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Executives

David D. Smith - Chairman, Chief Executive Officer, President and Director of Sinclair Ventures Inc

Lucy A. Rutishauser - Vice President of Corporate Finance and Treasurer

Analysts

Aaron Watts - Deutsche Bank AG, Research Division

Sinclair Broadcast Group, Inc. (SBGI) Deutsche Bank's DbAccess 21st Annual Media and Telecom Conference March 5, 2013 10:10 AM ET

Aaron Watts - Deutsche Bank AG, Research Division

Okay. I want to get started here so I don't waste any time. Pleased to have a full team here from Sinclair Broadcast. To my right, your left, David Smith, President and CEO; Lucy Rutishauser, who is VP of Corporate Finance and Treasurer; and then next to me, David Amy, Chief Financial Officer. And I think we're going to jump right into Q&A.

Question-and-Answer Session

Aaron Watts - Deutsche Bank AG, Research Division

And given that Sinclair has been one of the more active folks in the market lately, there's certainly enough to talk about. Maybe I'll turn it over to David. Just give us your thoughts on your recent transactions that you announced last week, maybe you can talk a little bit about those and some of the thought process behind them?

David D. Smith

Well, for those of you who've followed Sinclair for a long time, you know our view has always been when we find assets that we think fit our profile, we're a buyer. Candidly, we always have been and always will be. These acquisitions, especially the Four Points, the Freedom, the Newport and now the current ones, the Barrington and COX, all represent transactions that we think have significant upside to them. They provide us a significant vision in terms of our national scale, our ability to negotiate transactions at all levels, whether it's for purchasing cameras or doing retrans deals or syndication deals, all these things are incredibly accretive over time. In the longer term, well, if you've followed us for a number of years, you've noticed our history has been that we think our long-term prospects for spectrum space play in television and the opportunity it's going to provide for us are very material, and we think that time is getting closer and closer. So we like the television business in spite of what those in the -- sometimes print media often refers to us as "dead money". The fact of the matter is there's nothing dead about us at all. We're very much alive and opportunistic and see a very bright future for television.

Aaron Watts - Deutsche Bank AG, Research Division

With most of the transactions you just spoke on, they seem to center on the kind of mid-market station groups. And your most recent announcement with Barrington and COX, it seemed that you're moving a little bit smaller in our focus. You did start kind of a new Chesapeake group to focus on those small ones. Can you talk about what attracted you to those smaller markets, if you think going forward, that's an area that you will continue to focus on? Or is it more case-to-case basis?

David D. Smith

It really is a case-to-case, but at the same time, our history has always been one of a consolidator. And there are a limited number of properties left in markets: 20 to 100. So being the consolidator that we are the next focus is a natural focus for us, is looking for markets 100-plus, 80 to 100-plus. And Barrington represents a huge chunk of assets for us, and we just think they fit our profile very well. We're setting them up under Chesapeake specifically, because a small market mentality is a little bit different than a larger market mentality like a Cincinnati, Ohio or Columbus or something of that nature. It takes a little more focus, a little more attention to do what we need to do there. So we want them set up under a different umbrella and not be a distraction from our larger core business, so the smaller -- mid-sized markets.

Aaron Watts - Deutsche Bank AG, Research Division

Can you talk a little bit more about what you see as the synergies between running the mid-market stations and still having the smaller market stations under the same corporate umbrella, albeit a little bit in the operating group?

David D. Smith

The synergies are always the same. It really makes no difference whether it's New York City or it's Butte, Montana. In the grand scheme of the things, it's about leverage and it's about how you use that leverage to run your day-to-day business. So the leverage you get from having 8, 10, 12, 14 additional television stations in small markets just becomes additive to the whole scale of things. There's no rocket science in that. It's pretty basic stuff. Every percent of the country, every couple percent of the country means that much more in the context of discussion in retrans or programming or anything else. So it's really -- in the larger picture, it's all relevant. It's all important to the grand scheme. Grand scheme for us is spectrum space. It really is, and has been for a long time. These acquisitions are just a mechanism to get in position to be able to play the larger game, what we think is clearly going to be a larger game of opportunity that exists by virtue of a platform that's capable of doing things well beyond what it's capable of now.

