Salomon Smith Barney Global Entertainment,
Media and Telecommunications Conference
January 9, 2001
Ruthellyn Musil
Good morning everyone, and thank you for being here. This
certainly beats the weather back in Chicago.
Pat Mullen, Tribune Television group vice president
will give you an update on broadcasting in just a minute,
but let me start with a brief overview.
Tribune today is well positioned for above
average growth for years to come, thanks in large part to
our broadcasting group as well as last year’s acquisition
of Times Mirror.
Our growth is based on three critical factors:
- A unique multimedia presence in markets
across the country;
- The ability to generate strong cash flow,
margins, and growth; and
- Significant financial strength, which gives
us important flexibility.
As many of you know, Tribune today has:
- $6 billion in revenue,
- $1.5 billion in EBITDA,
- and a substantial market cap.
In terms of revenue, we are the eighth largest
media company in the United States.
We are the nation’s second largest newspaper
publisher measured by revenue and cash flow—the third
largest, measured by circulation;
And that’s just the newspaper story --
we are also the nation’s fourth largest television group.
We are a major factor in interactive media
-- with a group of Web sites that frequently rank in the top
20 nationally for news and information. In November, Tribune
Interactive’s total unique visitor count increased 15%
to 5.6 million, ahead of Knight Ridder's Real Cities, Scripps
and the New York Times.
When you put it all together, Tribune reaches
80% of the households in America -- and we are the only media
company that has television stations, newspapers and interactive
sites in each of the nation’s top three markets, New
York, Los Angeles and Chicago.
What you just saw provides the foundation for
solid financial growth, including consistent, double-digit
increases in EBITDA. In 2001, on a pro forma basis, cash flow
should be up around 15%, to the range of $1.8 - $1.9 billion.
Our debt is at a comfortable two-times 2001
EBITDA, and we have a strong "A" bond rating, giving
us flexibility as we plan for the future and the muscle to
continue expanding our media businesses.
And while our broadcasting, publishing and
interactive segments are powerful on their own, together they
position us to deliver even more for advertisers and consumers.
This will accelerate top-line growth.
The best new example of this is Tribune Media
Net, designed to pursue high volume/high growth national advertising
opportunities that will increase our revenue share.
This year we expect Tribune Media Net to deliver
more than $40 million in new revenue, based on three strategies:
First, we’re going after other people’s
money. We learned this in our early days in the independent
TV business, where "other people" meant the networks.
Now, in publishing, with our larger national footprint, we
are competing in the $3 billion market created by The New
York Times, Wall Street Journal and USA Today.
And since our $40 million target represents
only about 1% of that market, we see significant opportunity.
Circulation is a key selling point for this
strategy:
Aggregate daily circulation for Newsday, the
LA Times and the Chicago Tribune is 2.2 million. That compares
to the Journal’s 1.8 million, USA’s 1.7 and The
New York Times’ 1.1. But when you look at circulation
on a market-by-market basis, the story for advertisers gets
more compelling.
As you might expect in New York, The New York
Times leads with 667,000 in circulation. But what surprises
a lot of people is that Newsday is only 90,000 behind with
573,000. And Newsday covers a high-income area -- the counties
of Nassau and Suffolk -- where The Times has very low penetration.
Moving to Los Angeles, the LA Times circulation
of 993,000 has an enormous lead over all three. Look at The
New York Times here at 21,000.
The same is true in Chicago.
So the pitch to advertisers is simple. Don’t
not buy the three national papers, just buy less. But buy
Tribune’s top 3 combinations and significantly increase
your reach in high income homes in the most critical markets.
Plus it’s a more cost efficient buy.
The second way that Tribune Media Net is generating
incremental revenue is to package our top 3 markets along
with Tribune’s other 8 newspapers.
Buying national advertising in newspapers has
been difficult; we intend to make it easy. And it is already
paying off with customers like Valassis, distributor of 90%
of all coupons in U.S.
