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Executives

Vincent L. Sadusky - President and Chief Executive Officer

Scott M. Blumenthal - Executive Vice President Television

Bart W. Catalane - Senior Vice President, Chief Financial Officer

Analysts

Victor Miller - Bear Stearns

Bishop Cheen - Wachovia Securities

Kit Spring - Stifel Nicolaus

Marci Ryvicker - Wachovia Securities

John Blackledge – JP Morgan

John Kornreich - Sandler Capital

LIN TV Corp. (TVL) Q4 2007 Earnings Call February 27, 2008 8:30 AM ET

Operator

Good morning, ladies and gentlemen, and welcome to LIN TV Corp.’s earnings call for the fourth quarter and full year that ended December 31, 2007. (Operator Instructions) Before we introduce today’s speakers, I will read a brief legal statement from the company.

This conference call may include statements that constitute forward-looking statements, particularly in the area described as business outlook, but also including any other statements of future business prospects or financial results including, but not limited to, the use of words like believe, expect, estimate, project or other similar expressions.

These forward-looking statements are subject to various risks, uncertainties and assumptions which may cause these expectations and assumptions not to occur or to differ materially from those outcomes projected in the forward-looking statements.

Such risks and uncertainties include, but are not limited to, the potential deterioration of national and/or local economies; global or local events that could disrupt TV broadcasting; softening of the domestic advertising market; further consolidation of national and local advertisers; risks associated with acquisitions, including integration of acquired businesses; changes in TV viewing patterns; ratings and commercial viewing measurements; the execution of retransmission consent agreements; increases in syndicated programming costs; changes in television network affiliation agreements; changes in government regulation; competition and seasonality and other risks discussed in our annual report on Form 10-K and our other filings made with the Securities and Exchange Commission, which are available on our website, www.lintv.com, in the Investor Relations section, or at http://www.SEC.gov, which discussions are incorporated into this call by reference.

We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. At this time, I will turn the call over to LIN TV’s President and Chief Executive Officer, Mr. Vincent Sadusky.

Vincent L. Sadusky

Good morning and thank you all for joining us this morning. Participating with me on our call today is Scott Blumenthal, our Executive Vice President of Television, and Bart Catalane, our Senior Vice President and Chief Financial Officer.

I will start with overviews of the fourth quarter results and digital and interactive areas and then provide some current trend observations. Scott will then update you about station ratings and operations. And finally, Bart will provide fourth-quarter financial information and close with our current 2008 business outlook. We’ll then be happy to take your questions.

For the fourth-quarter overview, we were pleased with our fourth quarter and full year performance. Despite slowing economies in many of our markets, our stations continued to increase market share and, as a result, our core TV ad sales, excluding political, increased 5% for the fourth quarter of ‘07 and for the 2007 full year our core TV ad sales increased 3%.

Our local television advertising revenues excluding political increased 7% in the fourth quarter of 2007 and 5% for the full year ended December 31, 2007. The acquisition of KASA-TV, the company’s Fox affiliate in Albuquerque, and the company’s focus on new business development efforts across all of our 29 TV stations led to our strong performance.

Our national advertising revenues, excluding political, increased 2% for the fourth quarter and decreased by 1% for the full year. The automotive category recovered and was actually up 5% in the fourth quarter, but down 1% for the full year.

The restructuring of our sales organizations in early 2007 to better compete for nontraditional TV ad dollars was a big driver of our revenue share growth. We believe our continued focus on developing new, nontraditional TV advertising relationships is a valuable service we can provide to local businesses and will further differentiate us from competing media outlets.

Our stations continued their ratings dominance and, despite the decline in this season’s network primetime ratings, we maintained our average household rating during the November sweeps.

Complementing the growth in core TV ad sales, I’m pleased to report our digital revenues increased 131% to $4.8 million for the fourth quarter, and 108% to $14.9 million for the year.

Retransmission consent fees increased 164% in the fourth quarter of 2007 compared to the same quarter of last year. LIN continues its vigilant pursuit of obtaining fair market value for the retransmission of its local broadcast station signals. During the fourth quarter of 2007, the company reached 16 new agreements with cable operators for both its analog and high-definition digital channels.

