We believe a number of factors have contributed to the Broadcasting Group’s challenges. In fiscal 2000, the network rating cycle clearly turned in favor of ABC and WB, while the FOX network and affiliates across the nation did not fare well. In addition, increases in available advertising inventory have affected the ability to raise rates throughout the industry.

Additionally, we have been making significant investments in WGCL-TV (WGNX prior to July 4, 2000) to improve the station’s competitive position and long-term performance. We also have invested in expansions of local news production and extensive station branding and market research. While we expect these investments to pay off over the long term, they have caused a reduction in operating profit and margin for the group.

Nevertheless, broadcast television maintains high cash-flow margins and remains an exceptionally powerful and effective mass-reach medium. Broadcasters also have several advantages in the digital environment – most notably, valuable spectrum. As a result, we believe numerous opportunities lie ahead for local broadcasters, and we’re undertaking several initiatives to improve our stations’ results.

Our immediate focus is on:

• Continuing to enhance the performance of WGCL-TV.

• Strengthening our sales and marketing programs.

• Increasing the ratings of our local news programming.

• Improving cost management and station accountability.

In addition, our long-term planning for the Broadcasting Group includes:

• Maintaining strong network relations.

• Developing additional revenue streams.

• Diversifying our affiliate portfolio.

Enhancing the performance of WGCL-TV
No other initiative is more important to our Broadcasting Group than enhancing the performance of WGCL-TV, the Atlanta CBS affiliate. When announcing the acquisition, we heralded the addition of a fast-growing top 10 market and the station’s great potential for significant revenue share gains and operating improvements.

Since we acquired the station, our efforts to improve its performance have concentrated on specific news, sales and marketing, and programming initiatives. These fundamental changes are not quickly or easily achieved – but we are encouraged by our initial progress with each step taken. For example, we tripled our daily local news production, from 90 minutes to 4.5 hours. The ratings decline that the station was experiencing has been reversed.

Our news products are attracting more viewers and establishing clear credibility in the market. In fact, the station won several of the top Associated Press awards for television news in Georgia this year – including Best Newscast, Best Spot News Coverage, Best General Reporting and Best Sportscast. The station also received a Regional Emmy Award for Best Newscast. Another important action to separate the station from its past performance is a complete brand positioning effort, which includes a change in call letters. On July 4, we launched a campaign transforming CBS Atlanta to WGCL-TV, “We’re Georgia’s Clear TV News.”

We look forward to translating the station’s momentum into significant long-term revenue and profit growth.

Strengthening our sales and marketing programs
Another core strategy is strengthening our sales programs. A significant step is creating enterprise sales teams in four of our markets. In the new structure, some sellers concentrate on existing clients that are negotiation-driven, while enterprise sellers focus on new business development from clients who have not traditionally advertised on television. We believe this action better positions each of our account executives to use their skills. In addition, the teams will be instrumental in driving new business and revenue growth at our stations. Depending on their success, we plan to roll out this model to our other large-market stations.

In addition, we realize that strong sales leadership is critical for each station. Aggressive sales training and development programs, as well as recruiting and retention initiatives, are ensuring that we have the best sales leadership teams in place now and in the future. As a result, we expect our stations’ revenue performance to outpace the growth of their markets.

Increasing local news ratings
In recent years, another priority for the Broadcasting Group has been expanding the amount of local news and other local programming produced by our stations. Over the past 30 months, we have increased the amount of local news across our group by more than 40 percent, from 152 to 217 hours per week.

With our news expansion investments nearing completion, our emphasis shifts to improving ratings for our news programming. As part of this strategy, we are stressing straightforward news and consumer-focused service journalism. Our strategy is ultimately designed to make our coverage a brand promise, distinctly different from our competition’s approach.

The result will be a stronger viewership among audiences in key demographics, which translates into advertising revenues. Several of our stations have made notable improvements in their news programming and are generating ratings share growth. Results at KCTV in Kansas City and WFSB-TV in Hartford have been particularly encouraging.

A strong local news presence is important for several reasons. Local advertisers generally allocate 25 to 35 percent of their advertising budgets to local news. In addition, stations control the entire advertising inventory for local news. Our additional news blocks lessen the stations’ reliance on syndicated programming, and we control the changes that can be made to improve ratings. Our news initiatives also help our stations build stand-alone local brand identities to help insulate our performance from the inevitable ups and downs of the networks.

Improving accountability and cost management
The general managers at our stations understand their markets well and make the most prudent decisions possible based on their circumstances. Each station manager has been directed to carefully balance spending with demand – again setting our focus on improving margins.

We are taking a hard line on staffing and only adding positions that lead to revenue generation.

A look at the long term
With our immediate initiatives already underway, we also expect to grow the Broadcasting Group through several long-term strategies. First, we expect to maintain strong relationships with our current network partners. While many of our initiatives involve local news and other programming, we realize the network relationship can be mutually beneficial. Specifically, in fiscal 2000 we renewed our NBC contract for WSMV-TV in Nashville. The station continues to receive compensation from the network, albeit at a lower level than before.

We also are continuing to develop additional revenue streams. Our investment in iBlast Networks is one example. (See iBlast below for more details.) In addition, we continue to develop unique marketing programs that capitalize on Meredith’s consumer database and publishing assets. For example, the Better Homes and Gardens Back to School Guide, the Ladies’ Home Journal Great American Health Test and the Family Money Tax and Financial Planner have helped our local stations differentiate themselves in their markets, bring new advertisers to television and drive incremental revenues.

Other new revenue opportunities include the digital repurposing of our local content. For instance, our stations are working with the Interactive and Integrated Marketing Group to improve their online presence, which extends their brand identities and leverages their local news and programming.

Finally, we want to continue to grow the group’s overall household reach and diversify our affiliate portfolio over the long term. However, we will not make another large station acquisition until we’re satisfied with the positioning of WGCL–TV.

Both in the intermediate term and over time, we believe our initiatives and long-term focus will contribute to revenue and operating profit growth for our Broadcasting Group and the company.

iBlast
Meredith expects to benefit from an exciting new revenue opportunity for television. iBlast was formed when several broadcasters, including Meredith, dedicated a portion of their digital spectrum to create a powerful, wireless infrastructure for delivering content to consumers.

The iBlast network will allow content providers to deliver digital products to consumers through their computers. For example, the system could provide quick access to a rich variety of videos, music, games, text, images and software. The spectrum pipeline has a competitive advantage over traditional Internet connections, which are limited by their size and lack of portability.

Meredith owns a minority position in iBlast and will share in its revenues. We expect iBlast to begin operating in calendar 2001.