The Minneapolis Star from Minneapolis, Minnesota • Page 11

TV station may fara a fancy profit Audience-rating battle boils down to earning power wf mi i By RICHARD GIBSON The Star's Business Editor gramming for you, and all you have to do is go out and sell a few (station) breaks." That's an oversimplification, of course one that wouldn't go over well with the 150 TV stations that reported losses in 1973, or the four radio networks that lost $6 million on revenues of $40 million last year, or even, perhaps, the managers of WCCO-FM and KSTP AM-FM, who contend they went in the red in 1974. FIGURES OBTAINED by The Minneapolis Star put the KSTP radio net loss at $74,269 on revenues of $1.26 million. The WCCO-FM loss reportedly was $402,221 for the last fiscal year. However, those figures, like all Star photos by Charles Bjorgen Technician at WCCO-TV watched monitors at station, a profitable operation the minneapolis star tition is showing prime-time entertainment. BUYING BROADCAST time is a numbers game.

There are numbers compiled periodically that purport to show how many men and women in various age brackets are watching what programs. There are numbers of households doing the same thing. And there are numbers preceded by dollar signs that indicate how much it will cost to reach the target audiences. Almost none of the numbers lasts very long because of the highly competitive nature of the business and its stakes. So an agency media buyer spends much time studying the rating sheets, which in more than one way resemble racing forms.

1974 Performance of Local TV Stations (In 000s) PRETAX PRETAX STATION REVENUES PROFIT MARGIN KMSP 5,775 $2,422 41.9 KSTP 10,100 2,813 27.8 WCCO 10,020 2,870 28.6 WTCN 6,360 974 15.3 Total 32,253 9,079 28.1 Year ends Sept. 30 Estimates You want to make a lot of money? Get a television or a radio station. So goes the theory. A man who makes it his business to help others buy stations, a media broker, asserts that of broadcast properties is one of the most delightful propositions in the world. It's only second-best to owning the United States Mint." That bit of hyperbole is understandable when one considers the latest national calculations on the pretax margins of TV stations.

The Federal Communications sion (FCC) says the rate is 19 percent. FEW OTHER industries in the United States do that well. In large part, profitability comes because broadcasting is an oligopoly, a closed economic market set up and maintained by the government. There are only so many station licenses. Trim Bfew An inside look at the Twin Cities media The licenses are hard to get, but once obtained they seem well worth the effort, which includes the frustrating defense of them every three years when the FCC must renew them.

Challenges to licenses are about as common today as canned laughter on the tube. "I know of FM (radio) stations with untested financial capabilities selling for 12 times revenues," a well-placed source says. The prices at which TV stations change hands is another indication of their profit potential. The only local station that has been sold in the past 16 years WTCN-TV. In 1955 it went for less than $2 million.

In 1964 it was sold by Time-Life Broadcasting, to Chris-Craft Industries, for $3.9 million. In 1972 Chris-Craft sold it to the current owner, Metromedia, for- $19.7 million. Between 1964 and 1972, in other words, the 'station appreciated 50 percent per year. THERE ARE three basic types of TV stations: Those owned by the major networks, NBC, CBS, ABC; network affiliates, which are owned by individuals or corporations and which carry network programming, and independents, which also may be owned singularly or corporately. The networks themselves can own and operate only five stations and they do so, where possible, in the biggest metropolitan markets.

In 1973, their pretax profit margin on those outlets was a tidy 29 percent. The three Minneapolis-St. Paul affiliates and lone independent aren't doing badly, either. Their pretax average that same year was 25.7 percent. In 1974 it was 28.1 percent.

"A network affiliate," says a man who worked for one, "is a license to steal if you want to. The network does 90 percent of the pro aug. 29, 1975 11 A but it's known to bs cma'l other ca' affiliates. 1 "WE'RE DEDICATED in the news area," says Swartz, a former theater manager. He calculates that within three years a successful news show could return the anticipated outlay and perhaps even show a profit.

News is attractive to media buyers because the shows draw men, a difficult audience to reach. An advertising executive at Dayton's Department Stores says Dayton's has found that the news shows on WCCO and KSTP provide "an 'excellent audience for us, more dual viewership, and from what we can find out, upper-scale income in what we call the power years, from 35 to 55." Because of that, securing commercial time on the late-evening ie vs isn't easy. There's a waiting line. "You have to reserve it, months in advance," the Dayton's executive said. A Red Owl Stores, advertising man said, "I waited two or three years before I was able to get a 30-second spot, and we've held onto it.