Aaron Watts - Deutsche Bank AG, Research Division

And maybe we can just continue along that theme with spectrum. What do you see today as the main opportunities where you can generate profits from that spectrum that you have? How do you see utilizing it?

David D. Smith

Well, right now, the way the existing platform is structured, it's somewhat problematic to do any grand-scale-type operations. But we anticipate in the future, given the advances that are taking place in the industry, I'm sure if you follow the industry, you'll notice there's this new term out called 4K that's coming. It represents a capability that's essentially 4x the resolution of what we do now. Programming is being produced and actually football games are being shot, certain aspects of football games are being shot in 4K. When it comes time to do 4K from a broadcast perspective, we're going to need a different platform than we currently have. When that platform arrives, we'll not only do 4K but we'll have the capability to do lots of other things simultaneously, whether it's partnered with phone companies and become a download pipe for them or set up multichannel platforms or brand is yet to be determined. The point is, is the pipe will be there and then it's simply up to us as entrepreneurs to figure how to maximize the value of that pipe, which I think we'll do.

Aaron Watts - Deutsche Bank AG, Research Division

How do you see the timeline for this playing out? Maybe we can start with, when do you think the auctions will actually happen?

David D. Smith

If the ball would find it out, then I could really make some money. I'm not sure when the auctions are going to happen. And frankly, I'm not sure whether there's going to be a lot of TV stations that want to sell their spectrum space. There's certainly some speculators out there who are gambling that there's some value in that in the near term, but those are speculators; that's not our business. We think in the grand scheme of things that there's probably a 3-year, probably 2- to 3-year worth of work left to get the industry where it needs to be to be able to do 4K and anything else that's coming. And when that happens, that's when the real opportunity starts. Between now and then, our view is, we're going to accumulate spectrum space and buy businesses that are just clearly accretive to what we're doing now and run them in the normal course. And we're very comfortable doing that, obviously.

Aaron Watts - Deutsche Bank AG, Research Division

So it's still a few years out until you're really set to see the monetization of that asset?

David D. Smith

Yes.

Aaron Watts - Deutsche Bank AG, Research Division

Okay. With Sinclair, I know you said that you don't think most broadcasters are going to participate in the auction. With Sinclair and some of your markets participating, I mean, what would be your consideration in...

David D. Smith

I can't fathom being a participant in the auction. It makes absolutely no sense to me.

Aaron Watts - Deutsche Bank AG, Research Division

Okay. Anything else in the FCC with what they're looking at? I know they had been looking at some of the arranged -- marketing arrangements that go on. Any concerns there that some of that focus could come on to Sinclair?

David D. Smith

No, I don't think it's going to -- if it comes to the industry, it's not going to affect us any more than it affects anybody else. I mean, the regulatory agency does what it does. They regulate, and our objective is to run a business. So we'll figure out how to solve that problem if it ever happens.

Aaron Watts - Deutsche Bank AG, Research Division

Okay. All right. One thing we've heard a lot about at this conference is sort of the disintermediation of audiences as some of the networks, for instance, make their content available in more ways, whether it's Hulu, Netflix, other ways to stream -- or mobile devices and how that ultimately impacts audience levels for linear TV. And I'm just curious, your thoughts on how that can impact the local TV broadcast.