LIN TV was one of the first broadcasters to fully commit to and make investments in its Internet infrastructure and content and we continue to aggressively build our interactive business. During the fourth quarter we launched over 20 new websites, including syndicated local channels on YouTube and many local micro sites. Total page views for the company stations websites were 118.8 million in the fourth quarter of 2007, compared to 73.7 million in the fourth quarter of 2006, representing a 61% increase.

Total page views did not include video impressions or third-party site traffic, since those metrics did not exist in most of the company’s markets in 2006, and this is an important distinction as several of our competitors include these amounts in their reported traffic numbers. We attribute this continued traffic growth to new initiatives, partnerships, and web products that offer users continuous breaking news and rich media content from our market-leading television stations.

In addition to a significant increase in the quality of our website, content and our functionality, we posted high interactive revenue growth, with our Internet advertising and other Internet revenues increasing by 89% during the fourth quarter.

On top of our revenue successes on a same-station basis, we also reduced our ongoing station operating costs, which include our direct operating SG&A and program payments, excluding stock-based compensation, by 4%, or $2.8 million, during the fourth quarter of 2007, and by 2%, or $6.2 million, for the full year.

We are proud of our cost efficiency efforts as we accomplish these largely through the implementation of new technology, and at the same time we were able to invest in and improve our on-air programming and expand our digital departments. As a result, our operating cash flow, coupled with our non-core asset divestitures, enabled us to decrease cash interest expense by 19% and strengthen our balance sheet.

Our results for the fourth quarter and the full year reflect the combination of solid local revenue performance for our highly rated stations, the rapid growth of our interactive businesses and our ability to successfully negotiate and obtain retransmission consent fees. We believe these results demonstrate the success of our strategic plan that we outlined to investors one year ago.

Before I hand it over to Scott, I wanted to briefly update you on the trends we are seeing so far in 2008. As you know, the media sector experienced slow growth in 2007 and the media growth outlook for 2008 is similar. However, television advertising should do well in the current year as political and Olympic advertising outlooks are positive and should drive substantially increased demand against many TV stations’ commercial inventory, especially in the second half of the year.

But fortunately, advertisers continue to utilize the services of high quality and proven media outlets, and our strong local television stations consistently compete very effectively for viewers and advertisers in their respective markets. As a result, we expect our growth to exceed U.S. media growth estimates for the year, particularly in the second half as we benefit from incremental political and Olympic advertising.

As in prior election cycles, our political revenues in the start of the year have been driven by market-specific primaries and local races and local issues. Several of our markets, including Michigan, Ohio, Texas, Virginia and Rhode Island, have benefited from the presidential primaries and we look forward to capitalizing on what should be a very robust political advertising market over the next several quarters.

On the local side, our local ad markets continue to perform well despite the difficult economy, particularly relating to housing and financial services. Our sales teams continue to be very proactive and we have developed a number of new business development programs in the area of integrated on-air and online campaigns.

A recent example is the Internet seminar we held for more than 100 businesses in Grand Rapids and the small business owner seminar we conducted in New Haven. Our local sales teams are committed to assisting local businesses sell their products and services, especially during periods of slow economic growth.

On the national side, after a strong fourth quarter, we have seen sluggishness in automotive and retail in early 2008. However, growth prospects continue to be good for telecommunications, including wireless phone companies, cable and Telco video products. Our experienced national sales teams are also doing similar proactive, multi-platform, new business development pitches, and we believe these will also produce results in 2008.

So in summary, we are pleased with our financial results and we feel as if we’ve made significant progress implementing our strategic plan, focusing on launching a number of new local digital initiatives that reached new audiences and provide new revenue streams.

And we accomplished this with a reduced cost structure while monetizing certain non-core assets, utilizing the proceeds to reduce our debt and strengthen our balance sheet which we think is critical, as there will be opportunities arising as a result of these current economic times.

With this I will now turn it over to Scott, who will give you an update on our station operations.

Scott M. Blumenthal

Good morning, everyone. Several key accomplishments during the fourth quarter of ‘07 as well as the full year indicated that our strategy is in fact working and that we are achieving the desired results. The November 2007 ratings period demonstrates the continued strength of our local station brands and news programs.

According to Neilson, many of our CBS, NBC, ABC and Fox stations were once again ranked number one for adults 18 - 49 and adults 25 - 54. The Neilson data also showed that our stations outperformed their national networks in the category of household share by an average of 65%.

