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Media General, Inc.
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RiskMetrics Group ISS Governance Services April 8, 2008 Rockville, Maryland |
2 Company Overview • Headquartered in Richmond, Virginia • 2007 Revenues – just over $930 million • About 7,000 employees • Operations • 25 daily newspapers • 23 television stations • 75+ portals, websites, Internet platforms |
3 Mid-90s – changed and sharpened our operating and geographic focus • An information company: platform is secondary • Southeast focus Mission Statement: “Our mission is to be the leading provider of high- quality news, information and entertainment in the Southeast by continually building on our position of strength in strategically located markets.” Evolution to: • a content company • focused on each particular market we serve Our franchise is local content |
4 An industry in transition: Change often enabled by new technology • cable television • the Internet Retaining fragmenting audiences requires that we become increasingly platform indifferent Lesson: the customer is in charge |
5 Business plan elements • Quality local information • Audience aggregators (but also audience segmenters because of the Internet) • Barriers to entry virtually eliminated (but ease of entry also allows us to enter new markets with niche products, all with Internet components, so that we can begin aggregating desirable audience segments) • Retaining Internet audiences requires development of a “sense of community” • User input on legacy sites • Blockdot; Boxerjam • DealTaker • (A lifelong bond with consumers) |
6 Harbinger – July, 2007, 13G – 9.1% (passive investor) – Immediately thereafter – swaps, making total economic interest 21.4% (swaps undisclosed until December, 2007) No contact from Harbinger • no calls before investment • repeated refusals to return calls after investment Indefensible |
7 Gabelli conference – April 1, 2008 • We heard, for the first time, Harbinger’s “prescription” for Media General: “Do better” (clothed in B-school jargon) but, a few specifics: • pursue duopolies • pursue retransmission consent fees • consider selling our Florida properties • sell DealTaker, Blockdot (and another small stake in an Internet company); and • pay down debt • also criticized our 2006 acquisition of four NBC stations |
8 Duopolies FCC requirements Allowed if: • 8 full-power stations remain after the merger • Only one of the stations is in the Top 4 in the market Mostly a large-market strategy • some MEG markets are too small to allow duopolies • depends on what stations/station groups become available • MEG’s Spartanburg tri-opoly • Alexandria (La.) virtual duopoly • use of digital bandwidth |
9 Retransmission consent fees (fees cable systems pay local television stations for carrying their content) • Cable carriage is contract based (contracts generally are 3-5 years) • Effect of increasing satellite and telephone penetration (competitors to Cable) • Sinclair watershed • Actually, being actively pursued by MEG • All television owners know this • Hardly a new “prescription” |
10 Selling our Florida properties • Gabelli conference audience reaction • Harbinger retrenchment to “maybe just sell The Tampa Tribune” • Worst possible time to sell a large-market newspaper • Low basis/tax leakage • Cannot be on-again/off-again presence in market |
11 Selling DealTaker and Blockdot • High-margin businesses • Role of “community” as a differentiator on the Web |
12 Pay down debt (underway long before we knew Harbinger) • SP Newsprint • 5 television stations being sold • Announced cost reductions/performance improvements |
13 2006 NBC Acquisition • Stockholder letter discussion • Gabelli conference • Political revenue/broadcast margins in 2006 and, now, 2008 |
14 What does this “prescription” show about Harbinger? • Short-term focus • Completely failed to understand MEG strategies – importance of serving good local markets – “leading provider” requires long-term focus Ideas do lead – But, there isn’t a single good new idea in Harbinger’s “prescription” Harbinger’s frustration over its own poor market timing does not translate to a claim that the MEG Board is ineffective. |
15 Harbinger’s nominees Sullivan • skeptical of “$1 billion” claim • character counts Davis • 13 public company boards already • RiskMetrics/ISS policy Liebau • no relevant operating experience • no public company experience |
16 Media General’s nominees • Charles A. Davis • Rodney A. Smolla • Walter E. Williams Media General’s Board – varied relevant backgrounds – varied perspectives and ideas – varied lengths of service |
