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Gray's numbers tell TV's story

Atlanta-based Gray Communications Systems Inc.'s results for fiscal-year
2001 (ended Dec. 31) provide a short course in the economic challenges that
faced broadcasters.

The combination of Sept. 11, the digital build-out, the lack of political ad
dollars, decreases in network compensation and a generally tanking economy did a
number on Gray's 2001 numbers and forced cost-cutting measures.

Gray -- which owns 13 TV stations in the South and Midwest -- saw broadcast
revenues slide 14 percent versus 2000, from $120.6 million to $106.4

It would have been worse the company said, except for strong national ad
sales (actually up 0.4 percent for the year to $31.2 million), particularly
automotive. Local sales, by contrast, were down 3.3 percent to $63 million.

The chief culprit for the revenue slide was the lack of political money,
which virtually disappeared from $5.3 million in 2000 to only $75,000 in

There was a sort of silver lining to the absence of political spots, though.
Gray said one of the reasons for the strong national sales was the availability
of time not taken up by political ads, which are sold at a discount.

Also accounting for the drop, the company put the cost of ad-free coverage of
Sept. 11 at $1 million over its 13 stations and pointed to a decline of $1.4
million in network compensation, primarily from the renegotiation with CBS of
affiliation contracts for three stations in Texas.

Although Gray did not break out a 2001 expense for digital-TV conversion, it
said its total estimated conversion expense between 1999 and 2002 will be $31.4
million, of which it has incurred $10.6 million to date. That will put its 2002
digital-TV expenditures at just north of $20 million.

The company trimmed operating expenses by 2.3 percent, or $1.5 million, in
2001 to ease the pressure on the bottom line. More than one-half of that
($833,000) came from a cut in payroll.

Gray said it believes 2002 will see low- to mid-single-digit
increases in local and national revenue, excluding political spending.