Underscoring the importance of our focus on localism, a number of our stations also achieved major rating gains and milestones in the fourth quarter. In particular, our Fox affiliates displayed impressive year-to-year growth in late news time periods. WNAC in Providence grew 33%, WVBT in Norfolk 25%, WALA in Mobile 20% and WLUK in Green Bay, Wisconsin, grew a remarkable 67%.

LIN’s TV stations were also ranked number one or number two for weekdays, sign-on to sign-off, in 76% of our markets. Recently we also benefited tremendously from the NFL playoffs and Super Bowl in several of our markets, in particular Providence, Indianapolis and Green Bay.

We complemented our in-depth on-air coverage with extensive online coverage from our dedicated Internet journalists. This resulted in a 300% increase in web traffic during the championship games as well as the Super Bowl.

Our station sales teams, which have trained and dedicated account executives for interactive, also continued to secure major web advertising packages for their local and regional sports teams. A critical component of these strategies has involved developing innovative ways to grow our core business, mainly to offset any negative impact from a decline in national advertising.

During the fourth quarter of ‘07, we focused on new branding initiatives for our duopoly stations, which are mostly CW and Fox stations. Our goal is to further relate to the demographic orientation of those stations while increasing our local program production and building share in order to create deeper, local community connections, so that these stations can stand out in their local markets.

As a result, during the fourth quarter of 2007, 15 of our stations gained market share. And overall, on a pro forma basis, our stations increased core market share by 30 basis points versus the fourth quarter of ‘06. Locally, excluding political, our stations grew 7% in the fourth quarter of ‘07 versus the fourth quarter of ‘06, and we attribute this growth directly to our new business development efforts.

With the changes to our operational strategy in place, we believe that our company is now well positioned to take advantage of the numerous opportunities in ‘08 Vince referred to, including robust advertising from a variety of political races and, clearly, from the Olympics.

Now, I would like to hand it over to Bart, who will discuss our fourth quarter and full year financial performance.

Bart W. Catalane

Now for a quick summary of our fourth quarter results of operations also as a reminder, these numbers reflect the results of Banks Broadcasting, Inc. and our Puerto Rico stations as discontinued operations for all periods presented, and you can find comparable quarterly financial information and supplemental financial data on our website.

So, first in terms of net revenues, our net revenues for the fourth quarter decreased to $108.6 million in fourth quarter, down $19.1 million, or 15%, from last year’s $127.7 million. The major driver of this decrease was the anticipated impact of lower political revenues in the off-election year, which were down $32.4 million gross and $28.1 million net.

Offsetting this decrease were increased core local advertising revenues, which again, Scott just mentioned, were up 7%, or $4.8 million gross, and also increased core national advertising revenues, which were up 2%, or $1 million gross. And then third the continued growth of digital revenues, which include retransmission fees and Internet revenues, which were up 131% or $2.7 million for the quarter.

In terms of our market growth and station revenue shares relative to those ad sales revenues I just spoke about, our total national advertising in our markets was down 1% while our total local advertising in our markets was up 8% for fourth quarter of ‘07 versus ‘06. In addition, as Scott just mentioned, our core station market shares for both market segments increased by 30 basis points during fourth quarter of ‘07.

Moving along to our station operating expenses, which includes direct operating SG&A and program payment costs but excludes stock-based compensation, our actual expenses decreased by $2.8 million, or 4%, to $67.1 million in fourth quarter of ‘07 compared to $69.9 million for fourth quarter of ‘06. The decrease was primarily due to discretionary cost savings in the areas of personnel, benefits and promotion and much of this resulted from our fourth quarter restructuring plan.

One quick note, these fourth quarter 2007 cost savings would have been higher and closer to our guidance in third quarter of ‘07 but there were several areas of unanticipated cost increase in fourth quarter which related to the following items.

One is, we had $700,000 of severance costs for station and corporate positions that we decided to go ahead and proceed with in fourth quarter. We also had $500,000 of news overtime and satellite costs for NFL playoff and political coverage. And then lastly, we had about $500,000 of bad debt expense for several advertisers who either filed for bankruptcy protection or were close to filing.

