Tribune Media Execs Urge Wall Street To Wait For Payoff From New Initiatives

Tribune Media execs told Wall Street today to expect lower profit margins in 2015 as the company spends to built its TV production operation and converts superstation WGN America into a basic cable channel. But they added — in a series of Investor Day presentations following its new listing on the New York Stock Exchange– that the company’s old financial model was unsustainable,  and the new one should pay off handsomely.

“Until a few months ago Tribune was primarily known as a newspaper company,” CEO Peter Liguori said. Now that it has spun off the print assets, “we’re a diverse, robust, and modern media company positioned for significant growth.”

WGN America’s profit margins as a superstation have been high because there’s been a “lack of investment, lack of programming, and lack of brand” especially in the four years ending in 2012 when Tribune was under Chapter 11 bankruptcy protection. But the CEO says that pay TV distributors, looking to cut programming outlays, likely would now start to drop the channel, which now reaches 71 million homes.  “Our decision was, let’s preserve that footprint in a way that’s meaningful by creating a branded general entertainment network, investing in original programming, finding exclusive syndicated programming.”

On Monday WGNA will switch from a superstation to a conventional basic cable channel in about half of its markets, with the rest converting within three years. That means distributors will pay carriage fees directly to Tribune, instead of copyright royalties to guilds and content owners. It also will free WGNA to offer multiple feeds so it can have shows that run in prime time on both coasts.

To take advantage of that change, Tribune has replaced re-runs of How I Met Your Mother and Rules of Engagement with programs that are more appealing to audiences and advertisers. They include original scripted shows (Salem, Outsiders, and Manhattan), unscripted series (Outlaw Country and Wrestling Death) and exclusive syndicated programs (Person Of Interest and Elementary). “This is the formula that’s worked for numerous networks in the past,” says Matt Cherniss, who’s president of WGN America and Tribune Studios.

Liguori assured investors that Tribune will just invest in shows — not pay for costly soundstages. “A studio is simply a connection between financial and creative,” he says. By taking an ownership stake in the shows it airs, it can benefit from syndication, home video sales, and overseas licensing deals.  Cherniss says the goal is to have at least one original show each week, with four productions each running for 13 weeks. “We’re no rush to get there. It’s not a race. We believe in quality over quantity.”

On other matters, Tribune says that its TV stations saw $105 million in revenue from political ads this year — and expects “material growth” in 2016, which also will include a presidential race. Liguori says he’s open to the possibility of letting the FCC auction off some of his stations’ airwave spectrum to wireless broadband providers– a process expected to take place in 2016.  “We’ve made no definitive decision. It’s just too early.” The owner of the largest collection of CW affiliates also says that he’s not satisfied with its performance. “They’re in a great position and I believe in it.… That network can represent phenomenal upside.”