David D. Smith

So let me just flip forward here and show you a slide that kind of addresses this issue to some degree. You always hear the discussion about how we're old media and why nobody watches us anymore and why we're going to go away. I mean, how many times have you all heard, over the last 15 years, "Broadcast will cease to exist"? It started with Microsoft a few years ago. And we thought it would be interesting, because this really kind of addresses the issue of what's relevant and what's not relevant. From 6 to 6:30, adults 25 to 54 in May 2012, it could have been any book, it doesn't make any difference what the book is, we just happened to grab this one off the shelf and threw the data together. WKRC, our CBS affiliate in Cincinnati, Ohio, has 33,309 people watching it. CNN news has 45. That's not our data. That's Nielsen's data. And the point of this is -- and by the way, ESPN has 3,748. So who's relevant and who's new and who's old? That's local news. The more important thing here is, when you look at what ESPN gets for retransmission fees and look at what CNN gets, CNN gets around $700 million a year in retrans fees. For what? That's kind of the question, isn't it? Look at what we get as an industry, just extrapolate what CNN gets to our industry, it's a real serious number. So you can see, just look down the scale here, our ABC in Columbus, Ohio, 17,000-plus; CNN, 300. CNN does $700-plus million a year in retrans according to Kaygen. I'm not telling you they're right or wrong, that's what's published. All right. Here's another group out, and this is late news, 11 to 11:30, KRC in Columbus, Ohio, 50,000 people; CNN has 78. So please tell me how CNN commands $700 million a year in retrans fees and our entire broadcast industry does peanuts compared to what they do on a percentage basis. Our Beaumont, Texas television station, 15,000 people watching our newscast; little dinky Beaumont, Texas. Look at what it does relative to ESPN, 15x the audience. So again, I ask you, who's relevant and who isn't? Morning newscast: KRC Cincinnati, 20,000; CNN, 644; ESPN, 791. My guess is, it's 5 to 7 in the morning and the show that's been on there has gone 14x the previous day, so nobody really cares about it. Our Fox affiliate, 14,000; CNN 1,000. Salt Lake City -- it just goes on. But what's really dramatic is when you look at this, here is early fringe on a CW and a MyNetwork television station that has no real serious network programming, it's all syndicated, look what it does. STR [WSTR-TV] on MyNetwork in Cincinnati, Ohio does 12,000 people; CNN does 153; ESPN, 4300. On MyNetwork in Raleigh, 13,730 versus 821 and 5,829, respectively. So I would ask you, who's old and who's relevant? Here's Milwaukee, Wisconsin, a CW that has no serious programming whatsoever, look at the difference. So if we're old, what is ESPN and what is CNN and what's relevant and what isn't? And by the way, those stations, those MyNetworks don't have news. They're standalone independent television stations that dwarf anything that ESPN gets. If you believe what you read, I'm not telling you, you should or you shouldn't, the ESPN gets $5-plus and CNN gets $0.60. So if they're getting that, what's our entire industry worth? That's kind of the $64 question for people to analyze.

Aaron Watts - Deutsche Bank AG, Research Division

So maybe just on that topic, how have the viewers -- those are the absolute numbers, but how have the trends been for local news?

David D. Smith

I think if we pulled out our rating books for just this February rating book, you would see the majority of our morning newscasts all went up in share of audience, whether it's Columbus, Ohio, Salt Lake City. Since we've taken Salt Lake City over in the last year and change, its dominant in terms of its newscast; it absolutely owns the marketplace. KRC in Cincinnati, up 2 share points in morning news; owns the marketplace. So how do you place the value on an asset that owns the marketplace? It's not CNN, it's not ESPN, and we didn't bother to put Fox Business news up there, because there's only 30,000 people across the entire United States watching it. But yet, it gets credibility and image in the marketplace. But on a relative basis, nobody's watching it. We're the dominant force in the local marketplace, always have been. And I don't see anyone that's going to knock us off the block anytime soon, whether it's Internet, newspapers gone Microsoft, I don't think so.

Aaron Watts - Deutsche Bank AG, Research Division

As people watch less live television now or don't watch at the kind of first showing, does that hurt you from a lead in, lead out?

