Infomercial Carrier Signs Deal to Buy Channel 63

A Florida-based infomercial television carrier gobbling up struggling UHF stations in a bid to become the nation’s seventh major television network has signed an agreement to buy Ventura County’s bankrupt KADY-TV Channel 63.

“It’s in a great growth market and it was available,” said Seth Grossman, vice president of corporate development for Paxson Communications Corp. “It fits perfectly into our concept. . . . It’s been on our radar screen.”

Signed last week, Paxson’s $8-million cash agreement still is subject to outbidding by other interested buyers at a September auction supervised by the federal bankruptcy court.

Either way, the sale will end a yearlong effort by a court-appointed trustee to bring the troubled station back from Chapter 11 bankruptcy.

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Since early 1995, Paxson has been eyeing and buying low-power UHF channels facing bankruptcy or mismanagement, then using them to vastly increase viewership under so-called “must carry” cable television laws, Grossman said.

Recently upheld by the Supreme Court, the rules force cable systems to retransmit the signals of local broadcast stations.

Paxson’s plan has worked. Beginning with four stations in January 1995, Paxson now owns 55 mostly infomercial stations, reaching about 58% of U.S. homes and 25.3 million cable television households. Paxson owns, operates or affiliates with stations in 19 of the nation’s 20 largest television markets.

By mid-1998, the company hopes to shift from selling air time to infomercial producers into more mainstream programming, and reach 70% of the nation’s living rooms by next year, Grossman said.

To Paxson, KADY represents the nation’s 115th largest television market, reaching from Malibu to Monterey County.

But the deal to buy KADY is not done, said John W. Hyde, chief operating officer of Crossroads V Communications. Hyde is a trustee who took control of the station from John and Erica Huddy last year following a ruling by a federal bankruptcy judge.

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In early September, the Santa Barbara bankruptcy court will open a court-supervised auction, where other companies and individuals can attempt to outbid Paxson with higher all-cash bids.

After the auction, the winning bid will go to the Federal Communications Commission for approval of the license transfer. Payments to Huddy’s creditors will follow. Claims against the Huddy’s Riklis Broadcasting total $9 million to $15 million, Hyde said.

There are about five bidders waiting in the wings, and the station may ultimately sell for more than $8 million, Hyde said.

To free up more capital for television acquisitions, the company in late June sold its 46 radio stations, 526 billboards and two minor-league sports teams for $693 million.

Together, those assets had generated half of the company’s $165 million in revenue in 1996. And just last week, the company expanded its television holdings by acquiring The Travel Channel, a 24-hour cable network serving 20 million cable subscribers.

If the KADY sale to Paxson goes forward, the station would initially become yet another media mecca for myriad infomercials.

But company officials report they are negotiating with major broadcast networks, movie studios and cable operators to develop a new national television network, one that would be a “destination station” geared to a specific niche market in sports, business education or even horror films.