Fox duops in Chicago

The Fox TV station group will have duopolies in the top three markets and nine overall with its deal last week to pay $425 million to Newsweb Corp. for Chicago UPN affiliate WPWR-TV.

Sources say Fox, which already owns WFLD(TV) Chicago, outbid WBBM-TV owner Viacom and WGN-TV owner Tribune to form the Chicago combo.

Layoffs are a near certainty. SG Cowen media analyst Peter Mirsky says, "second stations typically run at 5%-15% of the manpower of the primary station, with about 2% of the equipment."

Mirsky estimates Fox is paying 15 times 2002 cash flow of about $28 million, in line with prices for large-market TV stations. He estimates station profit margin at 40%-45%, which could hit 50% or more under Fox.

The acquisition is expected to close by year's end and would give Fox duopolies in New York, Los Angeles, Chicago, Dallas, Washington, Houston, Minneapolis, Phoenix and Orlando.

Fox likes the duopoly strategy because it gets a big boost in ad dollars while operating expenses of the second station are only an additional 15%-20%. Llachlan Murdoch, deputy COO, News Corp., and head of the station group, said the company's existing duopolies are now generating increased profit margins. Mitch Stern, who has day-to-day responsibility for the stations, said the acquisition was "important, particularly at a time when we are seeing a distinct recovery in the advertising market."

WPWR-TV is owned by Newsweb Corp., founded and headed by Fred Eychaner. Originally a newspaper printer, Eychaner bought WPWR-TV, then ch. 60, in the mid 1980s for a reported $11 million, sold ch. 60 to Home Shopping Network for $25 million and, after swaps, moved WPWR-TV to ch. 50.

Newsweb says it may look for other media properties.

—Additional reporting by Dan Trigoboff