David D. Smith

Well, I think that's an issue that needs to be dealt with longer term as it relates to our relationship with the rating services. So if somebody's watching my television station 3 days after the fact, I need to get credit for that. If they're watching it 5 days after that fact, I need to get credit for that. We're just not there yet as an industry to be able to force that to happen. We need more consolidation. If we had a consolidated industry and there was 5 players sitting at the table with Nielsen, we'd have that deal [ph] tomorrow. We're just not there yet, but we're getting close. But let me just read something, because this is -- you all may not see this kind of stuff like we see it on a regular basis. There was a -- essay that came out, or a report that came out last year prior to the election, it says, "Doubt the power of TV at your own risk." Kind of an interesting article. But this is all Nielsen data. And again, I'm not here to tell you Nielsen's right or wrong; I'm only here to tell you what it says. It says, "According to Nielsen's cross-platform report, television dwarfs the combined reach of online and mobile. The average monthly reach of television, according to Nielsen, is 428 million and change, online is 147 million and the average monthly reach of mobile is 33 million." So again, the argument is pretty simple. Who's the dominant medium? Local television stations are. Not cable, not the Internet, not YouTube. Are they important? Sure, they are. But in the grand scheme of things, nobody does what we are doing on a local basis. If you doubt that, just look at what you all do when you go home. You watch local television to see what's going on. Your wives do, your kids do, everybody watches television; just a fact of life. We take it for granted sometimes, but the fact of the matter is, it's always there. The thing that we're learning how to do, and this is kind of a new space for us, this whole notion about the local television station wanting to be in the Internet business is really fascinating, and we're becoming -- we're a long ways from being an authority at it, but we're learning. And I'll give you an example of the kind of things that we're learning. And there is money here, there's real money to be mined over time. Our station in Portland, Maine, our CBS affiliate in Portland, Maine; that's the #2 newscast in the marketplace. When the storm came through a few weeks earlier, you probably all heard about that. We had 325,000 views of our website just to see what the weather was. You take the 325,000 and you extrapolate that across our platform, and whether it's Beaumont, Texas, we had an incident at Beaumont, Texas last year, 3 million people came to our website. We're not good enough to be able to predict when those things are going to happen. So what we do from a selling perspective is that we're starting to think about the notion of forward-selling stuff in anticipation of an event in Any City, USA, and we're in awful lot of cities now, we can literally presell people coming to our website and know with certainty who they are, where they are and demographically, what's relevant about them. That's something as an industry, we haven't done and really given serious thought to, but it's where the world's going. And frankly, I think it'll be a material business for us in the not-too-distant future. And it's simple, because it's nothing more than us using our platform to drive people to our platform. It's really all it is, and it's something we're learning how to do.

Aaron Watts - Deutsche Bank AG, Research Division

On the local front, with your advertisers, is that something they're asking for?

David D. Smith

They insist on it now. You go into an advertising agency in today's world, and the first thing they ask is, "Where's your digital program? What have you got for us?" Because there's this attraction toward the Internet and digital and websites and yada yada. Okay, well, we're there now. But again, it's a new business for us and it will be material, the only issue is what day. Because it's a different science, it's a different business altogether. And it's about us using our news platforms to constantly image and push people to do things they wouldn't otherwise do. And just an example, here's something that -- as we test the marketplace, understand what makes people go from here to there, we did the contest in Portland, Maine, where we asked a very simple question of the news audience. It was almost childish. 325,000 people showed up to participate in it. Okay? So what does that suggest to you? It suggests that people are maneuverable. No rocket science in that, right? We're using our news platforms to drive people to our websites, and at the websites, we'll monetize them. It's important.

Aaron Watts - Deutsche Bank AG, Research Division

Who are you fighting for that incremental dollar with?

David D. Smith

Who are we fighting? I think anybody who's attempting to be in the news business, whether it's the newspapers, magazines, whomever. Everybody's trying to get that dollar, everybody wants that dollar. But nobody can do what we do. Nobody can deliver 50,000 people in newscast and simultaneously give you a website that maybe has 0.5 million people coming to it. We can package that. What does newspaper have to package? What does the Internet have to package? The Internet's got the Internet. They don't have what we have.

