Sinclair lowers revenue forecast

Ad-free coverage of attacks hurts big TV broadcaster

September 25, 2001|By Gus G. Sentementes | Gus G. Sentementes,SUN STAFF

Sinclair Broadcast Group Inc., one of the largest TV broadcast companies in the country, lowered its revenue estimate for the third quarter yesterday and withdrew its projection for the year, blaming declining advertising revenue due to the Sept. 11 terrorist attacks.

The Cockeysville company, which owns, operates or programs 62 TV stations in 40 markets, now predicts a $5 million to $6 million loss in September, "resulting from the Sept. 11th events and their aftermath."

Earlier in the year, several big media companies announced staff reductions to counter a slowdown in ad spending as the economy softened.

But the loss of revenues due to ad-free, round-the-clock TV news coverage in the early days of the disaster hurt many media companies, including Sinclair.

"We were on target to hit our numbers for the third quarter before the attack took place," said David B. Amy, Sinclair's executive vice president and chief financial officer.

"I think there are two forces at play here: one is the coverage and the elimination of commercial inventory while covering the events. Then, you have the mentality of advertising during this time period and the uncertainty it's created in the consumer."

Immediately after the attacks, many of Sinclair's stations canceled commercials to allow for nonstop news coverage, Amy said. Since then, many advertisers have canceled commercials while waiting to gauge the impact of the attacks on consumer attitudes, he said.

Sinclair's stations in Baltimore include WBFF-TV (Channel 45) and WNUV-TV (Channel 54).

Yesterday's announcement also led to heavy trading in Sinclair's shares on the Nasdaq stock market. The shares lost 18 cents, closing at $8.04 - well below their 52-week high of $12.69 on Jan. 16.

Previously, Sinclair's third-quarter projections called for a decline of 8.5 percent to 10.5 percent in net broadcast revenue. The company now estimates a drop of 12 percent to 14 percent from last year's third-quarter revenue of $175.6 million. Sinclair predicts revenue will be $151 million to $155 million, Amy said.

Sinclair did not provide a new projection for third-quarter cash flow, which it estimated in July would fall 20 percent to 24 percent.

As for full-year estimates, Amy said the Sept. 11 attacks left too much uncertainty to make projections, despite an "encouraging" showing in advertising sales last week.

Sinclair isn't weathering this storm alone. Hearst-Argyle Television Inc., which owns or manages 28 television stations, including WBAL-TV (Channel 11) in Baltimore, reduced its third-quarter earnings projections last week, blaming similar circumstances.

"Marketers are less concerned about shouting from the rooftops and more concerned about battening down the hatches," said Steve Vonder Haar, director of media and entertainment strategies for the Yankee Group, a consulting firm in Boston.

"Now you have the twin impact of reduced ad revenue coupled in many cases with increased programming costs" of tracking the story, he said.

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