Emmis Communications Corp. chairman and CEO Jeff Smulyan would consider selling his TV-station properties, worth $1 billion, if the industry’s competitive position against cable does not improve, according to A.G. Edwards & Sons Inc. analyst Michael Kupinski.
Smulyan is urging broadcasters to pool their digital spectrum and offer consumers a blend of HDTV programming from TV stations and 30-50 cable networks for $25 per month. Consumers would need to purchase $99 set-top boxes.
Smulyan is also an advocate of cable operators paying TV stations for carriage.
But in a Feb. 9 meeting with Kupinski, Smulyan expressed concerned that his wireless-cable proposal wasn’t taking off and that TV stations were failing to generate second revenue streams built on cable license fees.
Smulyan “voiced building frustration with television given that his efforts to provide an alternative to cable have been slow to get off the ground,” Kupinski said in an eight-page report.
Emmis, based in Indianapolis, owns 23 radio stations and 15 TV stations. According to Kupinski, the TV stations alone are worth about $1 billion.
Smulyan told Kupinski that if TV-station owners don’t rally around his wireless-cable plan and fail to get cash from cable, he would exit the TV business at some point.
“His view is that the industry must move forward on these initiatives or suffer the fate of declining business models and lower values for television properties,” Kupinski wrote. “His view is that he would sell television if the outlook was not favorable.”
Last April, Smulyan unveiled his wireless-cable proposal at the National Association of Broadcasters convention in Las Vegas, claiming that a national system could be put in place for $700 million. He said the plunging cost of digital-video-recorder technology would allow TV stations to provide nonlinear programming downloads that consumers would access at their leisure, perhaps for a fee.
Smulyan’s proposal was modeled after U.S. Digital Television Inc., which is using digital-broadcast spectrum to offer wireless cable in a few markets for $19.99 per month. The service includes local stations and popular cable networks, including ESPN and Fox News Channel.
Two weeks ago, Philip Lombardo, CEO of Citadel Broadcasting Corp. and joint board chairman of the National Association of Broadcasters, indicated that Smulyan’s idea had not caught on with the industry.
“It’s still active. It’s slowed down. Jeff is still putting groups together,” said Lombardo, an early backer of Smulyan.
Last week, the Federal Communications Commission voted 4-1 to ban TV stations from demanding cable carriage of multiple digital-TV services, holding that cable had to carry just one service per station after TV stations complete their transition to digital-only transmission.
Lombardo indicated that failure to get multicast must-carry from the FCC might induce TV stations to give pay TV services a closer look.
“There’s a perfect illustration of what would happen if multicast services are not provided by over-the-air broadcasting,” he said.
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