THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Monday, March 6, 1995 TAG: 9503040320
SECTION: BUSINESS WEEKLY PAGE: 12 EDITION: FINAL
TYPE: Cover Story
SOURCE: BY DAVE MAYFIELD, BUSINESS WEEKLY
LENGTH: Long : 210 lines
Over a golf game in which the loser paid off with a Pepsi and a Snickers bar, David Hanna picked up what promises to be the best tip of his business career.
There's this tiny TV station in Gloucester, his golfing buddy told him. It's off the air and its owners want out. Maybe you could make something out of it.
Hanna won the golf game, the cola and the candy bar. And what he's done since leaving Williamsburg Country Club that day in October 1992 may go down as one of the great ``wish-I'd-thought-of-that'' success stories in Hampton Roads broadcasting.
At 36, David Allen Hanna, ex-tug and barge line manager, ex-pipe and valve salesman, is president and general manager of WPEN-TV, a low-power TV station with unusually high-flying aspirations.
In a little over two years, Hanna and his crew at Hampton-based Lockwood Broadcasting Inc. have transformed a rinky-dink little station in a boondock corner of Hampton Roads into a spirited marketwide competitor for viewers and ad dollars.
WPEN's rise from ``Nowhereville'' has surprised the local broadcast industry.
``Everybody said we couldn't do this,'' Hanna says. ``We couldn't get cable systems to carry us. We couldn't get programming. We couldn't get Nielsen to rate us. But we've done all that and more.''
It's still a lightweight challenger in a ring filled with bigger and more seasoned fighters. But as it keeps scoring points, the little station is winning compliments from others in the TV business.
``Those guys are really wiley and they're persistent,'' says Lyle Banks, president and general manager of WAVY-TV, the NBC affiliate in Hampton Roads. ``I admire them for their gumption.''
The unlikely rise of WPEN isn't surprising to those who know the station's owner.
James L. Lockwood Jr. has a history of turning undervalued or distressed assets into profit makers. As a newly minted MBA out of Harvard Business School, 24-year-old Jim Lockwood led his father and uncle's crane and rigging company, Lockwood Brothers Inc., out of Chapter 11 bankruptcy in the late 1970s.
Lockwood's successful strategy for the Hampton company then and ever since has been to seek out the toughest jobs in the construction and transportation businesses: ``basically, things that other people are too smart to get involved with.''
Lockwood Brothers revolutionized how ceiling tiles are installed in tunnels, pioneered the transport of huge container cranes, erected roller coasters and developed techniques for loosening frozen coal in rail cars. It's best known nationally for moving heavy machinery.
The risks in handling such jobs are greater than normal, but so are the margins of profit.
In his latest foray into broadcasting, the 45-year-old Lockwood is applying that same contrarian strategy and counting on similarly profitable results.
With WPEN, he is also practicing one of his favorite preachings: that good managers can manage any business well.
The sum of WPEN General Manager Hanna's previous experience in television had been two courses in broadcasting as a journalism-public relations major at West Virginia University. But he knew how to run a business.
After Lockwood lured him away from a pipe-and-valve sales career to head up his newly formed tug-and-barge operation in 1986, Hanna transformed a ``dog with fleas, a real loser,'' into a profitable enterprise. So much so that when Lockwood sold the outfit in mid-1992, Lockwood refused to let his star manager go.
For two months, Hanna's job was scouting for a new business in which to reinvest his boss's seven-figure windfall.
``We really didn't have any idea what we wanted to do,'' Hanna says. ``And Jim didn't care - just as long as we made money.''
Hanna looked into buying a paper-bag manufacturing plant, starting a specialized rail-car factory, even operating a golf course. He's a 2-handicap, after all.
Then came that breezy day in the fall of 1992 when his golfing buddy suggested low-power TV.
Jim Lockwood liked the idea.
``What attracted us to it,'' Lockwood says, ``was we thought we could do it in a significantly different way that had advantages that weren't recognized at the time.''
In December 1992, Lockwood Broadcasting Inc. was formed. That same month, Lockwood purchased the Gloucester station for $155,000 from the local investor group that had launched it three years earlier.
The strategy devised by Hanna and another Lockwood manager, John Schaffner, was to expand the Gloucester station beyond its 12-mile transmitting radius.
Such a gambit had worked for a few low-power operators in other markets. In Corpus Christi, Texas, an operator assembled five different stations into a marketwide simulcaster. It's now a Fox Broadcasting affiliate.
But generally the 1,600 low-power stations licensed since the industry was created a decade ago are non-factors in their broadcast territories. Most are run by churches or schools. And profits for the remaining 400 commercial low-powers have proven elusive.
The big reason for their lack of success is that they have generally not been run professionally, says Hal Pontious, president of Showplace Broadcasting Inc. Based in Chicago,the company helps WPEN and two dozen other TV stations buy and schedule programming.
``There are a lot of entrepreneurs in the low-power business,'' Pontioussays. But there are only a few like Lockwood Broadcasting ``with the sophistication and the financial wherewithal to take it to the third or fourth step.''
