Ackerley Communications, Inc.

views updated

Ackerley Communications, Inc.

800 Fifth Avenue
Suite 3770
Seattle, Washington 98104
(206) 624-2888
Fax: (206) 623-7853

Public Company
Incorporated: 1975 as Northwest Communications, Inc.
Employees: 926
Sales: $187 million
Stock Exchanges: American
SICs: 7312 Outdoor Advertising Services; 7319 Advertising Nec; 7941 Sports Clubs, Managers & Promoters; 4832 Radio Broadcasting Stations; 4833 Television Broadcasting Stations

Ackerley Communications, Inc. is a diversified communications company involved in outdoor and airport advertising, radio and television broadcasting, and professional basketball. With 10,150 billboards located in Florida, Massachusetts, Oregon, and Washington, the company is the largest operator of outdoor advertising in each of the markets it serves. As the largest operator of airport advertising displays in the United States, Ackerley Communications owns and operates 5,160 displays in 129 airport terminals throughout the country. It owns five television stations in New York, Colorado, California, and Washington, and three radio stations in Florida and Washington. The company also owns the Seattle Supersonics, a National Basketball Association franchise.

By the early 1960s, the advertising industry had begun to attract hopeful entrepreneurs intent on profiting from the billboard properties that dotted the nations landscape. The inertia that had characterized the industry in the late 1950s ended when a group of investors purchased one of the nations largest billboard interests, General Outdoor Advertising, and then proceeded to sell off several of its markets. Prior to the break-up of General Outdoor, billboard properties had rarely changed hands and the opportunities to enter the field had, consequently, been limited. As more properties became available, interested parties began purchasing them, hoping to capitalize on what many viewed as a low-cost, high-margin investment. One of these hopeful entrepreneurs who envisaged the profit potential in the industry was Barry A. Ackerley.

During this time Ackerley was working in New York, selling advertising space for the magazine Better Homes & Gardens and hoping for greater opportunity and a faster path to success. Lacking the necessary capital to enter into the business immediately, he nevertheless was encouraged by the possibilities and returned to his native state of Iowa to work for an outdoor advertising firm, Stoner Outdoor Advertising. Soon after his relocation to Iowa in 1964, he approached a wealthy family in Wichita, Kansas, and asked for their financial assistance in acquiring billboards. The family agreed and, as a minority shareholder in the venture, Ackerley purchased billboards in Fresno and Bakersfield, California. Over the next four years, Ackerley purchased additional billboards in San Francisco, Oakland, and San Jose, California.

By 1968, the billboards in northern California had generated enough income to provide Ackerley with the start-up capital he had lacked in New York five years earlier. He sold his interest in the venture back to his benefactors and, with a new partner, parlayed the proceeds toward the establishment of an outdoor advertising company, Golden West Outdoor Advertising. Golden West, under Ackerleys management, operated properties in Sacramento, California, and in Colorado until 1974, when Ackerley purchased his partners share in the company and then sold the billboards in Sacramento, thereby becoming the sole owner of the Colorado market. These Colorado properties were not to remain with Ackerley long, however. Shortly after he had gained complete control of Golden West, he sold the company to Gannett Company, an outdoor advertising firm that would soon be one of Ackerleys main competitors.

With the money garnered from the sale to Gannett, Ackerley, after a brief return to the Northeast to work for an advertising firm, relocated to Seattle, Washington, in 1975 and purchased Seattle-based Foster & Kleiser from Metromedia Inc. and Obie Outdoor Advertising based in Eugene, Oregon. The acquisition of these two Northwest outdoor advertising companies formed the initial components of Ackerleys new company, named Northwest Communications, Inc. initially, and renamed Ackerley Communications, Inc. the following year.

From 1975 on, Ackerley no longer entertained the idea of selling any of his assets. His penchant for acquiring companies at a rapid rate led to his precipitate rise in the outdoor advertising industry, and while it also left his company in debt throughout most of its existence, for Ackerley, this was not necessarily a precarious position. By acquiring company after company and recording the consequent deductions allowed for interest payments and asset depreciation, Ackerley kept his taxable income at a minimum. Accordingly, his company rarely posted substantial earnings and often operated without showing any profits, but still continued to expand. Rather than gauging his companys success by monitoring the rise or decline in net income, the traditional barometer of a companys financial status, Ackerley relied on the amount of cash flow his company recorded. By maintaining a sufficient level of cash flow (the income from operations before depreciation, amortization, and interest are charged) Ackerley could continue to enlarge his holdings while his company appeared to teeter on the edge of failure.