The third strategy is the creation of multi-media
packages. We recently worked with Dreamworks promoting "The
Legend of Bagger Vance," in our newspapers and on our
television stations in New York, Los Angeles and Chicago.
Tribune Media Net -- and all of our other growth
initiatives -- are designed to maximize return for Tribune
shareholders. In fact, shareholder value added, or SVA, is
an important measure in how we run our businesses and a critical
factor in making decisions on acquisitions, capital projects
and new ventures.
We also have tied compensation to achieving
SVA targets.
Our goal is to increase it by 15% a year over
time, despite making the biggest acquisition in our history
last year.
Now before turning it over to Pat, let me go
over some of the key financial targets we reviewed with many
of you last month.
At that time, we said we were comfortable with
2000 EPS of about $1.30 per share for the full year and $0.35
in the fourth quarter. We have not updated our guidance since
then.
This year, earnings per share should grow 20%,
which translates to around $1.55 per share. We’re on
track for reported EPS to be accretive in 2003, the third
full year of the integrated company.
On a cash basis, before goodwill amortization,
we expect about $2.30 per share this year, which represents
an increase of about 20% over 2000.
In 2001, consolidated revenue should grow 6
- 8%.
Our broadcasting and entertainment group will
turn in a record performance in 2000, despite a challenging
revenue environment.
2001 will start with tough comparisons, but
for the full year we are planning both TV and group revenue
growth of 6 -- 7%, and cash flow will be up in the 9 -- 11%
range.
In publishing, pro forma revenue should grow
4 -- 6%. Cash flow should grow 12 -- 15%, driven by increased
efficiencies at the LA Times, Newsday and the Baltimore Sun.
We are planning significant margin expansion in LA in 2001.
At Tribune Interactive, the merger created
scale that benefits the top line and helps control expenses.
Revenue growth of 40 - 50% is planned in 2001, and significantly,
operating cash losses will be cut in half to about $25 million.
Tribune Interactive’s focus on reducing
costs, driving revenues and finding new opportunities in classified
has positioned TI to become profitable during 2002 and we’re
again using a broadcasting model. UHF-TV succeeded by not
over-promising, not over-spending and by operating efficiently.
This is what we are doing in interactive.
Our financial flexibility, operating efficiencies
and valuable assets give Tribune a clear advantage in today’s
fragmenting media marketplace. We are well positioned for
growth -- organically and through acquisitions -- and intend
to take full advantage of this as we build the multimedia
company of the future.
And a key part of that is our broadcasting
story, so here’s Pat.
Pat Mullen
Thanks Ruthellyn and good morning everyone.
I’m pleased to be here today to tell you a little bit
about Tribune Television and why we’re optimistic about
2001 and why we’re going to continue to outperform the
industry... even in the face of a tough advertising environment.
There are a number of factors that insulate
us from the challenges that face the rest of the industry.
We expect our strength with The WB, expansion of local news,
the launch of "Everybody Loves Raymond"
in early and late fringe and the terrific cross-media assets
that Ruthellyn mentioned will help us to again outpace our
industry competition.
The WB is once again the growth story of the
new season. In the November sweeps, The WB showed the highest
year-to-year ratings increases of any network in almost every
key demographic. In adults 18-34... up 28% year to year...
In adults 18-49 -- up 19% year to year.
In fact, The WB scored its first ever adult
demo victory over one of the major four networks by beating
CBS among women 18-34. There are several shows that are driving
this success.
7th Heaven, the WB’s signature
series, had its best November ratings ever... including a
42% gain in adults 18 -- 34 and +40% gain in adults 18 --
49.
Buffy and Angel realized
across the board increases in the 18-34 and 18-49 demos, scoring
the series highest ratings ever.
Dawson’s Creek showed impressive
growth among both men and woman 18-34... and Felicity,
the comeback show of the year, averaged its best numbers ever.
On Fridays, Sabrina brought her own
brand of magic to the WB conjuring up the network’s
highest Friday night ratings ever... in all demos.
