Belo Corp. says the damage of Hurricanes Katrina and Rita will cost the company $7.1 million and delay its acquisition of New Orleans UPN station WUPL from Viacom.
In New Orleans, CBS affiliate WWL, one of Belo’s top stations, was hard hit by Katrina. Several weeks later, its Houston CBS affiliate, KHOU, was impacted to a lesser extent by Rita. Belo says the storms cost the company $3 million in revenue and $4.1 million in expenses.
The company is also delaying closing its deal to buy WUPL from Viacom because of uncertainty in the market. “The assessment everyone is trying to make is what kind of physical or equipment damage was incurred. What are the insurance issues? How do we get all of that repackaged?” asked Belo Chairman and CEO Robert Decherd, on a conference call with analysts. More importantly, he added, “What does the New Orleans market look like three to five to seven years from now in terms of its revenue generating capacity?”
In 2004, WWL accounted for 2.4% of Belo’s total revenue. Before Katrina, the station projected to take in $11 million in the fourth quarter, but the company has revised that to $2 million to $3 million. During the storm, WWL lost money from days of wall-to-wall commercial-free coverage. The station was also forced to evacuate its entire team from New Orleans to Baton Rouge, where it operated for several weeks. Despite the devastation, WWL never lost signal and stayed on the air continuously.
But Katrina has radically changed the New Orleans market. The storm disrupted Nielsen ratings for months, including the November sweeps period. Thousands of residents have fled, which will alter the market’s size and revenue.
Belo previously said it would put off the planned construction of a new broadcast center for WWL. The station was scheduled to break ground on the day Katrina made landfall.
WWL is trying to get back to business. “WWL's entire sales team is on the street, actively pursuing business and advertising bookings are steadily improving,” Decherd said. “ We believe this leadership position, coupled with the station's singular performance during and since Katrina constitutes a valuable competitive advantage that will contribute significantly to the station's ability to rebuild its advertising base as the New Orleans market gradually recovers.”
Overall, Belo’s TV station revenue fell 6.6% in the third quarter, including the $3 million in lost revenue from the hurricanes and a $3.5 million increase in network compensation. Revenue also suffered because this is an off year for political races and the Olympics. In the third quarter 2004, Belo stations took in $22 million in political and Olympics monies, but political revenue accounted for just $1.5 million in the third quarter 2005. In another blow to the stations, automotive revenues dropped 6.4% compared to the same period last year.
Other Belo stations are helping take up the slack from WWL. At KHOU Houston, revenue increased 15% in the third quarter, despite a $500,000 loss from Hurricane Rita. In the July ratings period, Belo says its stations ranked no. 1 or no. 2 in 13 of its 15 markets.
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