Aaron Watts - Deutsche Bank AG, Research Division

How about cable? Some of the growing popularity of some of the cable shows. Has local cable been fighting ads with you?

David D. Smith

Well, I think the cable business is not going anywhere anytime soon. The fact of the matter is that they're in our space, they like selling to our advertisers; what I consider our historic advertisers, and that's fine. But what you should understand is, is the technology of today and the technology of tomorrow is going to allow us to compete directly against cable in that same kind of sale. So one thing -- one of the advantages that the cable guys have that we don't have as broadcasters yet, is the ability to zone sell. So using Baltimore as an example, Baltimore is broken up into 13 different zones, and the zone on the north side of town is completely different from the zone on the south side of town. Well, an advertiser in the north side of town has no interest in talking to an advertiser on the south side of town, but yet cable can walk into that advertiser and say, "You know what? It isn't efficient for you to buy broadcast. But you know what? I can sell it to you and I can give you everybody within a 4-mile demographic or 4-mile radius of what you want to talk to, and I'll charge you something less than broadcast charges." Well, that's such a deal, right? Well, it won't be too long, sometime probably this year, where at least our company will start zone selling. So we're going to go to the cable companies and the satellite guys as they evolve into this technology, such that we can literally do exactly what they do and sell zone per zone. So hypothetically, a spot in American Idol, if you will, that would normally be sold to 1 advertiser across the entire platform, we may sell thirteen times. So if I sell it for one time for $1, what's it worth on a 13x basis? Is it worth $1.10, $1.20, $1.30, $2, $3? I don't know. My guess is it's worth a whole lot more than $1. So our understanding the technology and the execution on that business model only puts us in their business and puts us directly competitive with cable on a spot-for-spot basis. We're going to be doing that.

Aaron Watts - Deutsche Bank AG, Research Division

Okay. Something thing -- Jerry [ph], you want to jump in?

David D. Smith

Go ahead.

Unknown Analyst

You're in the unique situation right now where you're the most strategic buyer and you're also the buyer with the most -- you're also the buyer with the most capacity. So that gives...

David D. Smith

I guess that makes us the buyer.

Unknown Analyst

And maybe the most desirous. You have been the most desired of any other buyers. So how much headroom do you really feel you have from a regulatory perspective, from a management perspective, financial perspective; how much headroom is there?

David D. Smith

From a regulatory perspective, we could double in size. Because right now, we're roughly 30% of the country. But when you count it the way the administrative agency counts it, we're roughly 16%, 17%, 18%, because UHFs count different than VHFs, kind of an old rule. So we can literally buy a TV station. I think it's markets from 75 or 80 to 200 and not hit the mark. Is that going to happen? Who knows? From a management perspective, it's always a challenge. Everybody's working harder, everybody's working more hours, and we have to expand to accommodate that. But we're not going to miss a beat just because we're buying businesses. We'll solve that as we kind of evolve into it. From a financial perspective, as you know, we have plenty of capacity, it's just about buying it right. That's all it is. If we can't buy it right, we're not a buyer.

Unknown Analyst

I mean, as far as -- as you're achieving greater and greater scale, does -- contractually, obviously, a lot of your synergies come from your ability to get good deals from the MVPDs. Obviously, you have your partner with the networks. I mean, how do you see -- a little more spectrum so you can help drive local standards, things like that. How do you see scale benefiting over time?

