March 19, 2024

DealBook: Gannett to Buy Belo TV Stations, Continuing to Diversify Holdings

9:59 p.m. | Updated

Leisa Zigman, an anchor at KSDK, a Gannett-owned television station in St. Louis.Tim Parker for The New York TimesLeisa Zigman, an anchor at KSDK, a Gannett-owned television station in St. Louis.

Owning a big-city television station can be a good business bet, even as the sector faces formidable competition from the Internet.

But a better bet is owning 30 or 40 of them.

That is the thinking behind a surge of consolidation in local television that crested on Thursday when the Gannett Company agreed to buy the Belo Corporation for about $1.5 billion in cash. Analysts said the deal was the biggest deal in local television in more than a decade.

For Gannett, best known for owning USA Today and a batch of smaller newspapers from coast to coast, the addition of Belo will nearly double its number of stations, to 43, from 23. It is the latest step in a yearlong strategy by Gannett to diversify its media operations amid continued struggles in the print industry.

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In announcing the acquisition on Thursday morning, Gannett said that after the Belo transaction closes, revenue from digital and broadcasting operations will make up two-thirds of its earnings. Investors were thrilled; Gannett’s stock closed at $26.60 on Thursday, up 34 percent from Wednesday.

“There is doubtless more to come,” said Robin Flynn, a senior analyst with SNL Kagan. “The next round of TV station consolidation is coming fast and furious, and the larger deals are getting done faster than most people expected.”

Station owners like Gannett have several strategic reasons for wanting to grow. Along with obvious efficiencies, bigger companies tend to have more leverage when they negotiate with cable and satellite distributors over retransmission fees — the broadcast equivalent of the per-subscriber fees that cable channels receive. These fees, although a relatively new revenue source, have become vitally important to stations as they try to offset audience and advertising declines.

Gracia C. Martore, president and chief of the Gannett Company.Carlo Allegri/ReutersGracia C. Martore, president and chief of the Gannett Company.

In many cases, Gannett’s stations earn higher fees than Belo’s, and because of contractual clauses “we will be able to move them to our rates shortly after we close the transaction,” Gracia C. Martore, Gannett’s chief executive, said in an interview.

Being bigger is also better when stations negotiate with the networks that provide them with programming. Networks like CBS have been aggressive about receiving a slice of retransmission fees, something known in the industry as reverse compensation. “Scale has become much more important” in those discussions, Ms. Flynn said.

Having a presence in more markets across the country — Gannett will have 21 stations in the nation’s top 25 markets when the Belo deal closes — can also help on the advertising front. Local stations in states with competitive elections have looked particularly valuable to investors as a result of the tremendous surge in political advertising every two years.

“Even though campaigns are doing more online with digital and social media, they’re still spending a ton at the local station level to get their messages out,” said Mark Fratrik, a vice president and chief economist for BIA/Kelsey.

His company’s research found that the Belo acquisition would vault Gannett past one of its chief rivals, the Sinclair Broadcast Group, to become the No. 3 local station owner in the United States, by revenue. The No. 1 owner is News Corporation, which owns 27 stations as well as the Fox broadcast network; No. 2 is the CBS Corporation, which owns 29.

Sinclair has been on a buying spree in the last 18 months, spending a combined $2 billion on smaller groups of local stations. Executives at Sinclair have cited many of the same reasons that Ms. Martore did on Thursday.

Belo had been concentrating on the broadcast sector. In 2008, the company was separated from its newspaper properties, including The Dallas Morning News, which became a publicly traded entity known as the A.H. Belo Corporation.

News of the deal heightened interest in other media stocks on Thursday, including Sinclair, which rose nearly 13 percent, and another rival, Nexstar, which rose more than 10 percent.

Dunia A. Shive, president and chief of Belo.Belo, via Associated PressDunia A. Shive, president and chief of Belo.

Ms. Martore said Gannett was open to “other broadcast or digital opportunities,” but that the Belo case was unique. She began talking with her counterpart at Belo, Dunia A. Shive, some time ago. The two eventually concluded that a combination made sense, and began exclusive talks. Under the terms of the deal, Gannett will pay $13.75 a share in cash, 28 percent above Belo’s closing price on Wednesday. Gannett will also assume $715 million of Belo’s debt. The deal is expected to close by the end of the year.