In its inaugural year, Northwest Communications recorded revenues totaling $6.6 million, giving Ackerley enough bargaining power to persuade the First National Bank of Chicago into financing the purchase of additional properties in Florida the following year. After securing a foothold in the Florida market, Ackerley next purchased billboard displays in Massachusetts in 1978 and then began plans to diversify his business interests. In 1980, he purchased Hart Advertising Company, a St. Louis-based operator of airport advertising displays. The Hart acquisition gave the company, now known as Ackerley Communications, Inc., advertising displays in 36 U.S. airport terminals, marking the companys initial move into airport advertising. A year later, Ackerley augmented his investment in airport advertising by purchasing the Winston Networks TDI subsidiary, which operated advertising displays in nearly 50 airport terminals.

After establishing a solid presence in both the airport and outdoor advertising markets, collectively known as out-of-home media, Ackerley next explored the broadcasting industry for further expansion opportunities. In 1982, the company purchased ABC-TV affiliate WIXT-TV in Syracuse, New York, from WIXT Television Inc. for $13.8 million. Eight months later, Ackerley Communications acquired KKTV, a CBS-TV affiliate serving the Colorado markets of Colorado Springs and Pueblo. Before the end of 1983, the company purchased yet another television station, KPWR-TV, since renamed KGET, the NBC-TV affiliate in Bakersfield, California.

By the end of 1983, Ackerley Communications owned television stations affiliated with each major television network, 11,000 billboard displays in Washington, Oregon, Florida, and Massachusetts, and advertising displays in 86 airport terminals. The companys all important cash flow had more than doubled in the previous four years, from $9.5 million to $22.3 million, and Ackerley stood ready to acquire additional businesses. That year the company also entered into a line of business that would facilitate the move from advertising on billboards to television stations: in November, Ackerley announced he had entered a definitive agreement with Seattle SuperSonics Corp., owned by FNI Corp., to purchase the Seattle Supersonics basketball franchise of the National Basketball Association for $21 million.

In less than ten years, Ackerley had built and led Ackerley Communications toward enviable success and had demonstrated an ability to acquire any company he deemed worthy of inclusion in his growing empire. Ackerleys acquisitive talents, however, failed him on two occasions in the year following the purchase of the Seattle SuperSonics. First, his bid to acquire a fourth television station, unaffiliated KZAZ in Tuscon, Arizona, was rejected, presumably because Ackerley Communications did not boast a large reservoir of cash. The second attempted acquisition was far more disheartening. Ackerley offered $156 million to buy the Des Moines Register & Tribune Company, the addition of which would more than double the revenues of his existing company. Recording $88.5 million in revenues for 1983, Des Moines Register & Tribune owned The Des Moines Register, the Daily Sun in Jackson, Tennessee, as well as two rural newspapers in Iowa. In addition to these principal components, the company also owned two television stations in Hawaii and Illinois, and three radio stations in Oregon and Wisconsin. Even more appealing, the companys properties also included a 14.3 percent ownership in Cowles Media, publisher of The Minneapolis Star and Tribune. The deal, however, was never seriously considered by the newspaper company. Industry pundits cited Ackerleys lack of newspaper experience as a possible reason for the failed bid and others speculated that, given Ackerleys holdings in broadcasting, he was only after the companys television stations, and would sell the newspaper once he had acquired it. Ackerley attempted to mollify the owners of the Des Moines company by stating that he had no intention of breaking up the company, telling The Wall Street Journal Look at our history. We only buy. We never sell, but conceded that the chairperson of the Des Moines company, wont even return my phone calls. Although Ackerley Communications was the third largest outdoor advertising company in the United States and the largest airport advertiser, critics contended that Ackerley had overestimated his position within the media industry. The newspapers were sold to Gannett Company, publisher of USA Today and the owner of a vast number of billboard displays, for $200 million in early 1985.

Despite the discouraging setback, Ackerley continued to expand and diversify, making an entrance into radio broadcasting during this time. Following the purchase of the Seattle SuperSonics, Ackerley acquired his first radio station, KJR-AM, in May 1984 for $5.8 million. Purchased from Metromedia Inc., the same company Ackerley had purchased Foster & Kleiser from in 1975 to launch Northwest Communications, the addition of the 5,000 watt radio station soon gave Ackerley Communications the synergism within its operations that had been lacking once the basketball team was acquired. KJR, regarded as a pioneer in developing the Top 40 music format, was converted into a sports talk station and by 1987 had obtained the broadcasting rights to the SuperSonics games. Now, with the addition of KJR, Ackerley could employ his billboards to advertise the SuperSonics broadcasts on KJR, which at once incorporated the three separate business segments composing Ackerley Communications.