David D. Smith

Well, I think, scale always does what scale does. It gives us the ability to reduce cost, it gives us the ability to clearly leverage the delivery platform that we have and deal with the MVPDs, as you noticed. And there's an example. So look at Mediacom, a large cable company. We represent roughly more than half of all their subscribers. So how can they not have a deal with us? In the context of DIRECTV, we're roughly half of their entire subscriber base. You have to do business with us. You have to do something that's fair and reasonable for everybody. Our definition of what's fair and reasonable is where the argument always is. So if CNN's worth $700 million a year reaching 95 million households and ESPN's worth billions and billions and billions and nobody's watching, what are we worth? That's where the friction is. The friction is always going to be there. It's always going to be there because we're worth more. When local broadcasters deliver 40%, 45% of the entire audience and we're getting 2% of the revenue, well, there's an imbalance in that. And it just takes time to go through the process, accumulate the leverage necessary to have a fair transaction, and we're trying to do it okay. But more is better. More gives us more opportunity to have that discussion. So you get what's fair. I would tell you, we're not getting anywhere near what's fair yet, it's just we're nowhere near. And you can't get it overnight, it just takes time. Because frankly, when you look at -- I'd tell you the obvious, but sometimes it gets lost. So you tell me the cable guys have 2 places where you get the money to give to the broadcasters. They can get it from a consumer or they can take it from the people that nobody watch. So if nobody's watching CNN and everybody recognizes CNN as a global leader in news, yet nobody watches it, right, you look at what they get versus what -- everybody heard of The Africa Channel? You know how much they get? You pick it. These are not my numbers, it's Kaygen's numbers. There's hundreds of channels on here, many of which nobody watches under any circumstances, that fact of the matter, get more than broadcasters get. Go figure. It's just a holdover from yesterday, it's all it is. And it just takes time to kind of wade through that history to get to what's a fair deal. So BET gets $0.20. I mean, you pick it. My Lord, there's just so many of them in here. Everybody heard of G4? Nobody watches G4 in here? One of the great cable channels. They get $0.10. Does anybody know what it is? There's hundreds of them like that. So do you want to know where the money is going? That's where it goes. For nothing that anybody pays any attention to. Our view is, that money needs to come to us. And that's what the networks are saying. They're saying the same thing. It's just going to take time. But it will happen. Yes, sir?

Unknown Analyst

Were you given a negative comp?

David D. Smith

On what?

Unknown Analyst

The reverse comp you paid. [Indiscernible]

David D. Smith

We can't talk about that. But what I would tell you philosophically is, is that reverse comp is just part of life; it's here to stay. It's not going anywhere, it's just part of the deal. The issue is maintaining our balance. There's always going to be a friction between the affiliate and the network, that's just nature of the business. They're going to want more and we're going to want more, so that just has to work itself out over time.

Unknown Analyst

Can you talk about how many of your stations have come to an agreement with the agreement to settle, or if they will walk, or you just -- it's all good?

David D. Smith

I think it's all good. I mean, I think we're very comfortable with the relationship with the networks. We understand their issues and I think they understand ours. But there's always going to be friction there. It's never going to change. The only way to change it is when the network buys everybody. And when's that's going to happen? Maybe someday. It's possible, my regulatory change.

Aaron Watts - Deutsche Bank AG, Research Division

And maybe just as a follow-up to that, I can try it a different way, we went from retrans being nothing, right, to being a real boon for you through the recession and coming out of the recession 100% margin give or take kind of money coming in. And as we move forward, obviously, it's going to trend down from that 100% margin. Do you see the dust settling at any kind of given level? Is it a 50-50 type split in the end or it's hard to say?

David D. Smith

I think it's just hard to predict right now, because I think networks want all they can get and we want all we can get. I mean, there's no genius in any of that, and that's when the discussion starts. Does it come to a natural end? I don't know what the answer to that is. My only concern is if the network says they want $0.01, then that means I need to get $0.03 or $0.04 or $0.10 or whatever the margin I want is from the cable and satellite guys, that's all. I just have to be able to pass it on. And if I can't pass it all on -- if it ever happens, I can't pass it along, that's a different discussion. But that's not going to happen anytime soon. That's a long-term issue. Every retrans transaction is 3 to 4, 5 years. So you get another bite of the apple in 3, 4 or 5 years. So when you think about where the money has to come from, it just takes time to move the people that are getting $0.10, $0.20, $0.30 over to where they honestly should be. It takes time to get that money, but it's happening, that's the important thing. Look, we sat here years ago and everybody laughed when we said, "We're going to get paid real money for retrans." Everybody laughed and said, "Yeah, right." And then we attended a conference down here a couple of years ago, and one of the biggest guys in the business said, "We don't pay cash to anybody," and we said, "Really? Maybe we should release this information, because that's -- what you just said isn't true." Well, the reality is everybody's getting paid. Some get paid more than others. And the ones that get paid more than others are the ones that have more average. That's all. The ones who have more viewers, ones who have more eyeballs, the ones who have better television stations, so -- and that's fair. We should get more, and we will.

