Program Spending Cut Back Amid ‘Chastened Attitude’ : Nationally, Indies Struggle Back Under Heavy Debt

Like a recovering alcoholic, the independent television industry is regaining its health after the binge of overspending and overexpansion that laid it low in 1986 and much of 1987.

About 25 non-network stations have been forced into bankruptcy and dozens of others have suffered acute financial distress since fall, 1986, because advertising revenues weren’t enough to cover heavy debt service and their obligations to TV program suppliers. As these smaller stations failed to pay their debts, the pain was passed on to TV programming firms, and, in some, investors who had bought their bonds.

Most celebrated of the cases was the bankruptcy of Grant Broadcasting System, a high-flying three-station chain that was forced into bankruptcy court reorganization in January, 1987, with debts of $250 million. Its failure forced such TV programmers as Lorimar-Telepictures and MCA to take big charges against their earnings in early 1987.

In recent months, there has been a slowdown in the number of new stations that are crowding into the nation’s TV markets. The independents are scaling back their purchases of new programming, and are slowly paying off the huge debts they began assuming in the mid-1980s.

The number of independents surged to 293 in 1986 from 112 in 1980. But the growth rate has slowed, to a current 310. Industry officials predict that new stations will continue to come on the air at a far slower rate.

“People have learned that you usually can’t have more than two independents in a medium-sized market, or more than one in a small market,” said Bishop Cheen, senior television analyst with Paul Kagan Associates, in Carmel, Calif. “These markets just don’t generate the advertising to support them.”

Purchases of programming peaked in 1986 at about 36,000 hours, said Cheen. Last year it hit 32,000.

The station owners who so aggressively bid up programming prices through the mid- and early 1980s are trying--though not always successfully--to hold those bids down. They are trying to hold their programming expenses to 40% or less of revenue, compared to the budgets that sometimes consumed 80% of revenue in the mid-1980s, Cheen says.

The independent station boom in the 1980s was in part brought about by the investors’ euphoria over the money-making capabilities of such stations. But the well-publicized decline of Grant and some of its peers has brought a change of attitude on the part of investors and lenders alike.

TXV Broadcasting, a 12-station chain based in Virginia Beach, Va., has unsuccessfully tried three times to sell debt and stock to the public. Several months ago, an Australian broadcaster sought to buy KDOC, the Fullerton independent partly owned by singer Pat Boone, but failed for lack of financing.

“There’s a chastened attitude out there,” a broadcast analyst said.