Sinclair says cash for content will grow

The Baltimore Sun

Sinclair Broadcast Group Inc. said yesterday that it expects to almost double to $48 million this year the revenue it receives from cable operators and others who pay to retransmit its local television signals, providing what could become a steady profit stream for a company that has led the industry in fighting for retransmission fees.

Those figures emerged as Hunt Valley-based Sinclair announced its fourth-quarter earnings.

Sinclair shares reached a 52-week high yesterday, climbing 4.7 percent to close at $14 on Nasdaq.

The company, one of the largest independent television station owners, has been aggressively seeking cash for its content in an industrywide battle over so-called retransmission consent fees, which cable companies have not paid in the past.

Last year, Sinclair said it generated $25.4 million in revenue from retransmission consent deals.

Sinclair, which owns or operates 58 stations, said it reached retransmission consent agreements with 75 percent of cable television and video providers in its markets.

Sinclair also received concessions from a New York cable operator after a high-profile fight over the fees pushed Sinclair to pull stations such as Fox and CBS from some cable systems in the Midwest and South.

David D. Smith, Sinclair chairman, president and CEO, urged other broadcasters to demand compensation for their programming in a conference call with analysts yesterday.

"I think it is now incumbent upon the rest of the industry to kind of recognize what we've been able to accomplish and kind of step up and start asking for what their due is," Smith said. He pointed to CBS, which has said it would ask for cash for its content in future negotiations, as the next catalyst to push the fight forward.

If the rest of the industry follows suit, Smith said Sinclair could double its retransmission revenue by 2010.

Traditionally, cable providers have not paid for a broadcaster's signals, arguing that they are available free over the air. Doing so would mean higher cable rates for customers, they say.

But broadcasters like Sinclair have been asking for fees in recent years, saying cable companies were essentially reselling local programming.

The fight may affect Maryland residents next month. Sinclair is currently negotiating with Comcast Corp., the nation's largest cable provider, over similar fees for 30 stations, including Baltimore's Fox and CW networks. Both sides have until the end of the month to reach a deal.

David B. Amy, Sinclair's chief financial officer, said the company is optimistic about reaching an amicable agreement.

"We've always had a good relationship with them," he said.

In contrast, Sinclair blocked programming last month from more than 20 TV stations on cable systems in the Midwest and South. The nearly four-week impasse ended two days before the Super Bowl. Mediacom Communications Corp. of Middletown, N.Y., - which has not paid Sinclair in the past for retransmission rights - agreed to pay to carry the stations for the first time.

Sinclair reached an agreement with Time Warner Cable last month. Financial terms of that deal were not disclosed.

But analysts say there was at least some cash involved in Sinclair's deal with Time Warner, partly driving up the company's stock price in recent weeks.

John Blackledge, an analyst at J.P. Morgan Securities, who does not own Sinclair stock, said investors have been encouraged by Sinclair's ability to generate retransmission revenue in an industry that has seen its advertising base erode in recent years.

"When you think about it, they're not a small company, but as a pure broadcasting company, trying to get compensated for those signals, it shows there is value in their signals and the content is valued by cable companies and satellite operators," he said.

Sinclair said yesterday its fourth-quarter profit was helped by higher political advertising revenue. Net income was $11.1 million, or 13 cents per share, in the three months ending Dec. 31, compared with a loss of $1.75 million, or 2 cents per share, in the corresponding period of 2005.

The company said fourth-quarter revenue was $198.1 million compared with $178.8 million in the year-ago period.

Revenue from political advertising of statewide and congressional elections was $21.6 million in the fourth quarter, up from $1.4 million in the comparable period of 2005.

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