Once all three of these business lines were working together, Ackerley set forth to increase his holdings in both out-of-home advertising and broadcasting. In 1985, Ackerley purchased unaffiliated KVOS-TV, located in Bellingham, Washington, and primarily serving the Vancouver, British Columbia, market. A month after the KVOS acquisition, Ackerley purchased the two radio stations owned by the Des Moines Register & Tribune Company, KGON-FM, a 100,000 watt station, and KFXX-AM, a 50,000 watt station, both of which served Portland, Oregon. By this time, a discernible pattern had developed in Ackerleys acquisitions. Almost without exception, broadcasting properties were acquired in markets where Ackerley had already established a considerable presence in the outdoor advertising market. Accordingly, as Ackerley continued to augment his television and radio assets, the markets that his broadcasting interests served mirrored the markets served by his outdoor advertising properties. This integration of his business segments enabled Ackerley to offer advertisers a multimedia package with a guaranteed audience, a set-up that was much more attractive to advertisers who typically had to negotiate for each advertising format.

With this strategy driving the companys acquisitions, Ackerley purchased KCBA-TV, an independent station affiliated with the Fox Broadcasting network and serving Salinas-Monterey, California, in 1986. The following year, KLTX-FM, a 100,000 watt station in Seattle, was added to the growing list of Ackerley Communications broadcasting properties. Two years later, in early 1989, before his company publicly offered shares of stock for the first time in the fall, Ackerley acquired WBOS-FM in Boston, Massachusetts, for $19.3 million and $16.9 million worth of outdoor advertising properties in southern Florida.

By this time, the companys aggressive expansion had produced a large debt$222 million at the end of 1989but this was nothing new for Ackerley Communications. The cash generated by the outdoor and airport advertising operations was sufficient to service the debt and fund additional acquisitions, such as the purchase of WAXY-FM, a 100,000 watt radio station serving Miami-Fort Lauderdale, Florida, in 1990. But, as the company entered the 1990s and the nation experienced economic recession, Ackerleys losses exponentially increased, becoming too large even for a company accustomed to operating in the red. In 1990, Ackerley Communications recorded a loss of $14.5 million, and by the following year the figure had increased to $39.1 million. Ackerley responded to this downturn by cutting costs, increasing the efficiency of the companys operations, and selling two of his radio stations, WBOS-FM in Boston and KFXX-AM in Portland, in 1992. By early 1993, the company had rebounded, posting its first profit for a full year since 1981.

As Ackerley Communications attempted to build upon the $3.2 million it earned in 1992, its prospects appeared bright. The Seattle SuperSonics reached the Western Conference finals during the 1992-93 season, a feat expected to boost the companys earnings in fiscal 1993, and its return to posting profits after an eleven-year hiatus bodes well for the future. The company had to contend, however, with the burgeoning movement against the erection of billboards, an issue it has fiercely challenged in the courts. Assuming legislation will not eliminate the underpinnings of Ackerleys communications empire, Ackerley Communications should continue to dominate each of the markets it is involved in.

Principal Subsidiaries

Ackerley Communications of Florida; Ackerley Communications of Massachusetts; Ackerley Communications of the Northwest; KVOS-TV; WIXT-TV; KKTV-TV; KCBA-TV; KGET-TV; WAXY-FM; KLTX-FM; KJR-AM; KGON-FM; Seattle Supersonics.

Further Reading

Ackerley Agrees to Buy Seattle Basketball Team, The Wall Street Journal, November 2, 1983, p. 19.

Going Public Via the Back Door, Marples Business Newsletter, November 21, 1984, pp. 23.

Lee, Gordon, Recent Ventures Turn Spotlight on Ackerley Firm, Puget Sound Business Journal, March 4, 1985, p. 6.

Pierce, J. Kingston, BattlhV Barry, The Weekly, February 13, 1985, pp. 3641.

Roberts, Paul, The Last Tycoon, The Weekly, May 30, 1990, pp. 3842.

Virgin, Bill, Ackerley Has First Winning Year Since 81, Seattle Post-Intelligencer, January, 22, 1993, p. B2.

Zonana, Victor F., Ackerleys Drive to Expand Media Firm Is a Factor in Bid for Des Moines Register, The Wall Street Journal, December 7, 1984, p. 24.

Jeffrey L. Covell