitment
to localism, combined with our scale positions us for growth.
First though, I want to take a minute to remind you of the
scope of Tribune Company overall. Tribune’s primary
business is local mass media. Our eleven newspapers, 26 television
stations and other media businesses will generate about $5.6
billion dollars in revenue this year. Free cash flow will
be more than $800 million, and year-end debt will be under
$2.2B.
As the only media company with newspapers,
television stations and local internet sites in the top three
markets, Tribune’s focus on major markets provides a
strong platform for growth. To give you a better sense of
the power of Tribune’s local media franchises, let’s
take a look at this video...
(Run corporate video)
Now let’s turn to Tribune Broadcasting,
which represents about one third of Tribune Company’s
revenue and cash flow. We participate in each of the major
segments of the television advertising business. We’re
in the network business, through our 22% ownership stake in
the WB Network, in the cable business, through WGN Superstation,
and in the syndication segment through Tribune Entertainment.
But our primary business is local television. Tribune Broadcasting
owns 26 stations in 22 markets. We’re the largest station
group not owned by a network, and our strength in the major
markets is particularly significant. We cover 40% of US television
households, positioning us as the fifth largest group in terms
of overall reach. Because of the UHF discount, for FCC purposes,
our reach is 30%, so regardless of how the ownership cap issue
is resolved in Washington, we have plenty of room to grow.
That brings us to two key aspects of our broadcasting
strategy -- localism and the value of scale. I’ll talk
about how these relate to the "big picture," and
then John Reardon will give you some examples of how they’re
working in the "real world" of station operations.
Despite the current debate about media ownership
rules, the bottom line is that localism is good business.
To be successful in local television -- and newspapers for
that matter -- you must be deeply involved in the local community.
That involvement takes many forms -- from
local news, to on-air public service campaigns, sponsorship
of debates, support of community events, sponsorship of charitable
organizations, and much more. All are intended to serve the
public interest of a local market. But clearly, one size does
not fit all... every market is different.
Over the last few years, Tribune has launched
local news operations in six markets on newly acquired stations
-- providing these communities with an additional outlet for
news that didn’t exist prior to Tribune’s ownership.
And each news broadcast is unique to the market it serves.
We’ve also expanded our news operations in six other
markets.
As an example, those of you from New York
have seen us launch and then expand our successful morning
news operation on WB 11. WB11 morning news soundly beats CBS
and is very competitive with ABC, NBC and Fox which have all
been airing news in the time period for many years. Today,
our stations together produce over 200 hours of local news
programming each week.
In addition to localism, it’s necessary
to have scale to compete in the media business today. This
is particularly evident in the competitive advantage scale
provides in programming our local stations. Our strategy has
been to purchase the best off network sitcoms. These have
helped us build highly successful early and late fringe blocks,
which account for 40% of our revenue.
We’ve created an environment and provided
strong promotion which enables good programs to thrive. So
it’s no wonder that key syndicators look to Tribune
first for the launch of their new shows.
An example of this is the deal with Warner
Brothers and HBO which we announced yesterday for Sex and
the City, beginning in the fall of 2005. When HBO made the
decision to take their first series into the syndication marketplace,
they chose Tribune to partner with. Sex and the City has aired
only on HBO and, therefore, has been available to only about
22% of the country. For the rest of the country, its a terrific
new program with built-in brand name recognition.
Now some of you may be wondering how this
program can air on a broadcast station... Well, due to the
foresight of the producers, it is in fact very appropriate
for late night broadcast television... Let me explain...
- Content will be modified for the
broadcast runs
- Sanitized scenes were shot during the original
productions
- Episodes run a full 30 minutes for their
HBO airing, cut to 22 minutes to fit broadcast schedule
A further example is next Monday’s debut
of the Sharon Osbourne Show across all of our 22 markets.
Another partnership with Warner Brothers, and produced at
Tribune Studios, this talk show fits well into our daytime
lineups. We’re especially pleased that Sharon’s
appeal is so strong with the younger audiences -- our core
demographic with the WB Network.
We have utilized the resources of the broadcast
group and worked with our friends at Warner Brothers to create
very strong launch campaign... let’s take a look at
an example of that promotion.
(roll tape of Sharon promo)
And while it may have been a bit unorthodox,
we also utilized WGN TV, WGN Radio, WGN Superstation and the
Chicago Cubs to gain some additional national publicity for
the show by having Sharon and Ozzie sing "Take me out
to the ballgame" during the 7th inning stretch at Wrigley
Field... let’s roll that tape.
(roll Ozzie/Sharon at Wrigley tape)
Fortunately, Sharon is a bit more articulate
than Ozzie and we’re very excited about her new show.
I spoke a moment ago about the WB network
-- it is our most compelling example of how scale has worked
to our advantage in programming. With the strength of our
major market stations, Tribune delivers over 50% of the WB’s
audience. In NY, LA and Chicago, we often double the network’s
national ratings. During this past season, The WB network
achieved its highest ever ratings for men, women, and adults
18-34 and 18-49. And as all of you know, the WB network exceeded
$710 million dollars in sales in the upfront market with cpm
increase of more than 20%. We’re certainly looking forward
to the launch of the new season starting next week.
