May 6 (Bloomberg) -- Peter Liguori, the head of Tribune Co., has opted for a strategy that comes naturally to the former TV programmer: more original content.
As the media company prepares to shed its print business, Liguori sees its future resting on new shows such as “Salem,” which premiered on Tribune’s WGN America cable network last month and is based on the infamous witch trials in 17th-century Massachusetts. In an interview, he ticked off the benefits of airing original shows on that station.
“You get an increase in your ratings, higher ad rates because advertisers want originals, and a rise in the brand profile of your cable network to get more distribution,” the 53-year-old chief executive officer said. “All of that is critical to TV.”
Liguori, a former Fox Broadcasting executive, has been busy building up Tribune’s once-meager TV unit, spending more than $2.7 billion in 2013 to acquire local broadcasters and increasing the company’s tally of TV stations to 42. After the middle of this year, when Tribune plans to spin off its newspapers including the Los Angeles Times and Chicago Tribune, the company will be entirely driven by TV, with WGN as its lone national cable network.
Tribune is now the largest owner of local broadcasters in the U.S., putting it among a roster of companies including Media General Inc., Gannett Co. and Sinclair Broadcasting Group Inc. that have acquired such assets to give them negotiating leverage with advertisers and cable providers.
It’s a far cry from a few years ago, when Tribune was better known for its struggling newspaper business. Not long after real-estate billionaire Sam Zell’s leveraged buyout in 2007, the company began to fall apart, saddled by massive debt and mismanagement. Tribune emerged from bankruptcy at the end of 2012 with creditors Oaktree Capital Management LP, JPMorgan Chase & Co. and Angelo, Gordon & Co. in control.
Liguori joined Tribune in January last year, replacing Eddy Hartenstein, who led the company during bankruptcy. He’s been guiding the transition to TV ever since, echoing media giants such as Time Warner Inc., which will spin off its magazine unit in a few months, and Rupert Murdoch’s News Corp., which last year cleaved off its newspaper division from its more profitable TV group.
This year, the broadcast-TV industry will see a 14 percent bump in sales to $27.5 billion, according to research firm SNL Kagan. Liguori’s investment should help Chicago-based Tribune reap more retransmission revenue -- the fees cable and satellite companies pay to broadcasters to carry their signals. Advertising dollars are likely to be boosted by increased political spending in 2014 during the midterm congressional elections.
Political ad spending is also destined for a much bigger haul thanks to a U.S. Supreme Court ruling last month that struck down limits on donations individuals can make to federal candidates.
Campaign ads make a huge difference. Tribune’s broadcast division saw an 11 percent sales slump to $1.01 billion last year, largely because its ad revenue had been better in 2012, an election year.
Among Liguori’s tasks, front and center is the need to get wider distribution for WGN, carried in only 72 million homes compared with better-known cable networks such as Time Warner’s TBS and 21st Century Fox Inc.’s FX, which are close to 100 million, according to SNL Kagan.
In addition to getting more licensing fees from pay-TV providers, a larger audience helps draw the attention of brand advertisers, who care as much about a show’s prestige as its ratings.
“How do we go from 72 million households to 100?” Liguori asked. “Originals.”
The pilot of “Salem” was seen by 3.4 million people in the seven days after its broadcast, according to Nielsen. That was a success in the eyes of Liguori, who didn’t set ratings targets for the fledgling programming effort -- making him an exception among numbers-minded TV executives.
“I didn’t want to sit there and write down any numbers,” he said. “I didn’t think it would have been good for overall morale to put a specific number out there.
He compared the early viewership of “Salem” with established hits like “Supernatural,” a similar-themed show from the CW network.
Liguori has insight into CW’s audience because Tribune owns 14 local stations that broadcast the network’s programs. CW, a joint venture between Time Warner and CBS Corp., is often considered a distant fifth network for advertisers, as it usually trails ABC, CBS, Fox and NBC in the ratings.
Tribune also has 14 stations affiliated with Fox, five with CBS and three with ABC. Tribune only has two NBC affiliates, meaning it doesn’t reap much from the network’s lucrative Olympics coverage.
While Tribune doesn’t provide much original content directly to its local stations, its holdings give the company influence over programming decisions at Fox and CW, Liguori said.
The contracts Tribune’s local broadcasters have with cable and satellite companies come up for renewal on the same schedule as WGN’s. That’s key for WGN, which only gets about 6 cents per pay-TV subscriber each month, much lower than other cable networks such as TBS, which receives 62 cents, according to SNL Kagan. When it’s time to renegotiate, WGN may be able to pry more from distributors by leveraging their desire to keep highly rated local broadcasters in their channel lineups.
Liguori’s plan is to make WGN more desirable on its own to distributors, moving away from a reliance on old sitcoms and Chicago sports coverage. Now the network has deals to rerun hit programs such as CBS crime dramas “Person of Interest” and “Elementary.”
Liguori renewed “Salem” for a second season, and WGN plans to air a new series this summer -- “Manhattan,” about the Manhattan Project, the top-secret U.S. effort to build the atomic bomb. He’s betting the original shows will increase awareness of the revamped network, which is still largely unknown, according to Tribune’s research.
“When we did testing asking people where `Salem’ premiered, we kept getting responses like HBO, Showtime, AMC,” Liguori said. “WGN America didn’t even make the list. People had no idea about our network -- their response was, ‘What’s that?’ and, `Where is it?’”
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