As a result of the net revenue and station operating expense variances, our actual broadcast cash flow, or BCF, for fourth quarter of ‘07 was down $16.2 million, or 28%, to $41.5 million, and that compares to the $57.7 million in fourth quarter of ‘06. Again, the decrease was primarily driven by the expected decline in political advertising.

Moving along to our corporate expenses, and these exclude stock-based compensation as well, these decreased by $1.4 million, or 24%, to $4.5 million, and that compares to $5.9 million in fourth quarter of ‘06. This decrease as well was also primarily due to our fourth quarter of ‘06 restructuring plan and related cost reduction initiatives.

So as a result of these BCF and corporate expense variances, adjusted EBITDA for fourth quarter of ‘07 was down $14.8 million, or 29%, to $37 million, and that compares to $51.8 million in fourth quarter of ‘06. Again, the variance is primarily driven and reflects the impact of reduced political advertising in fourth quarter of ‘07.

Lastly, free cash flow was $400,000 in fourth quarter. That’s down $26.2 million, or 98%, from the $26.6 million in fourth quarter of ‘06. Again, that primarily reflects the expected impact of lower political advertising and higher CapEx in our fourth quarter of every year.

Once again, for those unfamiliar, we make available reconciliations of our operating income loss, a GAAP measure to BCF, adjusted EBITDA, and free cash flow on our company’s website in the supplemental financial data link. To access that information, please go to lintv.com, where you will find this information both on the home page in the latest news section and also the Investor Relations section under financial reports and releases and quarterly and other reports.

Moving on to our balance sheet and other statistics, our total debt at December 31 was $832.8 million, with $24.3 million of this balance classified as short-term based on our term loan quarterly principle amortization that started in December of ‘07.

We also paid off an additional $35.1 million of our term loan balances during fourth quarter of ‘07 from excess cash. Of the total debt balance at December 31 of ‘07, we had $155 million in senior secured loans at LIBOR plus 1.375%, and our total weighted average cost of all debt at December 31 was approximately 6.2%.

Reflecting the continued positive earnings in cash flow trends in recent quarters, we had no amounts outstanding on our $275 million revolving credit facility at December 31, and our cash balances were $40 million as well at year-end.

So as a result of that, consolidated leverage at December 31, as defined under our senior credit facility, was 6.5x, and that compares to 6x at September 30 of ‘07 and 6x at December 31 of ‘06. Our bank covenant at December 31 of ‘07 was 7.75x, and, just to note, this covenant steps down to 6x on October 1 of 2008 and stays at that level through the remaining term of the facility, which goes through November 4 of 2011.

As well, our cash interest coverage at December 31 was 2.2x, and that compares to our covenant of 2.0. And our consolidated senior leverage at December 31 was 1x, and that compares to our covenant of 4.5x.

Also, at December 31 the company has approximately $251.9 million of federal NOLs, net operating loss tax carry forwards, which includes expected utilization of approximately $62.9 million in connection with the gain on the Puerto Rico sale and $27.4 million in connection with the 700-megahertz sale, when we file our consolidated 2007 U.S. tax return.

Finally, regarding our business outlook, again, this information represents forward-looking statements and is subject to risks and uncertainties. Anyone relying on this information should refer to the forward-looking statements heading in our press release in the item risk factors in the company’s SEC filings. The company assumes no obligations to publicly update its business outlook or any forward-looking statements due to new information, future events or otherwise.

So based on our current sales order pacings, the company currently expects that first quarter 2008 net revenues will increase in the range of 2% to 4%, or $1.7 million to $3.7 million, compared to reported net revenues of $91.8 million for first quarter of ‘07.

The company also expects that its station direct operating and SG&A expenses will increase in the range of 2% to 4%, or $1 million to $2.4 million for first quarter of 2008, compared to reported expenses of $56.8 million for first quarter of 2007. This anticipated expense increase is primarily related to investment spending to support the growth of the company’s Internet initiatives and variable sales costs related to higher political revenues and higher news costs for political coverage.

So as a result, I won’t go through the chart, but you have seen the expected ranges of revenue, expense and cash flow items for first quarter of 2008, and the 2008-year you saw on our press release this morning.

And with that we’ll now hand it back to the operator and be happy to answer any of your questions.

Question-and-Answer Session

Operator

(Operator Instructions) We’ll go to Victor Miller - Bear Stearns.

