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02 May 2006

A's SuperStation: A Missed Opportunity

With all of the upheaval happening in cable and broadcast television, it can be difficult to keep track of the casualties. Take for instance the once-fledgling networks, UPN and WB. Both thought they could be the next FOX by following the FOX blueprint of making shows for specific target audiences. In UPN's case the audience was blacks, followed by sci-fi. For WB, the target was the under-30 crowd. The failure of both experiments was finally made clear as parent companies Warner and Viacom announced a joint venture that would bring the best of the two networks together. The new network will be called CW, a nod to its Warner and CBS/Viacom roots. Its target audience will once again be young people, evidenced by its holding onto UPN's WWE franchise and several WB dramas.

Most of the stations that will make the switch to CW are currently WB affiliates. This is not the case in the Bay Area, where current UPN station KBHK-44 will be the local CW affliate. Moreover, FOX's recently announced and also youth-oriented My Network TV will appear on stations around the country formerly occupied by UPN/WB. The Bay Area is an exception in this case too, as KRON-4, once the proud local NBC affiliate, will carry My Network TV's limited (and based on KRON's existing programming, anti-KRON) lineup.

So what's to become of KBWB, the current WB-20 (formerly KOFY)? Parent company Granite Broadcasting had its earnings call today, and it announced that KBWB and WDWB-Detroit will be sold to a consortium of investment groups (including at least one hedge fund) for $150 million. KBWB and WDWB were supposed to be sold last year to a group that included several Granite shareholders, but the CW announcement effectively killed the sale so no network would be affiliated. In 1998, former station owner James Gabbert (does anyone remember the subliminal message scandal from several years back?) sold KOFY for $170 million to Granite, which immediately changed the call letters to KBWB. According to WDWB's Wiki entry, Granite is in danger of default (though it's not clear if the default is for either station or both), so it makes sense that the deal was for cash.

This looked like a unique opportunity for certain Bay Area investors if they felt emboldened by their $54 million equity gain (hint hint). There were several advantages for the A's if they acquired or partnered in acquiring KBWB:
  • They'd be able to finally quell criticism about poor signal emanating from KICU-36. KBWB's transmitter is on the always centrally located Mt Sutro, not in Fremont (KICU's current locale) or near Loma Prieta (KICU's former locale).
  • In future arrangements, the team would have full control over how many games could be on KBWB, as opposed to either FSN Bay Area or Comcast Sportsnet. The A's would finally have their own broadcasting megaphone, which should automatically give them some leverage over the regional sports networks (RSN's) and cable operators. They could also exercise a "convenient" revenue agreement between the team and station, the kind KTVU-2 and the Giants supposedly enjoy.
  • The entry price could be extraordinarily low, especially compared to the $700 million Young Broadcasting paid to buy KRON.
  • The A's would avoid the subscriber-carry problems that come with starting up a RSN.
  • The A's would immediately have a larger audience for advertisers than with a cable network relegated to digital-only, as CSN and FSN+ currently are.
  • An agreement could be put together starting in, say, 2011, in which Bay Area broadcasts would be handled by KBWB while Sacramento and the Central Valley would have broadcasts on CSN.
  • Control over the station would allow them to do more brand-building exercises, such as game replays or capsules (FSN did these a while back), or extended or more frequent pre-game shows. AN TV anyone?
  • In 2004, Granite invested in a DTV setup to replace the station's old analog equipment. That means the station is able to do HDTV out of the box, and they'd have the potential for two additional digital channels (AN TV anyone?). More HD broadcasts of A's games can't be a bad thing.
  • Should the A's really go after a MLS franchise, they'd immediately have a local broadcasting platform that MLS would kill for.
  • By including the station in the A's ownership group's holdings, franchise value could go up significantly, perhaps as much as it would once a new ballpark is up and running.
  • Success gained in the local television market should lead to the radio market opening up nicely for the A's.
Obviously, there are caveats to such an acquisition. Programming an independent station outside of the sports programming tends to be a crapshoot these days, with the virtually unlimited number of syndicated shows - especially crappy shows that really don't deserve to be in syndication. There are existing broadcasting agreements that would have to expire before the A's could get really aggressive with their own network. They'll have to hire industry veterans that know how to run stations - they could keep KBWB's staff intact. The A's have a long road towards proving themselves a worthwhile ratings performer on TV. And a "free" TV station wouldn't net the handsome subscriber fees a cable-based RSN would. The price would have been $75 million for the KBWB. It's easy for me to judge when it's not my money, but $75 million doesn't sound like a large amount when one considers the potential above.

