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Collateral TV Damage Less Than Expected

TV stations are exhibiting some battle scars from the Iraq war's disruption of advertising, but the damage is not as severe as some had feared.

Among TV-station groups posting financials for their first quarters, Tribune Co. and Emmis Broadcasting's results were strong, even startlingly so, Gannett and New York Times posted sharp declines in operating cash flow, and E.W. Scripps showed a smaller dip.

"Things were not as bad as people expected they would be in the first quarter, and we're still looking for some conviction on the second quarter," said Bear Stearns TV and radio analyst Victor Miller. "We'll start seeing that this week.

"Groups with heavier Fox, UPN and WB affiliations," he added, "are showing much less disturbance from the war because they carry less news and had fewer interruptions."

National advertisers started slowing spending on TV stations in February. Then, after the U.S. launched its attack on Baghdad March 19, networks pre-empted many local avails, and advertisers pulled out of news programming.

At Gannett, broadcasting revenue was down about $9 million, or 5.4%, and cash flow dropped 11%. Part of the problem was the absence of Winter Olympics revenues that enriched the group's 13 NBC affiliates last year. But both revenues and profits were crunched by the war. The stations "had some additional cost for war news coverage," said CEO Doug McCorkindale. "They lost the advertising where they were blanked out on most of the war."

Tribune is benefiting because its station portfolio is loaded with WB affiliates. The WB, which is partly owned by Tribune, has posted strong gains in valuable young-adult demos, fueling Tribune's local stations as well. The acquisition of Acme Communications stations in St. Louis and Portland, Ore., accounted for just two points of Tribune's 12.9% revenue gain during the quarter.

"We're seeing a share increase in most of our markets," said Tribune CEO Dennis FitzSimons. "We still have seen automotive very healthy. The movie category has been very strong for us. Again, this is where the young demos benefit us. And the retail category has been good, also. We have seen a decrease in direct-response, and the tourism category, as you might imagine, has been soft."

Emmis Broadcasting last week posted 11% gains in TV sales and cash flow—for its fourth fiscal quarter that ended Feb. 28, two weeks before the start of the war. No matter, said CEO Jeff Smulyan. "We're clearly pacing above our peers. I think, in March, we're the only TV company with positive numbers, maybe one of the only radio companies with positive numbers."

What's especially surprising is that results are strong even though, this year, Emmis's Fox stations didn't have the Super Bowl they had last year and its NBC stations didn't have the Winter Olympics.

Scripps's problems were rising expenses. TV-station revenues increased 7% to $70.2 million. But operating cash flow fell 2% because of the cost of covering the war, including setting up a TV bureau in the Washington offices of the Scripps Howard News Service.

New York Times station revenue went flat for the quarter, coming in at $32.2 million. But profits dropped 13% to $7.2 million because of higher payroll costs, partly due to an overhaul of CBS affiliate WREG-TV Memphis, Tenn.