116 3rd St SE
Cedar Rapids, Iowa 52401
CEDAR RAPIDS — The Gazette Company, which operates Iowa's largest locally owned news organization, Tuesday sold its TV station and the station's online operation — KCRG-TV9 and KCRG.com.
With the purchase, new owner Gray Television Inc. of Atlanta will have TV stations in 46 markets in 25 states. KCRG-TV9's market in Eastern Iowa will be the 11th largest for Gray and its first in Iowa.
Gray, which is traded on the New York Stock Exchange, said it paid about $100 million in cash for ABC affiliate KCRG-TV9, its latest of about two dozen station purchases in two years.
Kevin Latek, senior vice president for business affairs at Gray Television, said the purchase can be seen as part of a 'shakeout' in the local broadcast industry where getting bigger is necessary to survive.
At the same time, the break off of one of The Gazette Company's principal assets is another shift in direction for the company in a still-changing news industry landscape across the nation.
Owners for decades of The Gazette Company, the Hladky family was bought out by the company in 2012 and the company was placed in a trust for the benefit of the employees. The company sold its building housing The Gazette at 500 Third Ave. SE and merged its TV and newspaper newsrooms and online operations next door in the station's building at 501 Second Ave. SE.
With the TV station sale, The Gazette's newspaper newsroom now will be looking for new quarters, likely in the downtown area.
Of the company's 491 current employees, 130 will become Gray Television employees Oct. 1.
Joe Hladky III, chairman of the board of The Gazette Company, said the TV station's viewers will not notice much difference when they tune after the new owners take over. Bruce Aune and Beth Malicki, the station's two veteran anchors, are under contract and aren't going anywhere, he said.
Latek said as much.
'I don't think people will know the station is owned by Gray,' Latek said. 'We don't put our name on the building. We don't put our name on the newscast. KCRG-TV9 is the brand. That's what matters.'
In a talk Tuesday with employees, Latek drove home the point by saying that one of the company's stations decided to have an on-air contest that offered a shotgun as a prize. At a subsequent meeting of the company's general managers, he said half thought he was 'nuts' for allowing it and half wanted to know if they could give away shotguns, too.
'We don't care. It's a local market decision,' he said. 'If you're not running around with scissors, keep running.'
Hladky said his family's newspaper business created KCRG-TV9 from nothing in 1953.
By 1980, he said the station was struggling in 'fourth place in a three-horse race' among local TV stations. The company had to decide to either sell or 'be a player, a No. 1 player,' he said.
'We invested, and we are now dominant in the market,' he said.
But Hladky said the company has gone 'about as far as we can go' in the business as a single-station owner.
'When you look at the obstacles that we have been dealing with ...,' he said. 'When I took over responsibility, the network paid us a lot of money to carry its signal. Now we pay them a lot of money, and it's getting worse.'
At the same time, he said satellite companies DISH and DirecTV have blocked customers' access to KCRG-TV9 for a time in the last couple of years, battling over fees.
'We've been a single station in a great big ocean of sharks,' he said.
Chuck Peters, president and chief executive officer of The Gazette Company, said that Gray Television reached out to him in February, at which time he said he didn't see how Gray could satisfy the company's commitment to 'continuity and independence' or even agree on a value. Two weeks ago, though, they did agree and the sale proceeded.
'We look forward to seeing what the very talented KCRG-TV9 team can do with the scale and connections of Gray Television,' Peters said.
Gray's push to purchase additional stations, Latek said, comes as a number of large economic forces are impacting local television.
He said cable companies, for instance, are getting 'massively bigger' and their leverage is 'greatly increasing.' And viewers have access to video content from the likes of Netflix, Google and Apple on an assortment of devices.
'So we're in a period, we think, in local broadcast television where there is sort of a shakeout,' Latek said.
Al Tompkins, senior faculty member for broadcast and online at the Poynter Institute for Media Studies in St. Petersburg, Fla., called Gray Television 'a serious player in mid and small' local TV markets.
He said the reported sales price is a 'strong price.' But he said it's not surprising, given the TV revenue that comes into the market from political advertising.
Nor is it surprising, Tompkins said, to see a company with just one broadcast station sell.
'Increasingly it is difficult for small owners to survive in TV because they don't have the scale needed to bargain with networks, cable providers, national advertisers and vendors,' he said.
Ken Doctor, a national media analyst, said there has been more consolidation of local broadcast stations in the last 24 to 30 months as individual stations have started to feel the loss of advertising revenue to the likes of Facebook and Google.
'If you're a stand-alone TV broadcast owner, it is probably a good time to get out of the business,' Doctor said. 'Digital disruption will only increase and that will make it harder to sell advertising and control costs over time.'
Latek said his company's stations in 34 of its 46 markets, including the Cedar Rapids market, are first among market competitors. According to Rentrak analytic service, KCRG-TV9 reaches between 35,000 and 40,000 households for its morning, 6 p.m. and 10 p.m. broadcasts.
Gray's top markets in order of size are Knoxville, Tenn., Lexington, Ky., Wichita, Kan., Charleston, W.Va., Flint, Mich., Omaha, Neb., Toledo, Ohio, Madison, Wis., Waco, Texas, Colorado Springs, Colo., Cedar Rapids and South Bend, Ind.
With the sale of KCRG-TV9, The Gazette Company will now include The Gazette, Gazette Online, Color Web Printers, Fusion Farm creative and digital services and Vernon Research Group.