In several cities, the combined company will own multiple television stations; in St. Louis, it will own the top two, KSDK and KMOV, which usually would violate government rules. It will avoid that by using a tactic that has become common in local television: a shared services arrangement. The affected stations formerly owned by Belo will be structured so that they will not technically count as part of Gannett, but they will share resources like satellite trucks with the Gannett stations.

The public interest group Free Press, which calls this tactic “covert consolidation,” lamented the Belo deal.

“This increasing concentration of ownership — coupled with covert consolidation that combines formerly competing newsrooms — is failing local communities,” the group said.

Article source: http://dealbook.nytimes.com/2013/06/13/gannett-to-buy-belo-for-1-5-billion/?partner=rss&emc=rss

Off the Shelf: Compelling Tales, Rarely Told Well

Let me be the first to say that there are many exceptions — “Greed and Glory on Wall Street,” “Liar’s Poker” and “Den of Thieves” come to mind. Many fine authors are making an effort to tell great business stories. But of the sprawling mass of books that spill across my desk, far too many just aren’t very good.

The problems are as varied as the books themselves; enumerating them could take an entire page of this newspaper. Some are too technical, some not technical enough. Some topics are hopeless: I’m not sure anyone can shape the Greek debt crisis into a narrative an American would read.

Some authors aren’t able to gain access to the business people they chronicle, and thus produce books that feel incomplete. Some don’t know how to tell a story. Some don’t even try. Some books just plain put me to sleep.

I co-wrote my first business book in 1990 — it did O.K. — and ever since, I’ve wondered why so few take flight. There are theories, the kind business writers will discuss after a couple of beers but generally refrain from debating in public.

For one thing, these books aren’t easy to create. Businesses, and especially American corporations, offer scads of compelling human dramas, the vast majority of which go untold, even unnoticed. It’s the corporate world’s zeal for secrecy — and the tendency of companies to avoid publicity they can’t control — that makes these tales tough to find and even tougher to tell.

The difficulty of spinning a good business yarn, however, doesn’t fully explain quality issues. One problem for the business reader is that too many of the authors aren’t gifted writers; they are chief executives, professors and experts in their field, and the lack of professional craftsmanship shows.

A lot of business books I see are written by consultants and others who I suspect seek to use the books as giant business cards, a way of garnering attention, or worse, speaking engagements.

But the root problem, I’ve long sensed, isn’t the amateurs, it’s the professionals — those of us who write about business for a living.

It’s an open secret that many business journalists didn’t set out in that direction. I know I didn’t. Like me, many of my peers stumbled into the field by opportunity or accident and learned the ins and outs of the corporate world on the fly. (When I joined The Wall Street Journal, they had to explain to me the difference between revenue and profit.) For some writers, business journalism remains a ghetto they wouldn’t mind fleeing.

Yes, there are many contented business writers. But the number of e-mails I have received from those seeking advice on how to escape to broader horizons indicate that many are far from satisfied with their lot.

And therein lies the theory that dares not speak its name: Could it be that business journalism has not attracted the best and the brightest? There are many good writers out there, to be sure, but as a whole I’ve never felt that the business journalists compare favorably to those who follow politicians, serial killers, even football players.

Seriously, if you had to choose between covering the White House and pestering some zipper-lipped P.R. drone at Google or Intel for a quote on their latest earnings, which would you pick?

Airing this notion won’t win me any popularity contests, I know, but it’s a theory I can’t ignore.

I’m eager to hear what you think, by the way. Maybe I’ve just missed the really good books this year. What’s the best business book of 2011 so far? If you have a candidate, e-mail me at sunbiz@nytimes.com.

Article source: http://feeds.nytimes.com/click.phdo?i=3e91a70f3e89ce062da3de37dd62bbcc

Strategies: The Benefits of Telling the Ugly Truth

Then he tells you he’s not. “It was just luck,” he says.

That oil stock, the one that jumped 80 percent? A good pick, sure — but he had no idea it was that good. “It was a surprise,” he says, “Don’t count on it happening again.”

Disappointing? Maybe. But it sounds like the truth, and that may mean that the rest of what he says is true, too. This kind of self-deprecation may not be standard patter for financial advisers, but Shlomo Benartzi, a behavioral economist at the University of California, Los Angeles, says it should be.

In order to build trust and credibility, Professor Benartzi suggests, advisers should come right out with the truth, especially when it’s ugly. If advisers have been merely lucky — or have made recommendations that were outright failures — they should come clean about it, he says. Such admissions may be off-putting initially, he said in an interview, but as long as they are followed by a clear description of what an adviser is doing well — assuming, of course, that something is being done well — candor is good business.

