BELO. Belo may be more than 150 years old, but as Dennis Williamson explains, the company is starting a whole new life cycle in its own unique way.

Transcription

1 CHANGING THE GAME AT BELO Belo may be more than 150 years old, but as Dennis Williamson explains, the company is starting a whole new life cycle in its own unique way. DENNIS WILLIAMSON IS NOT YOUR TYPICAL CFO. He may have started out his career as an accountant. But almost immediately he took on a series of much different roles, ranging from business manager at KTVL-TV Medford, Ore., in the early years, to senior corporate vice president at Belo Corp., overseeing technology matters. Those experiences are informing his work at Belo, where he is currently executive vice president and chief financial officer. Williamson recently sat down with TFM editor Janet Stilson at Belo s Dallas corporate offices and discussed the unusual gambles that Belo s management seems to routinely take with key staff members. And he made clear that corporate style is just one indication that Belo s corporate DNA is unique. The company also is at a very notable juncture in its life. Back in Feburary, it completed the spinoff of its newspaper holdings into a new entity called A. H. Belo Corp. Belo Corp. is now focused on broadcast TV, cable news networks and a slew of Web sites, and the two companies still share some services. A. H. Belo provides Belo Corp. with Internet, technology and business development support, while Belo Corp. provides A. H. Belo with legal and payroll services. Dunia Shive, Belo Corp. s new president and CEO, noted in the company s annual meeting

2 in May that Belo TV stations hold No. 1 or No. 2 ratings rankings from sign-on to sign-off in 11 out of 15 markets. She reported that the units that are now housed within Belo Corp. generated revenues of $777 million in That included some $23 million in revenue from retransmission consent agreements with cable operators a number expected to grow to $28 million or $29 million in Shive noted the company s interest in acquiring stations to create more market duopolies. The company already has five. In his TFM interview, Williamson talked about the importance of duopolies in a multicast world. The automotive ad slump, disaster preparedness and newmedia brainteasers were also part of the conversation. An edited transcript follows. TFM: Do you think that your managerial background gives you a different mindset than other CFOs out there in the industry? DENNIS WILLIAMSON: I don t know much about other CFOs. But I will say that having operational experience has helped me make decisions in the financial realm, and vice versa. My background is not unusual in this company. Our current CEO, Dunia Shive, was the CFO, and before that was head of finance, and before that had been a manager on the Belo account for an auditing company. And at one point in her career she was COO. So she was very much involved in an operating environment. And I can just name you people well, Paul Fry, our investor relations VP, just got here last summer after managing KGW in Portland. TFM: Is there a chess master moving people around there? WILLIAMSON: It started with Robert Decherd [Belo Corp. s non-executive chairman, who was president and CEO before the corporate split, and who is now head of A. H. Belo]. His thing is, if people can think critically and make sound decisions, they can do it in any kind of discipline. They just have to learn it. He moves the pieces around the board, and you find yourself being asked to do things that you would have never thought you d be asked to do. We ve started putting accounting people here at corporate out into the field and vice versa. Because I really think that seeing the other side of it is really helpful. If you ve had that [field] experience and come to corporate, I think it s easier for you to make decisions. Because you know what impact the decisions will have on the operating environment out at the stations. And if you re in a controller position at one of our operating companies, you know what corporate is trying to accomplish. So there s an understanding that benefits the company as a whole. TFM: In Belo s first quarter earnings report, the decline in auto spending was seen as a key reason why revenue wasn t as high as expected. What do you do to make up for that? The entire media industry is affected by an auto ad pullback, and obviously it s a huge category. WILLIAMSON: Oh, it is for every broadcast station. In our company, in first quarter I think it represented about 24% of advertising revenue. And it was down 10%, which is also very significant. We can t go out and create revenue when it isn t there. I read a projection where [the auto industry is] only expected to sell 15 million units, down from 17 million units. Well, if you re going to sell 2 million less cars, you re going to watch your cost base. Unfortunately, advertising expense is what they re trimming. However, automotive is our fastest growing category on the Internet side. As you may have noticed in our earnings release, we were up over 30% in Internet revenues, and automotive is the largest category there. It didn t offset the 10% decline in advertising, but it s meaningful that it s growing, whether it s on the Internet or core business. TFM: There was a panel at the BCFM Annual Conference that highlighted two Belo Web sites O8sis.com [a Dallas lifestyle site for women] and HSGameTime.com [which centers on high school