One of the obvious reasons for the success
of The WB is the popularity of its young stars.
As most of you know, we own 25% of The WB but
we also own 15 major market affiliates that serve as the network’s
backbone. While The WB’s national ratings this year
have been terrific, it’s important to note that our
local ratings, particularly in New York, Los Angeles and Chicago,
often double the network’s national average.
Another competitive advantage for our stations
is Tribune Entertainment, the country’s largest supplier
of syndicated television action hours.
The really good news for us is that Tribune
Entertainment’s latest project -- Andromeda
-- is the season’s No. 1 action drama in first-run syndication.
Gene Roddenberry’s sci-fi adventure, featuring Hercules
star Kevin Sorbo, had the highest rated debut for a weekly
hour in five years and maintained strong ratings throughout
the November sweeps period. Simply put, we have a -- hit --
on our hands.
Season to date, Andromeda continues
to be the #1 action hour in syndication. The show is an excellent
example of the way Tribune Entertainment helps us at the station
level and at the company level. Our stations get a highly
rated first run show -- with great demographics -- at no cash
cost. Tribune Entertainment gets one of the country’s
strongest station groups as the launch platform for its new
shows. And finally, through international production partnerships,
we limit downside risk by laying off two-thirds of our production
budgets and then, we share in potential upside through syndication.
It’s a great business arrangement.
The success of this strategy can be seen in
the sale of syndication rights for its action hour, Earth:
Final Conflict, which was sold to cable’s Sci-Fi
Channel. Four years ago, we told you how the Tribune Entertainment
model was a low risk way for us to profit at both the station
and the company level. The Earth: Final Conflict
example validates the model.
Local news programming is also a significant
strength for us. In our key markets, we’ve always had
a solid local news presence but we’ve expanded aggressively.
Today, Tribune television stations provide more than 200 hours
of local news programming per week.
We’ve been particularly aggressive in
expanding our morning news programming. We now have morning
news operations in seven markets -- New York, Los Angeles,
Chicago, Boston, Seattle, Denver and Indianapolis.
KTLA’s morning news in Los Angeles, one
of the first local morning newscasts in the country, continues
to show its strength. In LA, our morning news is # 1 among
adults 25-54.
In Chicago, WGN Morning News is often the market
leader, regularly beating the network morning shows and local
competition. We are a strong number one in male demos across
the board. Now, though it’s tough to walk down Michigan
Avenue and face a minus-40 wind-chill factor -- the recent
spell of winter weather in Chicago has been great for ratings.
One snowy morning last month, WGN’s Morning News was
# 1 with a 20 share and the success continued throughout the
day with the station’s noon and primetime news also
ranking # 1.
In New York, the WB11 launched morning news
this past summer and is already matching the ratings performances
of Good Morning America and doubling the CBS
Early Show in key demos. A great performance for a newscast
that’s only a few months old!
Clearly, with that kind of success we must
be giving local morning viewers something they aren’t
getting anywhere else.
Now on to early and late fringe -- a day part
that we dominate on most of our stations. Friends
continues to be a ratings hit for our stations. In fact, just
Sunday night, Friends was awarded the Best Comedy
Series in the People’s Choice Awards. Plus the show
attracts the kind of demos that advertisers will pay a premium
for.
And, we’ve got some great sit-coms lined
up behind Friends. For fall of 2001, Everybody Loves Raymond
-- one of the top-rated shows on CBS. Interestingly, Raymond
is one of those shows that launched successfully but quietly,
then gained momentum. Just two weeks ago, it became the No.
1 sit-com on television. For fall of 2002, we’ve got
Will and Grace. In selected markets, Dharma and Greg and Just
Shoot Me also will join our lineup soon.
Another important contributor to our success
are our cross-media assets. While Ruthellyn mentioned earlier
the Tribune Media Net success, it’s important to note
that we are having similar cross-media success in individual
markets as well. In Los Angeles this week, we began a three-month,
six-figure advertising campaign for "dotLA," a company
that controls rights to a new Internet domain registry --
think of it as a "dot-com," "dot.org,"
or "dot-tv" address, but for a city. Ads will run
through March in the Los Angeles Times, on KTLA, and on latimes.com.