If you can get in and hold the thing, you're lucky." BIG ADVERTISERS such as Red Owl and Dayton's buy all their media time through ad agencies, as does almost everyone else once they find out that it doesn't cost them any more and that the agency will do all the work. The agencies get a 15-percent commission. If, for example, a commercial costs $300, the advertiser pays $300 to the ad agency and the station collects $255 from the agency. The other $45 is the agency's slice. Not everyone wants to buy the news, however.

WTCN-TV, the market's only independent, has done well by "counterprogram-ming." That is, when the affiliates are broadcasting their local newscasts, WTCN is showing reruns of "Star Trek" (at 6 p.m.) and "The FBI" (at 10 p.m.). The station produces one half-hour news show, at 9:30 p.m. nightly, while the compe Most ad rates are negotiable, but there is one glaring exception in the Twin Cities and that is WCCO-M radio. It is a nhenomrnn unparalleled in the industry. For years, WCCO-AM has dsi-nated not only this, but every other major market in terms of the percentage of listeners tuned in at any one time.

Now it's about 38 percent. Twenty years ago it was well over 50 percent. Despite the slippage largely due to the proliferation of radio stations with more specialized formats WCCO radio remains an incredible lodestone, not only for listeners but for revenues. WCCO-AM's current runner-up competitor has 9 percent of the listening market. "WE'RE THE seventh-largest station in the country in terms of audience.

That's raw listeners in an average quarter hour." a station salesman says nonchalantly. "The other six are in New York and Chicago." WCCO radio, established in 1924 by the Washburn-Crosby Co. (thus the call letters), has relied on easy patter, homogenized music, authoritative news and a take-charge attitude during tornados and other disasters to ascend. According to financial data obtained by The Star, the station took in $8.6 million, spent nearly $4.5 million, all told, in the last fiscal year far more than any other radio facility here and earned million pretax. That makes for an astounding margin of 48 percent.

WCCO A I performance becomes even more impressive when compared with that of its TV sister. The television station had a pretax net of $2.8 million on revenues of $10 million. Still, the 28-percent margin of WCCO-TV is respectable. That keeps it about even with news rival KSTP-TV. Profits, though, aren't everything, says KSTP President Stanley S.

Hubbard. "If you don't serve the public, if you milk the station and have a schlock operation, you can't stay in business long," he says. "To the extent we serve the public, we make a living. Right now we're having rosy days." the others in broadcasting, must be looked at with a certain weriness. "Some of the cleverest people in the world are broadcasting accountants," one WCCO employee admitted.

He noted that all three Twin Cities radio stations professing losses were in the top 10 of a recent survey of listeners. "Just listen to all those commer-. cials, and add $50 or $75 every time you hear one," he said. How much stations, TV especially, make is carefully guarded information. It took a decision by the Minnesota Supreme Court to get Hubbard Broadcasting owner of the KSTP stations, to reveal its books to minority shareholders, who had filed the suit.

Exactly why secrecy prevails is speculative grist. The Star obtained earnings figures for the four local TV stations, although two stations, WCCO and WTCN, refused to provide them. Together, the four grossed $32.2 million and earned $9.07 million, pretax, according to the FCC. KSTP AND WCCO were about tied in TV revenues last year, at roughly $10 million each. And each reported pretax profits of about $2.8 million.

KMSP's revenues totaled $5.8 million, but it realized nearly as much profit as the other affiliates, $2.4 million. Metromedia, WTCN's parent, declined to break, out the station's earnings from its multi-station totals, but simple subtraction from the FCC totals of the other three Twin Cities TV outlets leaves WTCN with a pretax profit of $974,000 on revenues of about $6.3 million. The station's management indicated both figures were low. Traditionally KMSP, the ABC station here, has rolled up spectacular results. For the past five years its pretax margin has averaged 40 percent.

