The effort to make WGN America a platform for pricey original programming is over, Sinclair Broadcast CEO Chris Ripley told analysts today in a call to discuss his company’s $3.9 billion deal to buy Tribune Media.
WGNA “is already going to be shifting its strategy away from high-cost originals into more cost-effective originals and reruns” now that Peter Kern is interim CEO of Tribune — replacing Peter Liguori, who left the company in March — Ripley says.
“We think that is the right path for WGNA,” the Sinclair chief adds. “WGNA doesn’t have a revenue problem. It’s got a nice contractual ramp-up of affiliate fees over the next couple of years, and a nice base of advertising revenue.”
But the ratings don’t “justify the type of spending that they do on the original programming side,” he says. “We believe quite firmly that that channel could be run much more profitably just racking a fraction of what they spend on programming and return that to station profitability.”
Liguori championed WGNA’s original drama series initiatives which have included Underground, Outsiders, Salem, and Manhattan.
Underground is the only original scripted series still on the network, with a renewal decision pending.
In anticipation of a sale, last month the network canceled its popular drama series Outsiders on the heels of Outsiders and Underground driving WGNA to its most watched primetime month in history in March.
Kern said at the time he planned to reallocate resources to “a more diverse programming strategy and to new structures” that would “deliver even more value to our advertising and distribution partners.” He added that cancelling Outsiders would “free up the resources to reach this goal.”
If the Sinclair-Tribune deal passes muster with the FCC and antitrust officials, which the companies expect by year end, then Sinclair would be the largest owner of ABC, Fox, CW and MyTV affiliates, No, 2 for CBS, and No. 3 for NBC. It also would have either the most, or second most, watched stations in 26 of the top 75 markets.
As for other Tribune assets, Sinclair says that it plans to keep its 31% stake in Food Network, which it values at $1.6 billion-$1.8 billion.
Tribune stands to collect about $180 million in dividend payments from Food Network this year, Ripley says. “We’re happy to hold on to that stake. It’s incredibly valuable.”
Still, if majority owner Scripps Networks wants to buy the Tribune shares “we are open to that, of course.”
But it plans to sell a 32% interest in CareerBuilder, as well as real estate.
Sinclair says it expects to net as much as $700 million from the asset sales.
Ripley says he doesn’t believe Sinclair should have to divest any stations in the 14 markets where the two companies each own at least one outlet in order to steer clear of an antitrust problem.
“They really have no impact on overall competition,” he says. “We hope regulators will agree with us.”
If they don’t, the markets where Sinclair probably would have to divest a station include Wilkes-Barre, PA.; St. Louis; and Salt Lake City.