“From a behavioral standpoint, it’s really better for your credibility if you’re honest,” Professor Benartzi said. If you don’t take credit when the market rises, for example, you may not have to take responsibility when it goes down.

In a new study for Allianz Global Investors, a unit of Allianz, the financial giant, he draws on the broad findings of behavioral economics to make some startling recommendations for advisers. The paper — which assumes that most advisers are honest and won’t use their newly acquired psychological acumen to exploit clients — is titled “Behavioral Finance in Action: Psychological Challenges in the Financial Adviser/Client Relationship and Strategies to Solve Them.”

Behavioral economics holds that individuals do not necessarily act rationally and in their own self-interest. Instead, they make intuitive decisions that may be swayed by phenomena like “framing.” Far more people are likely to buy a package of cold cuts, for example, if it’s framed, or labeled, as “90 percent fat-free” than if it’s labeled “containing 10 percent fat.”

The paper opens what it calls the “behavioral finance toolbox” for advisers, explaining how to overcome obstacles posed by investors’ “intuitive minds.”

For example, research by Professor Benartzi and Richard H. Thaler, an economics professor at the University of Chicago — and a regular contributor to Sunday Business — found that people were generally likely to save more if asked to “precommit” to doing so in the future. Their findings have been incorporated in many 401(k) plans.

By agreeing to deduct a certain amount of money from your paycheck starting next Jan. 1 and to increase the deduction every New Year’s Day thereafter, you can procrastinate — you don’t have to do anything now — yet increase your savings substantially. And if those increases coincide with raises, your take-home pay won’t decline, avoiding “the mind’s hypersensitivity to loss,” the paper says.

You can also opt out freely — which may make you more comfortable with the plan in the first place.

The new paper takes precommitment strategies much further, advocating, for example, a “Ulysses contract” — or a “commitment memorandum” that spells out what to do when the markets move 25 percent up or down. The adviser and the investor are both supposed to sign it — agreeing in advance, perhaps, to buy more stocks in a market plunge, and not to sell. Conversely, when markets soar, they may be committed to selling overvalued stocks, not buying more of them — rebalancing the portfolio to restore an agreed-upon asset mix.

The concept of resisting temptation this way is at least as old Homer. In “The Odyssey,” Ulysses had his crew bind him to the mast and agree in advance to ignore his entreaties before sailing near the Sirens, whose songs were irresistible. It worked for Ulysses. Whether contemporary investors are ready for the strategy is another question.

“The idea is great, but it may be a little aggressive for many people,” said Bud Pernoll, senior managing director of Bay Mutual Financial, an independent financial advisory firm in Santa Monica, Calif. Many individuals and some companies will balk at signing a “contract” that might seem to limit their flexibility, he said, even though the strategy makes a lot of sense.

Mr. Pernoll is a fan of behavioral finance and its concepts, but he says the field is in its infancy and is just beginning to be absorbed by financial practitioners.

The Ulysses contract is deliberately provocative, Professor Benartzi said. It “forces you to think in advance — both adviser and client — and put a plan in writing and explain, when you’re tempted to take an action, how it fits into your plan.” He added that “the flip side — controlling the intuitive mind” so it doesn’t do damage — is important, too.

The paper gives advisers tips for enhancing their credibility. They should display their credentials prominently on the wall — this makes their recommendations more believable, the paper says. And they should present the downside of an investment strategy before explaining its benefits. “By talking about the downside first,” the paper says, “the financial adviser is displaying honesty that elicits a greater willingness in the listener.”

IN the wrong hands, of course, such insights could be quite dangerous, said Barbara Roper, director of investor protection for the Consumer Federation of America. Behavioral economics can teach an adviser bent on enriching himself how to more skillfully push an investor’s buttons.

Advisers have many different backgrounds and credentials, and work under different ethical guidelines: no universal fiduciary standard requires all advisers to put investors’ interests first. That could change: as required by the Dodd-Frank Act, the Securities and Exchange Commission has studied the issue and recommended the creation of such a universal standard. But it has not taken final action.

Cathy Smith, co-director of the Allianz Global Investors Center for Behavioral Finance, says the company hasn’t taken a position on the issue. Professor Benartzi, on the other hand, says he favors “having more consistency in the credentials” of financial advisers as well as “a requirement that they should first and foremost do what’s right for the client.”  

Article source: http://feeds.nytimes.com/click.phdo?i=e7b652bfcdaceae97791a8c104b09562