Aaron Watts - Deutsche Bank AG, Research Division

Anyone want to jump in? So curious what you kind of view as the core growth trajectory for your business going forward the next few years, and maybe you can kind of highlight that against the backdrop of where the public market multiples are now for TV versus other local media like radio or outdoor that are growing...

David D. Smith

Let's go to the Lincoln thing.

Aaron Watts - Deutsche Bank AG, Research Division

Kind of in a context, let's call it flat to maybe growing slightly or I don't know...

David D. Smith

So let me kind of address this in a broad brush. We always find it interesting that people look at the television industry as, yes, it's yesterday news, it's old news, it's dead money, it's old media, it is whatever it is, right. So here we are, Sinclair, we're a small media company. We got a market capital of $1.1 billion. We've got EBITDA $400 million, on a pro forma basis, it's $512 million, all right. So you look at Netflix, and what is Netflix? They're taking somebody else's content and selling them to the public, right. They've got a market cap of $10 billion. They have a negative free cash flow. For them to get to where we are, they've got to grow by 5.4x. Is that going to happen anytime this week, or next week or next year? How about Yelp? How can Yelp be worth more than we are, $1.3 billion, they get negative numbers everywhere. All they do is bleed money. Can you guys help me understand? This is -- I'm just a poor lowly broadcaster trying to figure out, what am I missing in the financial world where people put money behind companies like that and all they do is bleed money with no prospect of ever getting out? LinkedIn, worth $18 billion. They have to multiply by 4x to get to where we are in terms of EBITDA. Are they going to do it anytime soon? I bet you I'll grow my EBITDA faster than they do. So what am I missing there? Somebody, all you bright guys help us understand that, will you? Because again, we're just poor lowly broadcasters trying to make a living selling spots, and we don't understand that. I look at Under Armour [ph]. I had picked Under Armour [ph] because it's a Baltimore company, we know the family, we know the guys who run the business. $5 billion market cap. And they make $150 million a year free cash flow, so what? Okay? Just curious.

Unknown Analyst

[indiscernible]

Lucy A. Rutishauser

Yes. Right, before Barrington and COX.

Aaron Watts - Deutsche Bank AG, Research Division

Time for one more question.

David D. Smith

Pick another slide.

Lucy A. Rutishauser

Will you take the next one? [indiscernible]

David D. Smith

So here's an interesting perspective. We reached 34 million households. That's where our coverage is now. Netflix reaches 32 million, 33 million households, and all they do is stream. Are there barriers to entry in our business? Damn right, there are. No barriers to entry in their business and you know who's coming to their business? Intel. That's a scary prospect, because they have some brains, not that the guys in Netflix don't, but they must be pretty smart; they're worth $10 billion. We're in the retrans business, and the spot business; they're just in the subscription business. We're in the high-margin business, they're not. Again, these are all just -- when you look at what we can do in the future, the spectrum of opportunity that we have, I'm not going to define it for you here because it would take too much time, but sometime in the not-too-distant future, we're going to be talking about the specifics of what real spectrum business is all about and the opportunity it presents for the industry, let alone us.

Aaron Watts - Deutsche Bank AG, Research Division

I think we're about out of time.

David D. Smith

Out of time?

Aaron Watts - Deutsche Bank AG, Research Division

Thank you.

David D. Smith

Thank you. Thank you, all.

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Source: Sinclair Broadcast Group's CEO Presents at Deutsche Bank's DbAccess 21st Annual Media and Telecom Conference (Transcript)
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