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2001 Meredith Operations Overview
Broadcasting

We enter fiscal 2003 with renewed optimism for our Broadcasting Group, spurred by two factors. First, in Kevin O'Brien we believe we have found a leader who can reposition our attractive broadcasting assets to build shareholder value. Second, although it is too early to claim a complete victory, it appears the worst downturn in the history of the television business is behind us.

Though revenues and profits from our Broadcasting Group were lower in fiscal 2002 than in the previous fiscal year, we were encouraged by increases in advertising demand over the last two quarters. We are positioning the Broadcasting Group to take advantage of further recovery in fiscal 2003.

Our duopoly - formed by the exchange of our television stations in Orlando and Ocala, FL, for station KPTV in Portland, OR - is one example of our repositioning strategy. By creating a duopoly of KPTV and KPDX, we are improving the efficiency of both stations and are better serving advertisers and viewers in the Portland market.

We moved our FOX affiliation to KPTV to use its more powerful VHF signal to broadcast more popular FOX programming, and we made KPDX the market's UPN affiliate. In a dynamic, young market like Portland, we believe advertisers will be especially attracted to our ability to reach 18- to 49-year-old viewers.

Also, we signed new affiliation agreements for our FOX stations (Portland, OR; Las Vegas, NV; Greenville, SC; and Bend, OR).

We are interested in creating additional duopolies to improve the efficiency and revenue potential of our Broadcasting Group. Our top priority, however, remains improving the overall performance of each of our existing stations.

That priority is the reason we hired a new group president and replaced general managers at five of our stations, including those in our three largest markets. There now are new general managers in Atlanta, Phoenix, Nashville, Portland and Las Vegas. We also replaced six news directors and six general sales managers.

In addition to rebuilding the management team, we have injected enthusiasm, accountability and a winning attitude into each station. We strive to be market leaders in sales, news and ratings.

In sales, we have set aggressive targets for each station, including specific share, revenue and profit goals. We are developing a culture in which each employee is charged with generating revenues or supporting sales. Everyone from the news anchor to the general manager is expected to contribute to the sales effort by calling on clients.

We are working to grow the pool of local advertisers by developing business from clients new to television advertising.

We are benefiting from efforts to develop sales collaborations with our Publishing Group, specifically our "Cornerstone" promotions, which generate more than $1 million in new and incremental revenues each quarter. Four times a year, we produce eight-page print pieces - like the Better Homes and Gardens home improvement programs and the Ladies' Home Journal health planners - and offer advertisers the opportunity to sponsor these products. Collaborations like these give us expanded sales opportunities because they are marketing programs unique to Meredith.

Our second initiative is improving the quality and the ratings of the local newscasts at all of our stations. Local newscasts generate a large share of the revenue for a television station - more than 30 percent on an industrywide average - and are an income source controlled completely by the station. In addition, viewers identify us through our news coverage. This quality is crucial to making sustainable gains in ratings and in advertising sales.

To help us achieve the quality we want, we created a new position, group vice president of news, to set specific standards, provide leadership and ensure consistency. We are changing our news culture by instilling a fast-paced, quick-response, complete-coverage team approach to our news reporting. Some of the country's top news consultants are already conducting market research to help us gain a greater understanding of what viewers want in our newscasts and how we can best deliver it to them.

The third initiative is improving our management of syndicated programming. We are buying better programs, and we are using our group buying power to contain costs. To get the most out of every syndicated programming dollar we spend, we are looking closely at each station and buying the shows that fit its needs.

To conclude, we are focused on improving the performance of our Broadcasting Group through improved ratings, revenue growth and restored margins. By accomplishing that, we believe we will position our Broadcasting Group to be an increasingly valuable contributor to Meredith's overall goal: creating long-term value for its shareholders.


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