Tropical Turmoil

In the tropical paradise of Honolulu, local broadcasters are bracing for a shake-up. Emmis Communications, which owns top-rated Fox affiliate KHON and No. 2 CBS outlet KGMB, is selling the stations and breaking up a duopoly.

The two stations share back-office functions and collaborate on ad sales. While they maintain separate news departments, the newsrooms pool video and reports. The split will alter the competitive landscape in the country's 71st-largest TV market.

Emmis, which is unloading all 16 of its TV stations to focus on its radio properties, cut a deal two weeks ago to sell KHON to SJL Broadcast Group and investment firm Blackstone Group and is still looking for a buyer for KGMB. It's highly unlikely the duopoly would be able to stay intact, as FCC ownership guidelines dictate that if a buyer wanted to acquire both KHON and KGMB, they'd need a waiver. To qualify, the duopoly must meet certain conditions, such as one station is failing or is not among the top four in the market. With both KHON and KGMB highly rated and financially sound, a package deal is doubtful. (Emmis' dual ownership was grandfathered.)

Along with being No. 1 and 2 in prime time and late-news ratings, the stations are the top billers in the market. KHON took in $19.5 million in gross revenue last year, and KGMB nabbed $13.5 million. Overall, local broadcasters in Honolulu tallied $63.3 million in 2004, up from $60.2 million the year before.

The market covers all of Hawaii. To carry their signals across the islands, broadcasters use sister stations on Maui and the Big Island. After a downturn in the 1990s, business is picking up. “There is strong growth in tourism, construction and defense spending,” says Hearst-Argyle-owned ABC affiliate KITV General Manager Michael Rosenberg. While those categories are not major advertisers, Rosenberg says a trickle-down effect prompts traditional categories, such as automotive and fast food, to increase spending.

With ownership changes afoot, the competition is poised to pounce. KITV recently added a satellite truck. Raycom Media-owned NBC affiliate KHNL leases the market's lone helicopter and has a new morning anchor team. Its sister station, WB affiliate KFVE, broadcasts more than 100 University of Hawaii sports events—from women's volleyball to men's football—each year. KHNL produces a 9 p.m. news for KFVE, and the stations work together on ad sales. Independent KIKU is geared toward the island's 47% Asian population. (See story on page 14).

The market's isolation continues to push stations to innovate. “These are islands where not a lot of people come and go,” says KHNL General Manager John Fink. “We have to try new things.”

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