November 05, 2004|By Andrea K. Walker | Andrea K. Walker,SUN STAFF
Two days after President Bush's re-election, executives at Sinclair Broadcast Group Inc. said they believe they have benefited from the media buzz stirred up by their decision last month to air a news special that included criticism of John Kerry's anti-war activism when he returned from fighting in Vietnam.
During a conference call to discuss third-quarter earnings that fell 46 percent, Sinclair executives told analysts that although they thought the media mischaracterized the news program, the barrage of publicity generated a boost in ratings for some of its newscasts and introduced new viewers to its stations that reach one-quarter of the country.
"The thing that has really gone unnoticed by most is the promotional value we've received ... which is probably worth tens of millions of dollars," said David D. Smith, president and chief executive officer of the Hunt Valley company, one of the largest independent owners of television stations.
"What's the promotional value of being on Good Morning America for five minutes?" Smith asked. "What's the promotional value of being on every cable news channel literally for a period of six to eight days and being the topic of conversation. What's the effect of being in the print media a multiple number of times."
Sinclair said its bright outlook reflected the turn of events since nearly a month ago when it directed its stations to air parts of a controversial documentary Stolen Honor: Wounds That Never Heal.
The film included interviews with veterans who contended that American prisoners of war in Vietnam were held longer and abused because of Kerry's protest against the war after he completed his tour of duty.
The company drew criticism from Democrats on Capitol Hill, warnings from analysts that they'd face retribution from regulators and rejection from some advertisers and investors. Sinclair's stock fell 17 percent to a three-year low. But after the company softened its stance on airing the documentary, its stock rebounded.
Bush's re-election was seen as good news for the company, helping the stock to rise nearly 4 percent Wednesday.
Shares retreat
But yesterday, Sinclair's shares fell 15 cents, or 2.1 percent, to close at $7 in an up market. Sinclair reported yesterday that third-quarter earnings fell as it faced a decline in advertising in the auto, retail, fast food and beer and wine industries.
Net income fell to $1 million this year for the quarter that ended Sept. 30 from $3.9 million in the third quarter last year. Diluted income was 1 cent per share this year compared with 5 cents in the quarter last year.
The Federal Communications Commission, which regulates use of the public airwaves, remains in Republican control. Some experts believed that the company, whose controlling family are heavy Republican contributors, would have faced greater scrutiny of its licenses, especially in markets where it controls more than one station, had the Democrats won.
Smith said yesterday that the company made more advertising revenue during the Oct. 22 show it ultimately aired about political documentaries than it would on a normal Friday night, despite the fact that many companies pulled their commercials. Oak Tree Furniture in Columbia was the only business that advertised during the show on Sinclair's flagship station in Baltimore, WBFF-TV.
"We made more revenue during that show than we would across the entire platform normally," Smith said in response to an analyst's question, without elaborating. "We did that without selling as much ads."
Sinclair also said ratings for its news programs have recently risen in markets such as Dayton, Ohio - the state considered the political epicenter of the president's victory.
Some critics, however, wondered yesterday whether Sinclair was exaggerating the benefits of the controversy.
"I don't know about audience retention and whether he is correct, but it doesn't seem to pass the common-sense test," said Ben Scott, policy director for Free Press in Northampton, Mass.
The nonprofit earlier this week challenged the license renewal applications of several Sinclair stations in North Carolina and South Carolina, arguing that the company was illegally operating too many stations in certain markets.
Throughout the nation, few viewers actually watched the much-discussed show. In 15 of the largest markets in which Sinclair aired it, the program averaged a 2.9 rating and 5 share. That means 2.9 percent of the television homes in those markets were tuned to the show, accounting for 5 percent of all the homes with TV sets in use at the time, according to Nielsen Media Research.
Bush win downplayed
The company yesterday also downplayed the significance that Bush's win would have on easing restrictions on the number of media outlets one company could own.
Sinclair lobbied in favor of changing the rules, as did Tribune Co. of Chicago, owner of The Sun. The FCC voted last year to allow greater concentration of media ownership, but the 3rd U.S. District Court of Appeals in Philadelphia overturned that decision.
"I don't think the administration at this point in time is going to do anything it hasn't already done, which isn't much," Smith said.
Some media analysts had predicted that Sinclair's TV license renewals would be scrutinized more closely by the FCC, although that threat was considered greater had Kerry won.
Sinclair did not comment on how the documentary affected advertising for the fourth quarter, but Moody's Investor Service lowered its outlook on the company to "negative" from "stable" because of lower-than-expected revenue growth this year.
Moody's also raised concerns about Sinclair management's intervention in the programming of its 62 television stations.