Nobody but Tribune can offer advertisers that kind of cross-media
muscle in the nation’s top 3 media markets!
We’re also using our cross-media assets
to cross-promote our properties. As an example, in New York,
WPIX does not have a large budget for newspaper advertising.
But, using our successful Chicago model, now that Newsday
is part of the family, ads promoting WPIX programming frequently
appear in the paper. This enables WPIX to reach the upscale
demos of Nassau and Suffolk counties at no cash cost. But
the cross-promotion works the other way as well -- Newsday
stories and reporters are prominently mentioned during WPIX
newscasts. We are seeing similar successes in Los Angeles
and Hartford as well.
As you know, Tribune Television is already
the nation’s 4th largest television group. But we’re
always looking for opportunities to expand our station group.
We expect the FCC to launch a meaningful review of the newspaper/broadcast
cross ownership restriction. Abolishing or modifying the rule
can be done at the Commission level. It does not require legislation.
Given all we have heard from the Bush team, we are optimistic
about what might happen in this area.
We currently own and operate 22 stations in
20 markets reaching 38 percent of U.S. homes. Since FCC rules
discount coverage for UHF stations, by FCC calculation we’re
at 28 percent -- well under the 35 percent cap -- so we have
plenty of room to grow.
We’re concentrated in major markets with
stations in 10 of the top 12 markets... and 16 of the top
30, which gives us a substantial national footprint.
We were also among the first station groups
in the country to take advantage of loosened FCC regulations
that permit ownership of two stations in a single market.
We’ve got two-station clusters up and running in Seattle
and New Orleans and we’re aggressively looking for more
opportunities to double-up.
Naturally, duopolies improve efficiency because
there is one infrastructure and one management team for two
stations. It works on both the revenue and cost side. Owning
two-station clusters allows us to share programming content,
improve buying power, expand local news presence and generates
significant back-office savings.
Our focus on efficiency pays off in margin
expansion. Our EBITDA margins have grown consistently, and
over the last 10 years TV cash flow margins have more than
doubled. Our aim is to improve margins 1-2 percentage points
each year. All good news!
But the economy is slowing. Some advertisers
are being more cautious. Many have delayed placement of ad
dollars instead of making large annual buys like they did
last year. But looking ahead, we’re optimistic.
We see analogies between 2001 and 1999. 1999
was a terrific year for Tribune Television. Our TV revenues
were up 13% on a same station basis, while the industry was
up only 5%. One reason we outperformed the industry in 1999
was the absence of Olympics and elections. Neither the Olympics
nor elections benefit Tribune in a major way. Obviously, we
don’t carry the Olympics. And -- perhaps less obvious
-- the largest share of political advertising goes to traditional
network stations which tend to attract older demos that politicians
target first because of voting patterns. Therefore, like in
1999, our comparables are not as tough as some of our competitors.
- But there were other factors that drove
our 1999 success:
- We had a great distribution platform
- Growing markets
- Stations in strong audience share positions
- An outstanding performance from the WB
Network
- And a growing programming contribution
from Tribune Entertainment.
Those very same elements are still in place
today. So, for 2001, we expect to again out-perform the industry.
Tribune Television is well positioned for the
future. We’ve got one of the nation’s largest
station groups and we’re aggressively looking for acquisition
and duopoly opportunities to continue our growth. Our affiliation
with The WB gives us great ratings momentum and we have the
competitive advantage of Tribune Entertainment. We have established
prime time news and morning news... and strong early and late
fringe programming.
Together, these assets position us to continue
to outperform the market in 2001-- and beyond!
Now we’ll be happy to take questions.
:: :: ::
Tribune Company is not responsible for
updating the information contained on this page beyond the
published date, nor for changes made to this document by wire
services or Internet service providers. |