Victor Miller - Bear Stearns

Scott, in terms of the auto, obviously you said for the year it was down, fourth quarter was up, first quarter is trending a little on the sluggish side it seems; Vince said so. What is the overall trend line there? It still sounds like it’s a drag, and it’s 20% of your revenue.

Secondly, in terms of C3, seeing the networks down probably 15% plus. Through the broadcast season Fox is actually up, probably mid single-digits in terms of C2 versus live program ratings. What are you seeing in terms of, as you’re getting into the numbers now at your local stations, what’s the impact of C3 there, and what are you seeing specifically on younger demographic trends?

Are you starting to see some of that winnow away from gaming and other -- and the Internet and things like that in that particular demo, and then one follow-up.

Scott Blumenthal

On the automotive question, yes, it is a little bit sluggish as far as the year. We did finish 5% up in fourth quarter for automotive. Of that, quite frankly, 13% domestic was up; foreign was down 10%. But local dealers were up 15%.

And I bring that up because I think we’re going to see a little bit of that same trend going on this year. As you’re probably well aware, General Motors is now getting out of the selection of the regional agencies, which gives our stations the opportunities to work more directly with the dealer groups and do things that are in the best interest of the markets that they are talking about specifically, rather than national average.

So, is it a little sluggish as the year starts? Yes. But we see opportunities, particularly in the second half as these agencies settle down with the dealer groups around the country? I think the answer to that is yes also, so that we’re going to be able to see, not dramatic, but at least low single-digit growth in the automotive marketplace.

As far as the C3 is concerned, at this level, I will tell you it’s more of a national number than it is local. Most of the local markets are not looking at C3 numbers. The youth market, it’s hard to say because Fox has skewed it so heavily at the beginning of the year.

This is the time of the year when their programming sort of dominates the prime time periods anyway, with “Idol” and some other hits. So, the youth market, yes, it’s so up in the air because the LPMs right now haven’t hit all the markets. As those roll out, clearly we’re going to see differences in the impact in the youth market, 18 to 34, and some markets have gone away with LPMs. So, I don’t know that I’d buy that totally.

We are still seeing local market advertisers projecting audience levels to remain about the same as far as those areas on our television stations that generate the revenue, and that are our news and that’s our syndicated product. Prime is still up in the air as we get the rollouts of the return of the programs after the writers strike. But I’ll tell you on a local basis, I don’t think we’re going to see near the problems that the networks are facing right now.

Victor Miller - Bear Stearns

With the Banks money you’ll get down to below 6.5x for year-end ‘07 and probably [par] sub 5x for ‘08. And even if you did the same cash flow in ‘09 as you did this year, you’re probably back in the mid fives. So balance sheet is in a lot better position than it was three years ago, two years ago. So, question is, is there any other things that you want to do strategically in terms of assets that you’re looking to sell to improve that balance sheet even more?

And also can you go into the marketplace, are there any opportunities with your sub notes and the way they are being priced to actually go back in and buy some of those notes below par? Or would you consider repurchasing some of your shares in order to, when the day comes and you’re able to put the company back up for sale on the marketplace, that you will be able to leverage the equity a little bit more even though multiples are compressed?

Vincent Sadusky

Right now, our focus is to continue to utilize our free cash flow to pay down debt. We like where we’re projected to be at the end of the year and we have a high confidence level in our ability to get there. But at the moment, we don’t think it’s prudent to utilize our capital to buy back notes or buy back stock.

We’ll continue to be opportunistic. The valuation of television stations has been very strong, even in this credit crunch. So, as we’ve said all along this year, in order for us to be acquisitive it would have to be something that was extremely attractive in terms of ROIs.

Now, we are benefited by having a terrific capital structure and a very low average interest rate. So we’ve got flexibility there. But we’re certainly very focused on the here and now of the value of this company, and if we did something on the acquisition side, because there were opportunities, because other companies are starting to get to, hit some of their stress points, and there may be some assets available.

We’ve said all along, we would only do it if it penciled out to be accretive in year one, within one year, and really benefited our growth profile and gave us a longer-term growth opportunity in terms of strengthening us in our retrans negotiations and brought something to the table with our interactive properties as well.

So we’re selective; we’re choosy. But we’ll certainly keep our eyes open, given the capital structure that we are fortunate enough to have in place.