3 sports, localized in a number of markets]. Are you planning to roll out more niche Web sites say over the course of the next five years? WILLIAMSON: That s hard to predict. I would say yes, there will be other niche sites. I couldn t predict how many or what type, but as long as there s a sustainable market for it so that economically it s viable, you re going to see broadcasters getting into those sites. TFM: Will video on mobile devices be a big revenue generator? WILLIAMSON: I think there will be a business model there. I don t think anybody has quite figured out what the answer is yet. We ve experimented with quite a number of things weather, news and some other things. And the technology works, but we re kind of struggling with questions like: Where s the market, and what is the market, and what do people want on those devices? There s certainly a lot of use of those devices in terms of texting on them and so forth. And in that case the provider of the device and the network has created the market for it. And for us to intersect with that, the content has to be appealing and compelling. And nobody s figured out the key to that. We re part of the Open Mobile Video Coalition, which is trying to set standards for sending content to different devices. As long as we can get consistent standards for all the different devices, and we can send directly to that device and not have gatekeepers, then it s an open and level playing field for all broadcasting companies. TFM: Bud Brown, the president and general manager of WWL-TV and WUPL-TV in New Orleans, recently told me about the lessons he learned from Hurricane Katrina, about how to prepare for disasters. Has disaster preparedness changed at the corporate level? WILLIAMSON: Yes. One of the things we have done technically, is we can control the master control of every station here in Dallas. All of our logs are prepared here in Dallas for all of our stations and then electronically fed out to all of the stations. So as long as they can continue to run logs, we can operate stations here. Ironically, in a disaster, you re not running commercials. You re running wall-to-wall coverage of whatever it is. As long as the transmitter stays on and that was the key to WWL s success during Katrina they maintained transmission throughout the whole hurricane. Most if not all the other broadcasters transmitters got blown up or they were flooded. We were above the water, and we had generators. So we maintained power, and we kept broadcasting. We had team Belo on site. We had people come from Seattle and Portland and Louisville and Dallas and Houston and St. Louis. They went to New Orleans and worked with our colleagues there. Having compatible systems in terms of technology systems and news editorial systems helped. Because you could come from Dallas and go on a computer and you knew what you were doing. We sent helicopters and trucks, and we had more people helping, because when you go 24 hours a day, you can only do that for about 36 hours, and then you re dead. Technically all our stations are interconnected with a wide area network, so if any station had to abandon its site, we could still operate the equipment through the automation via our wide area network. TFM: Was the wide area network in place before Katrina? WILLIAMSON: We were rolling it out. In fact, Houston could have taken control of WWL at the time. But we didn t have to. TFM: When you consider the multicast opportunities that digital allows, are there other formats beyond news that you d like to get into?

4 WILLIAMSON: Well, that s the big question right now. This is all going to happen on Feb. 9 when analog all goes away. But we ve been experimenting with our digital spectrum for the last four or five years. A station doing HD isn t going to be able to do six additional channels; it ll do one or maybe two. But if you have a duopoly, if you had two stations, and one of them was an independent and didn t require HD for the kind of programming it delivered, then you could have maybe six channels there. TFM: How do you view Project Canoe, the cable consortium working on standards and services that would allow systems to offer interactive advertising opportunities on a national scale? Is it a threat or an opportunity? WILLIAMSON: Well, cable certainly has a leg-up on broadcasters, in the sense that they have two-way back-and-forth to the home. They can get data out of the home, which is a competitive advantage when you go to an advertiser and say, I can tell you who was in that room and what age group saw your commercial. So yes, I think that it s an interesting proposition. They should have been doing this for a long time. And it s interesting that all the cable operators can get together and do something like this, but the broadcasters can t, because that might be seen as collusion. So it s certainly something that we re watching. TFM: And you re getting revenue from operators by way of retransmission consent? WILLIAMSON: Yeah. Belo has had cash compensation for years through the news channels, both in Texas and in the Northwest, which were put together at the same time as our retransmission consent agreements. They re all inter-related. What s new is cable s view now that they have to pay for broadcast content, even if it s not a news channel. Because where they once were the only gatekeeper, now you ve got [telephone and satellite options]. I think there s a recognition on the part of cable, maybe begrudgingly, that they re going to have to pay. TFM: What do you consider to be your biggest challenge? WILLIAMSON: The whole challenge of technology and the different distribution methods that are here and that are coming, and how we participate. As long as we can produce content that the local residents of our communities want to see, how it gets distributed to them is unimportant relatively. We want to be there, wherever they want us. More closely at hand, over the next few years, one of the interesting questions is what will the network and the affiliate relationship migrate to? There are some areas of conflict where what s in the networks best interests may not be in the affiliates. Now, that [tension] has existed for a long time, but with technology as a new element to this, the relationship is undergoing reassessment by both parties. TFM: What makes you most excited when you consider future possibilities? WILLIAMSON: The opportunities that we have at our disposal the wins and the losses that we re going to have that to me is fun. As long as we focus on where we ve been and who we are, relative to our communities and the people who live there, I think we have a great future ahead of us, regardless of how the technology evolves. [At Belo], you find yourself being asked to do things that you would have never thought you d be asked to do.

5 BELO CORP. AT A GLANCE HEADQUARTERS: Dallas, Texas FOUNDED: REVENUE: $777 million NO. OF EMPLOYEES: 3,000 LARGEST MARKETS: Dallas/Ft. Worth, Houston, Seattle/Tacoma, Phoenix BROADCAST: 20 TV stations in 15 markets CABLE NEWS: Regional channels in Texas and the Northwest. Local channels in Phoenix, AZ, New Orleans, LA; Boise, ID; Hampton/Norfolk, VA. Two are alliances with Cox Communications INTERACTIVE: 25 Web sites and several interactive alliances