Broadcast executive Albert M. Holtz would like to add a few television stations to his two-station chain, but until recently he hasn't seen much on the market that he thought was worth the price.
"There's been big problems lurking in those balance sheets," said Holtz, who is president of Pittsburgh's Meridian Communications Corp.
Now, though, the shakeout that has gripped the nation's non-network, or independent, television industry is quickly dropping station prices and creating buying opportunities for stronger companies. Amid the gloom at last week's annual convention of the Assn. of Independent Television Stations, some broadcasters talked eagerly of the opportunities they saw in stations that have been run aground in the past 18 months by high program expenses, soft advertising revenues and increased competition.
Some predict that in the next year, as more troubled stations file for bankruptcy protection, some will be snatched up at deep discounts by financially stronger station chains, Hollywood studios and other companies, thus accelerating the consolidation of the industry.
"These deals didn't make sense before; there wasn't enough distress out there," said Holtz. "Now there is, and I'm going to be looking for stations like crazy."
The industry's distress was evident all last week, even as the independent station executives met at the Century Plaza to ponder their industry's future.
WTTV-TV, an Indianapolis station principally owned by investment bank Drexel Burnham Lambert and its executives, sought bankruptcy protection, as did independent WGGT-TV in Greensboro, N.C. Meanwhile, program syndicators who are the major creditors of the former operator of Boston's WQTV-TV filed a petition in bankruptcy court in Los Angeles to force that company into involuntary liquidation.
The rapidly declining prices of stations were also evident last week, as Lorimar-Telepictures said it will pay $21.25 million for station WPGH in Pittsburgh, down from a $35 million price negotiated last July.
Some broadcasters see these developments hastening a new era in the independent television business.
In the past eight years, more than 150 independent stations have been launched, many by entrepreneurs with little broadcast experience who have relied on speculative capital raised through limited partnerships and high-risk, high-yield "junk bonds." From now on, some broadcasters say, the independent television business will be increasingly dominated by multi-station chains with more conservative financing strategies.
These larger firms will tend to have more executives with programming and financial expertise needed to make the tough decisions that face television stations, say broadcasters, such as how much to spend on attractive but expensive programming.
"It's tough for a guy who's come from the car business to make a decision like that," Holtz said. "When this shakeout is over, there will be fewer of these inexperienced people around."
Because multistation companies operate in several markets, they will be better insulated against softening of the regional economy, and will be more attractive to lenders.
While the increased number of stations in recent years was largely in single-station companies, "the stand-alones are going to have a harder and harder time competing with the chains," said Tim McDonald, chief executive of TVX Corp., a Norfolk, Va.-based chain that plans to expand to 12 stations with the purchase of five Taft Broadcasting stations this year.
Among the companies on the prowl for promising distressed stations is a new firm backed by producer Norman Lear, Act III Communications, based in Atlanta. On Dec. 31, Act III purchased independent station WNRW-TV in Greensboro, N.C., from TVX Corp. and is looking to purchase several more this year, said U. Bertram Ellis, the company's president.
Troubled stations can return profits if purchasers know which to pick and have "patient money" that can be invested for five or more years without pay-back, Ellis said.
Meridian Communications' Holtz said he may be competing with Hollywood studios in his search for salvageable stations. They are in a good position to turn profits from distressed stations because of the cost advantage they would have in using their own programming, Holtz said, noting that Lorimar-Telepictures, MCA and other suppliers have already shown an interest in additional station acquisitions.
May Spur Sales
The outcome of the pending Grant Broadcasting System bankruptcy might also spur the sale of distressed stations, depending on its outcome, some broadcasters believe.
If Grant, which owns three stations, is able to shed part of its $200 million in programming debt as part of the Chapter 11 proceeding, it will gain an important cost advantage against competitors in the Miami, Chicago and Philadelphia markets where its stations operate.
Other financially distressed stations may follow Grant into Chapter 11 if its effort seems likely to succeed, Ellis predicted. And those stations would become valuable to potential purchasers--and dangerous to competitors--as they shed their debts, he said.
"If Grant blazes a trail, then lots of others will follow," he said. The prospect concerns Ellis, whose new station competes with WGGT-TV, the Greensboro, N.C., independent that sought Chapter 11 protection last week.