Victor Miller - Bear Stearns

What are your sub notes trading at in the secondary market right now?

Bart Catalane

We’ve heard, Victor, they don’t trade much. There just isn’t that much of an active market right at the moment, but they were trading at 98.5, 99. You’re talking about the 2.5% notes, talking about the 6%, yes, 6.5% are trading lower than that, obviously.

Victor Miller - Bear Stearns

If you could buy those in the open market, that would be essentially paying down debt using free cash flow, but you’d actually be leveraging it because you are buying it below par. So you would consider something like that obviously, right?

Vincent Sadusky

Absolutely.

Bart Catalane

We have a $200 million restricted payment basket. We really haven’t used much of that. We obviously have a $200 million authorization outstanding on the stock repurchase program. We’ve only used $18.5 of that.

Victor Miller - Bear Stearns

Did you answer the question on whether you had any more assets you felt or working out something on that joint venture with NBC or something else that you might be able to monetize?

Vincent Sadusky

There is not a lot we can say on that front at this point. If there was, we would. But as we’ve said all along, we’re constantly looking at the portfolio to really maximize it.

Operator

We will go next to Bishop Cheen - Wachovia Securities.

Bishop Cheen - Wachovia Securities

Let me just do one follow-up on auto. So I think your response was that you see opportunities, but the way it will play out is it will get better in the second half of the year and you don’t expect to see any kind of growth, maybe a dip in the first half?

Scott Blumenthal

Right, I think as the General Motors agency deals settle down, we will see more growth in the second half, and I think we’re going to be looking at somewhere low to mid single-digit for the year.

Bishop Cheen - Wachovia Securities

Okay. So that 5% Q4 was kind of...

Scott Blumenthal

I think that’s indicative of what we’re going to see this year.

Bishop Cheen - Wachovia Securities

You think that is indicative?

Scott Blumenthal

Yes, on a yearly average.

Bishop Cheen - Wachovia Securities

Again, I guess the lion’s share of that growth coming second half. Let me turn to two other questions. Aside from the inflow from Banks, which I don’t think you’ve received yet, correct me if I’m wrong. Are there any other significant cash inflows that you expect to come in Q1 or Q2, or any significant cash outflows other than your normal business operations, such as any more severance lumps that need to be paid? I’m just looking for lumpy cash movements through your balance sheet.

Bart Catalane

Yes, there is the issue of the 2.5% debentures, the convert. And whether, there is a put date of May 15, Bishop, on that. So we’ll see what happens with that, obviously.

Bishop Cheen - Wachovia Securities

That has a number of put dates, but that’s, certainly, that’s the first put date. So we’ll see where the market is at on there.

Bart Catalane

Right.

Bishop Cheen - Wachovia Securities

Half a million of bad debt expense, what do you think you’re going to see on that kind of metric as we go through 2008? Do you think you’re going to see your bad debts as a percentage of your revenue creep up, and if so, how much?

Bart Catalane

It’s something we’re paying a lot of attention to. Obviously our credit collection procedures in recent quarters have gotten that much more stringent. And we hope that the percentage obviously does not creep up, but if a local economies in some of these very seasonal as well as home furnishing and financial services related businesses suffer continued local challenging markets, as they have, it’s something that could creep up.

But the good news for us is historically those percentages have been really constant over the last five, six years despite some challenging economies. So we’ve kept it, for the most part, in line. Obviously in fourth quarter it crept up a little bit. But it is something we’re paying a lot of attention to. We are not anticipating it going up a lot in 2008.

Bishop Cheen - Wachovia Securities

Ballpark it’s a very low; it’s a 2% kind of number or less for you? What is it up to, your revenue?

Bart Catalane

It’s much less than 1%, or even less than one-half a percent. It’s a very low percentage.

Bishop Cheen - Wachovia Securities

The vision thing, assuming you don’t find those great compelling accretive acquisitions and you focus on your debt reduction, where do you think you would like to see your leverage, what’s achievable as we get to New Year’s Eve? At the end of the year, where do you think your debt leverage would be?

Bart Catalane

Yes. I mean we’re looking in the 4.5 to 5x. That’s where we’re comfortable, obviously. Again, the covenant steps down to 6x on October 1. We want to be well below that.