While we’re on programming, let me remind
you that we have a good story on the cost side as well. Expenses
have leveled out as we’ve cycled through the earlier
seasons of our hits like Everybody Loves Raymond and Will
and Grace. Accordingly, we will see a slight decline in programming
expenses this fourth quarter and in 2004.
On that note, let’s turn to John for a few minutes.
As the General Manager of KTLA and with oversight responsibilities
for our west region station group, John knows what localism
and scale mean in day-to-day operations of a local station.
John...
John Reardon, General Manager/KTLA
Thanks, Pat.
Making the most of the opportunities afforded
by the scale and localism of Tribune’s station group
requires a great deal of versatility;
As Pat said, one size does not fit all.
However, similarities do exist, and today,
I’m going to talk about three types of opportunities
that we have in our west coast markets.
First is the cross-media opportunity here
in Los Angeles. Second is the two-station cluster in Seattle.
And the third looks at how Tribune Broadcasting’s scale
brings value to a new acquisition like KWBP in Portland.
Cross-media opportunities in large markets
like Los Angeles generally consist of three components: content-sharing,
cross-promotion, and cross-selling.
When The Los Angeles Times combines its vast
editorial resources with the incredible reach of KTLA, the
result is a formidable...
one-two...
content-sharing...
cross-promoting...
punch.
A terrific example of this occurred in April
of this year when KTLA contributed the power of its promotion
to the LA Times Festival of Books. The result was record attendance
and over $500,000 in incremental revenue for Tribune.
A great example of cross-selling is underway
right now. KTLA and the LA Times created a winning campaign
for a brand new client -- Vegas.com.
The combined efforts will result in more than
$2 million in incremental revenue for 2003.
The LA Times sold a year-long ad in the Wednesday
Weather Page of the California Section. Then, to drive viewers
to this ad in the newspaper, KTLA runs :10 spots during the
Tuesday 10 O’Clock news and again during the Wednesday
morning news. Vegas.com is delighted with the results; let’s
take a look at the spot.
(roll Vegas.com :10 spot)
Now let’s move up the coast to Seattle,
the largest of Tribune’s two-station cluster markets.
Here, we face a completely different set of circumstances
altogether. Different resources, different local economy,
different competitive factors.
Certainly, the benefits of two-station clusters
are well known by now -- the various savings created back
by office efficiencies, co-location and the like. But up in
Seattle, we’ve been able to go a step further. We made
a conscious decision to build two strong stations
by taking advantage of unique cross-promotional opportunities.
For example -- Sharon Osbourne, which premieres
this Monday, will run at 10am on KCPQ...
and 5pm on KTWB. This approach not only maximizes reach, but
also aggregates audience across a key demographic.
For the all-important early and late fringe
sitcoms, we promote Everybody Loves Raymond -- which runs
on the WB Station KTWB -- on our Fox Affiliate KCPQ. And then,
we promote Friends -- which airs on KCPQ -- over on KTWB.
This is a great tool for re-aggregating audience
and it works; the first six months of 2003
resulted in the highest-ever market share for the two stations.
With this ability to accurately target selective demographics,
there’s no better reach vehicle than television.
Finally, the scale of Tribune’s television
group is already bringing value to our latest station acquisition,
KWBP in Portland, Oregon. Acquired just four months ago from
Acme Television, we are very pleased with the results so far.
Tribune is a successful, long-time operator of local television
stations; the company can bring a wealth of management and
operating experience to any newly acquired property.
Marketing, on-air promotion, sales, engineering
-- every aspect of a newly acquired station can be quickly
addressed and -- if necessary -- improved.
But certainly, the most significant advantage
of scale to a new acquisition is realized in programming.
Moving forward, KWBP will have access to the
same quality programming that we acquire for KTLA, WPIX and
WGN... programs which would likely not have been options for
the station without Tribune’s scale.
A really great example of the synergy that
I’ve been talking about is the WB magazine in front
of you. If for some reason you don’t see one, there
are more copies out in the lobby - and I encourage you to
pick up a copy for a closer look. This magazine will be a
supplement in the September 21st edition of the LA Times.
This represents a real accomplishment -- synergy you can actually
hold in your hands.
Produced in-house, promoted on-air at KTLA
and distributed by the LA Times, this will go out to almost
a million and a half homes. From putting program promotion
in the hands of viewers to driving younger readers to the
newspaper, this is something the company is very excited about.
Thank you very much for your time.
Pat Mullen, President/Tribune Broadcasting
Thanks, John. You can see how our strategies
translate into results in our local markets. Competing in
a fragmented media environment requires the ability to adapt
to local circumstances. We will not lose sight of the fact
that our success is built upon providing compelling content
for local viewers. And scale is important in program acquisition
and other areas of cost control. With a strong focus on both
these aspects of our business, we have a winning combination
for growth at Tribune Broadcasting.
With that, we’ll be happy to take your
questions...
:: :: ::
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
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