Think about it. Wouldn't this have been a great way to enter the media market and solidify the A's presence? Would it not be a huge paradigm shift, moving from being a team with little leverage over its broadcasting future to one with potentially enormous leverage? If the A's were surveying the market, they should have been aware of the possibilities. Did they show any interest? I intend to find out.

20 comments:

Georob said...

My first inclination is to say that our problem is radio, not television. Certainly, the Giants have more games than the A's do on FSN, but at least it's FSN. Just how much would it cost for the A's to own its own TV station?

And short of the Cubs and Braves, who else has a "Superstation"? And is "Free TV" a legitimate factor anymore? (Except maybe for the die-hards in the OAFC who refuse to pay for cable)

Now, you bring up James Gabbert. If the A's could get someone like him to be totally creative and try stuff that no other local(or sports) station would normally do, an A's based TV station might work.

But unless Lew Wolff or someone else wants to pay cash for it, whoever bought KBWB would be beholden to investors wanting it to look like any other station.

So much for creativity

Kenny said...

I'm confused, is KBWB up for sale again?

Marine Layer said...

KBWB isn't for sale anymore based on the press release. The deal could fall apart. We'll see.

This is all about taking advantage of opportunities as they arise. The A's can sit back and wait for the so-called perfect media situation to come - which may never happen - or they can be proactive. Radio stations aren't for sale piecemeal these days. They're usually part of large portfolios. As for the comparison between the A's and Giants on TV, I took the day off today for some minor surgery. While I was recovering I caught the Giants game on KTVU. I would've preferred to see the A's game on KICU or FSN.

Back in the 80's, the term superstation had meaning. If you had a C-band dish you could get premium channels, ESPN, NESN, and the superstations: WGN, WTBS, and WPIX. WGN and WTBS ended up becoming national powerhouses, while WPIX was the Yankees' flagship for nearly 50 years. In today's fractured TV landscape it's impossible to have such growth. But the A's, who are exposure-starved, should look into every possible avenue for building exposure. Wolff said last summer that he wanted to know how to build a media network. This would've been a big piece.

Kevin said...

Aquiring or partnering with a local TV station would've been great. But I don't think Wolff at this point is in any position to make such a move. Remember he has not totally ruled out the A's moving out of the area. Until he knows where he will be for the next say 20 years, I don't think you'll see any real commitment to radio or TV.

FreeSanJose said...

Can I just say that this is why I love this site. Great stuff.

Marine Layer said...

If I were more cynical, I'd buy that argument. Practically speaking, it's a lot easier to divest oneself of a TV station than a baseball team.

Bleacher Dave said...

ML,

Once I again you show that you're thinking about different things, differently, than the rest of us.

I can't wait to see what you find out!

peanut gallery said...

Amazing analysis ML. Just amazing.

I tend to agree with Kevin. I think Lew will first determine the long-term location of his team. Once he feels situated physically, he'll start looking more closely at expanding his virtual (broadcast) presence. Sure, it might be easy to divest himself of the station, but is he looking at a potential loss if he moves it within a short timeframe? He seems to only invest where there is sure money to be made. Is this one of those situations short term? I look at what happened to KRON after they lost their affiliation. The value of that station dropped like a brick.

Kevin said...

ML,

Any thoughts on perhaps doing an interview with Wolff once a decision has been made on the location of the ballpark? I think it would be very interesting to hear how the A's intend on dealing with some of the issues raised here; demographics, traffic, pricing, financing, increasing the fan base.

Marine Layer said...

The A's are looking to invest in MLS too. Only one team in the entire league currently makes money. There are definitely short-term and long-term implications with any investment. Regarding KBWB, short-term is through 2010-2013, plenty of time to work up a solid business model. If not, cut your losses, claim the tax breaks, and move on. TV stations aren't going to depreciate like bad dot-com penny stocks, so there has to be a floor for the recent valuation and sales price drops. There are tangible products, services, and technology there, along with a regional, Bay Area presence a RSN can't surpass. The issue facing OTA has been and will continue to be innovation in the face of competition.

At some point I intend to try to get an interview with both Lew and Keith Wolff, and Michael Crowley if that's possible. But not until a concrete proposal's out there. Probably after a draft EIR is released.

Georob said...

Certainly broadcast revenue is a bigger part of a team's profitability than ever before, but my sense is that it's still an end product of how the team is doing on the field and in the stands. And until the A's get more popular by way of longer post season appearances and better marketing, I think they will be limited as to how they do on radio and TV.

