Fox bid jolts Sinclair stock

Share loses $3.3125 over network plan to take 20 of its ad slots


April 09, 1999|By Mark Ribbing | Mark Ribbing,SUN STAFF

Sinclair Broadcast Group Inc.'s stock fell 23 percent yesterday on concerns over Fox Broadcasting Co.'s plan to take over prime time commercial spots from its television affiliates, including 20 stations owned by Sinclair.

As the largest owner of Fox stations outside of Fox itself, the Baltimore company could lose the most from the plan, which was delivered to Sinclair on Wednesday.

Sinclair's stock lost $3.3125, closing at $11.0625.

According to Sinclair, the plan calls for it and other affiliates to give up 20 prime time commercial spots per week to Fox.

The affiliates may buy the spots back for $10 million per year, less than what they would cost on the open market.

If they choose this option, the affiliates would get an additional 15 prime time commercial spots per week from Fox. However, 25 percent of the average revenue from those spots would go to Fox.

If an affiliate were to reject the option, it would lose the revenue from the advertisements.

"At this point, we anticipate taking the [buy-back] option," said Sinclair's treasurer, Patrick J. Talamantes.

"We're currently studying all of our options," said Talamantes, who said Sinclair was consulting with other owners of Fox stations.

Sinclair said that if it were to exercise the buy-back option, it could limit its losses from Fox's action to less than $10 million for the 12 months ending in June 2000.

Fox, a subsidiary of Rupert Murdoch's News Corp. Ltd., declined to comment on the matter.

Sinclair owns 20 Fox stations; Fox itself owns 22. In Baltimore, Sinclair owns Fox affiliate WBFF-TV and programs the WB Network's WNUV-TV.

The relationship between the broadcast television networks and their local affiliates has often been tense and uncertain. The new approach by Fox could alter and complicate that relationship further.

Paul T. Sweeney, an analyst with Salomon Smith Barney Holdings Inc. in New York, said Fox's tactic was born of simple economics.

"There's a real imbalance in profits in the TV business," he said. "TV stations are very profitable. Networks are not profitable."

Sweeney added that even if networks squeeze their affiliates for a bigger share of ad money, the acquisitive and aggressive Sinclair will continue to thrive.

"I think Sinclair is a very innovative television company, and I think they're going to continue to find ways to make money," he said.

Pub Date: 4/09/99

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