Hanna's initial goal was actually fairly modest: to get his station into every home on the Peninsula side of Hampton Roads. Right away, he convinced cable systems in Newport News and the counties of James City, Mathews and York to carry the channel.
Behind the scenes, meanwhile, he and his crew of broadcast rookies fumbled at the controls.
A week after taking over, the station suddenly went off the air. Hanna and his helpers spent a frenzied hour trying to figure out what happened before somebody noticed an unplugged extension cord for the station's microwave transmitter.
The old joke had come true.
`That would have been my foot,'' Eric Kidwell, the station's production director, sheepishly admits. ``We taped that cord into the wall with about eight rolls of tape. And we learned not to take anything for granted anymore.''
When WPEN launched in January 1993, it ran home shopping 24 hours a day. But within three months, Hanna and his helpers had gathered enough know-how and confidence to add to the mix. They debuted a local talk show and a weekly NASCAR news/feature program called ``Raceline'' and began making local commercials.
Hanna's first big breakthrough was winning exclusive Hampton Roads broadcast rights to about 50 Baltimore Orioles games a year. That was a big revenue booster. In months of baseball broadcasts, the games have generated as much as half the station's ad sales.
Emboldened, Hanna started aiming to broaden the reach of the station even more: into South Hampton Roads. As his aspirations grew, he was by early 1994 winning marketwide rights to re-run classic TV shows like ``M*A*S*H'' and ``Hill Street Blues.''
Hanna says the station's youthful staff - all but four of the 19 employees are in their 20s - prodded him along. ``These people haven't learned to become realists,'' he says. ``I've got a team of Mario Andrettis driving a Go Kart. And I'm trying to get them into a high-performance car.''
A year after the station's launch, Hanna had weaned WPEN completely off home shopping and had changed over to an eclectic mix of programming that now also includes Bloomberg Business News, Western Athletic Conference sports, wrestling shows and quirkylocally made music programs like ``Karaoke Night Fever'' and ``Ramblin' Country.''
To build loyalty, Hanna tosses in themed ``viewer appreciation'' prize nights. During a recent John Wayne movie marathon, he gave rodeo tickets to viewers who called when a horse galloped by. ``We're not afraid to have fun,'' he says.
By last fall, after adding another low-power station in Hampton, Hanna was serious about fixing one problem, however. He convinced Nielsen Media Research to start tracking WPEN's ratings.
The Hampton and Gloucester stations' combined cumulative share in November - 2 percent of all viewing households on the Peninsula - is miniscule compared to the region's big network affiliates. They routinely pull audience shares of about 20 percent each.
But for the first time, WPEN could prove to advertisers, cable operators and program syndicators that it was attracting viewers.
Armed with the numbers, Hanna made his move to the south side. Cox Cable's agreement to start carrying the station Feb. 1 in Norfolk, Portsmouth and Virginia Beach added more than 200,000 homes to the station's reach. Now it's in about 370,000 of the 590,000 homes in the local broadcast market.
The greater footprint has helped WPEN jack up ad rates. It charges a minimum of $75 for a 30-second spot, up from $35 pre-Cox and $10 at its launch in 1993.
Hanna says Cox's carriage agreement has also strengthened his hand in bidding for first-run syndicated shows - about a dozen of which WPEN is still competing for the right to air starting in the fall.
Traditionally, syndicators have been reluctant to sell shows to low-power stations. ``I don't blame them,'' Jim Lockwood says. ``The statistics were so overwhelming against this working.''
Lockwood is not ready to declare WPEN a success. But he says the station is two years ahead of his financial goals. There's a good chance that by the end of the year it will be profitable on an operating-cash-flow basis, he says. Revenues are budgeted to triple in 1995, to about $750,000.
He's already invested more than $1 million in the station, and he's confident enough to plan sinking another $250,000 into a new studio, right next to the Lockwood Brothers headquarters. The station's employees currently work out of a corner of that building. Photos of tugboats line their walls.
For all of its gains, Lockwood knows that the station's biggest challenge is still ahead: getting programs that interest more viewers and, probably more importantly, effectively promoting the shows. Only then will it be able to charge the ad rates needed to turn a comfortable profit.
``It will be difficult for them to get whatever the hottest product is,'' says Christopher Pike, vice president and general manager of WTKR-TV, the local CBS affiliate. With a half-dozen local high-power stations competing for the shows, he says, the best WPEN can hope for is left-overs - and maybe some surprise hits.
Hanna concedes, ``We're not in a position to take something away from someone that's going to hurt them.'' But he says there are enough ``crumbs'' to make money.
Through ``counterprogramming,'' he hopes to carve out profitable audience niches. Example: he plans a local prime-time call-in talk show starting in the fall.
It's been a wild two-year ride for WPEN. The stakes are getting higher.
Worried? Nah, says Jim Lockwood. ``We sort of think we can do anything we put our minds to.'' MEMO: See microfilm for description and graphic of WPEN-TV and timeline of
development. ILLUSTRATION: Color photos by Richard L. Dunston, Staff
Brian Capaldo...
James L. Lockwood, Jr...
David Hanna
Photos
Jay Ward...
Baltimore Orioles...
M*A*S*H clip
by CNB