The station has been such a moneymaker lor its parent, Twentieth Century-Fox Film that in the Hollywood studio's, lean years it used the TV station as debt collateral. Nowhere is the maxim "time is money" more appropriate than in broadcasting. Every second costs. Depending on what time of day and the amount of repetition desired, 30 seconds of advertising on, say, KSTP-AM, costs from $16 to $40. ON WCCO radio, which is such a special situation that it defies comparison with others in the market, 30 seconds during the prime morning "drive time" between 6 a.m.

and 10 a.m. can cost $145. TV rates are much higher, partly because of the complexities of commercial production, partly because Total Audience 37.6 9.0 8.3 6.0 5.6 4.3 4.0 3.4 3.0 2.8 1975 survey. it: of the larger audiences. On KSTP-TV, for example, a 30-second spot can run anywhere from $30 to $900.

Like beef, the most expensive time is prime. But after that it's the evening news shows on KSTP and WCCO. The twjj TV rivals are locked in what's commonly referred to in their shops as a war, and it's been going on about as long as the one in the Middle East. Some say that as much as anything it's due to the need of Hubbard's chairman, Stanley E. Hubbard, to be No.

1 in a market where he was first with the medium. For years KSTP, the NBC affiliate, had been the leader in news audience ratings. Then WCCO, after carefully, patiently training a brigade led by anchorman Dave Moore, knocked KSTP off the mountain-top. Last year KSTP attacked again, with a new on-camera trio apd aggressive promotion. It regained news preeminence, albeit a slim one.

Only a few rating points (thousands of viewers) separate the two, nightly news shows each station" broadcasts at 6 p.m. and 10 p.m. SO WHAT'S all the fighting about? It's more than a desire to inform the public. It's more than gaining a reputation for the best, most authoritative news team in the community. Succinctly, it's money.

News shows have an incredible drawing power for advertising dollars. One knowledgable source believes that up to 40 percent of the profits at KSTP and WCCO could, directly and indirectly, be derived from the news effort. His rationale goes this way: The high bedtime news viewer-ship commands premium prices. WCCO charges $1,000 a minute for a commercial on its "Scene Tonight." KSTP does the same for its "Eyewitness News." Because the news shows represent the major local programming commitment, they tend to draw local rather than national advertising. Stations don't have to split local ad revenues with their networks, as they do national ad fees.

The 6 p.m. and 10 p.m. news shows are the bookends for prime time. A popular news show is a desirable lead-in to prime time, and it is a means of keeping the viewer with that station. KSTP and WCCO personnel prefer, in interviews, to talk about the high cost of news shows and staffs, and to emphasize the public-service angle.

They are vague on the financial rewards of news. One man who is not, however, is Donald Swartz, president and general manager of KMSP-TV, channel 9, long an also-ran in the news derby (how far back depends on how you read the ratings). Swartz says he intends to make a bid for No. 2 (behind whom he doesn't say.) KMSP recently fired anchorman Ben Boyett, then hired a consultant to tell the station what it needs for a successful news program. Swartz expects the report about Sept.

1. He's prepared, he says, to triple the current news budget he won't TOP TEN ON RADIO'S HIT PARADE Swartz brings in the bucks, keeps costs down at KMSP "That guy knows how to make a buck," says a long-time watcher of Donald Swartz. Swartz, 59, is a former movie-theater operator who now functions as president, general manager and film buyer for KMSP-TV, the ABC affiliate in the Twin Cities and one of the most profitable sta Station Listeners per quarter hour WCCO-AM 119,600 KDWB-AM 28,800 KSTP-AM 26,500 WAYL-FM 19,000 tions around. One key to that success is Swartz personal attention to the films Channel 9 procures, but he winces at a competitor's remark that Swartz "buys programing by the pound." His reputation is that of a penurious man who dictates memos ordering cameramen not to waste so much film. Other stations afe studded with color TV sets but KMSP relies primarily on black and white sets as monitors.

The station is highly automated, which Swartz 5. KEEY-HV1 6 KSTP-FM 13,600 7 WDGY-AM 12,700 KRSI-AM 10,700 9 KQRS-AMFM 9.700 lo! WCCO-FM 9,000 ji si says neips keep costs down Our programming 12 years and over, 6 a.m.-midnight, Monday through Sunday. Simultaneous broadcast. costs are substantially lower than the other stations." Swartz Swartz looks back now on "many years of strug gling," which taught him that "shrewdness may have some merit The station was losing $30,000 a week when I took over (in the early 1950s). That's $1.5 million a year.

It took me a long time to py up the losses. And I didn't draw any money out of this place for six months." Source: Arbltron, April-May.