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Earnings Trials and Tribune-lations

A weak ad market, problems at WB network and the absence of political ads hammered financial results at Tribune Co.’s TV stations during the third quarter.

For the three months ended September, the Tribune stations’ revenues dropped 6% to $302.3 million, while operating cash flow plunged 21% to $106.6 million.

“Right now it is a buyer's market,” Tribune President Dennis FitzSimons told investors in a conference call Thursday. TV division President Pat Mullen abruptly exited the company last week without much explanation.

FitzSimmons is hoping for a bit of an ad rebound. “We would hope to see in 2006 some categories come back, as well as political and Olympics tightening things up a little bit.”

Tribune Co. said it has reduced the value of its 22% stake in the network to zero. (Time Warner owns the remaining 78%).

That sounds like a headline, but Harris Nesbitt media analyst Lee Westerfield characterized the disclosure as an inconsequential bookkeeping move, saying that the network’s accumulated losses had simply now equaled the $130 million Tribune has invested in The WB over the years.

Of Tribune’s 26 broadcast stations, 19 are WB affiliates, including properties in giant markets like New York, Los Angeles and Philadelphia. So far in the three-week-old fall season, WB has seen a 12% decline in audience. That trickles down to Tribune stations.

Still, Tribune next week expects to start talks to renew its affiliation agreement with WB, which expires this year.

Tribune is trying to cut costs at both its newspapers and TV stations, downsizing news divisions in Philadelphia and San Diego and tapping the local NBC O&O stations to produce newscasts for the stations.

But FitzSimons says there’s not much cutting left at the stations group. “The TV side is more a function of programming costs, and the [profit] margin situation is a revenue issue. The declining revenue in this soft ad environment has made it very difficult.”