Whether they be in Oakland, Fremont, or San Jose; the A's must market themselves as a BAY AREA team. After all, the media outlets all say "SF/SJ/Oakland", or some similar combo.

This is where the Giants and 49'ers have a huge advantage. Do you know of anyone that refers to them as "West Bay" teams? Of course not. The "San Francisco" label still is a powerful brand and will continue to be for the forseeable future.

Marine Layer said...

These days, baseball teams can't run the business side of the ship primarily based on performance on the field. It's a typically a loser's gambit, and it's the most performer. Even when teams perform well, they're not expected to hit their peak unless they've won a WS - and how often does that happen? Owners can't back on that. They have to do what they can to insulate themselves from poorly performing seasons. The nice thing is that revenue sharing conceptually helps through the lean years, but teams are expected to emerge from the down period firing once they have the requisite team and the other two prongs - media and stadium - properly situated. Some might call my strategy putting the cart before the horse, and I don't entirely disagree with that. Others might say it's the kind of bold thinking needed to break out of the pack. Gotta spend money to make money.

Georob said...

I hate to say this, but the A's DO have to be careful about televising too many home games, as it probably keeps a lot of people from going to the Coliseum. The classic 1979 game attended by only 600 or so fans was televised locally, as were many lowly attended games back in those days.

Over a quarter century ago? Perhaps, but I'll bet there are still those in the A's organization who want to be careful about local TV.

Marine Layer said...

Times have changed. The A's just raised their ticket prices 25% and are on the verge of even greater price hikes once a new ballpark is built, and you're worried about broadcasting too many games?

The biggest hole in the A's TV schedule is road games, not home games. The vast majority of home games are televised, the notable exceptions being the weekday afternoon tilts. I doubt there'll be an appreciable difference in attendance for those games if they're televised.

The business has to be grown with the anticipation that many factors will change. Stay static and you regress.

FreeSanJose said...

I've heard various accounts on this, but is it the A's or FSN/KICU that is keeping so many weekend afternoon road games off the air? I'm sure many share my annoyance to learn that an A's at Detroit/Texas/Minnesota/etc. Sunday afternoon game is not being televised only to find out there are no conflicting live programs on either channel. Care to shed any light?

Marine Layer said...

It's a cost/popularity issue. Historical bottom-feeders such as Detroit and Tampa Bay may get one game per road series televised on 36, while all Yankees and Red Sox games get the full treatment.

Georob said...

What I'm trying to say is that I don't think that Lew Wolff wants any part of buying a radio OR TV station, even as a partner.

He has one singular goal: To get the A's a new stadium. And if we continue to have media problems afterward, I'm sure the A's will then address them.

But if there's no stadium, NOTHING happens, and the team is gone.

Marine Layer said...

Having a singular goal is not how any of the money people in this ownership have earned their billions. They multitask. They have many oars in the water. They diversify.

The ballpark thing can only go at a certain speed and that's typically a grind. Focusing solely on the ballpark while ignoring other potential opportunities, frankly, is not a wise move. I doubt that's how they are going about their business.

That uncertainty about the team leaving the Bay Area? It's been reduced significantly over the past year. It's a possibility, but it can't be a focus.

Besides, Wolff said last summer he's interested in getting into the media side. What could have changed so drastically since then to dissuade him from that?

Georob said...

Let me repeat again: If the ballpark doesn't happen, nothing else will.

That doesn't mean that Lew Wolff isn't going to be open to opportunities with media outlets or anything else that enhances the marketability of the A's, it's just that he's not going to invest too much money or effort until a ballpark deal SOMEWHERE is finalized. Then I think you'll start to see the "dominoes fall" in terms of TV, radio, corporate sponsorships, etc.

But again, the ballpark is at the center of it; and until a deal is in place, there will continue to be a great deal of uncertainty over the future of this franchise in the Bay Area.

Anonymous said...

An A's TV station can greatly increase attention on the team as well as attendance at the park. Making them a phenomenon and an "event" is the key to marketing them.

Even smarter would be to have the station itself gain a reputation for young, exciting, innovative programming of some type and with the A's on there as well. By associating your brand with a station that has a good rep. you can do very, very well.

I think the key to marketing the A's in the bay area is to market them as the young team. Let the midgets be the old folks, financial districts team. The kids want to see the A's. Having lower prices helps this (for now).

Also, younger people are more apt to crowd onto bart with 6-8 friends and head out the ballpark.