Bishop Cheen - Wachovia Securities

Right, but leave a cushion for ‘09 when you don’t have that political windfall coming.

Bart Catalane

Yes, absolutely. I mean, we want to well below 6x.

Operator

We’ll go next to Kit Spring - Stifel Nicolaus.

Kit Spring - Stifel Nicolaus

Could you talk about where you think Internet revenues can go as a percentage of revenues over the next few years, and then talk about what you see happening with trends in affiliate fees. Do you see that moving to reverse compensation where you have to pay content companies at some point? And then finally, can you talk about what the impact of the Olympics will be for you guys this year?

Vincent Sadusky

We’ve said all along with regard to our Internet revenue, we think the potential for that over the next several years is to get up to where the newspapers have been over the last few years, and that’s in the 5% range of total revenue. I think over the long-term there’s an opportunity to exceed that, but that’s clearly our goal over the next two years.

With regard to reverse compensation, I don’t think you’ll see reverse compensation in the way that you saw reverse compensation with, let’s say, the Granite deal years ago.

But I think what you will see is networks increasingly asking their affiliate groups if including them in the decisions around significant landmark programming deals, like big sports contracts, for example, and basically, putting it back to the stations and saying, hey guys, you know what, if you want the NFL or incremental NFL games, this is a pretty pricey thing for the network. We’d like you guys to help us out with that.

So I think that may not even be in the form of cash compensation. It may be, and it may be in the form of incremental available inventory in the program.

So I think that’s likely the way it will go. I don’t believe it will go the way of paying cash for affiliating with a network, especially for the television stations that are extremely well run, that continually way over-index the network, the network national rating. We benefit the network programming tremendously from the packaging that we do around our lineup of syndicated and local programming in addition to the network programs.

With regard to the Olympics, we’ve got the Olympic numbers built into our station-by-station budget. So, we haven’t broken out separately what we think the incremental impact of the Olympics is, but you will see, if you go back and take a look at our historical growth in the third quarter in every other year, in those Olympic years, I think you’ll get a pretty good sense of what the incremental bump is.

We’ve got a lot of NBC television stations, and we do benefit from that. And then it puts incremental pressure on the ad inventory as well for the non-NBC stations in the market. So it has a tendency to bring in real new advertising dollars and benefit those local markets, especially the markets that have stronger NBC TV stations, and we’re fortunate to have that.

Operator

We’ll go next to Marci Ryvicker - Wachovia Securities.

Marci Ryvicker - Wachovia Securities

I have two questions. The first, as you signed 16 new retrans agreements in the fourth quarter of ‘07, what percent of the subscribers in your markets are now covered by these agreements and how much might this increase in ‘08? And then secondly, Vince, you said that you’re increasing your market share. Is this coming from other TV groups or from other media?

Vincent Sadusky

Yes, on the retrans question, we have now about 25% of our paid television household universe is covered with done deals on the digital front. We’ve got another 25% or so are DBS households that we’ve stated all along, we’ve gotten analog deals with them and we’re in the process of working out digital deals. So we’ve got a ways to go yet on our retrans front, but we’re very happy with the success we’ve had to date.

Market share, we’re seeing that coming from other television stations and print primarily. It’s no secret what’s been taking place each month with the decline in advertising on newspapers in markets across the U.S., so we we’re seeing those trends in our markets as well. And it’s not just on the classified side, as some folks believe. It’s on the hard advertising side, as well. So, it’s been a combination.

It’s really been newspaper advertisers, we’ve been largely able to bring over on the Internet side, as it’s a less expensive alternative and it provides, in many cases, video advertising. And on the television side, it’s primarily been from other television advertisers in the market.

Operator

We’ll go next to John Blackledge – JP Morgan.

John Blackledge – JP Morgan

On the M&A side, wondering what the current M&A multiples are? I’m assuming the environment is very light. But wondering if we’ve seen multiple compression and what a good multiple would be that would make sense for you in terms of a return on investment.

And also just wondering what you are using as U.S. media growth in ‘08? I know you said you’re looking to exceed that. Wondering what that number is. And then, if you could just remind us, on the political side, I’m sure it’s going to be a record year for you in terms of a presidential year, but when we we’re thinking about modeling it out, we are modeling it out versus ‘04 rather than ‘06.

Vincent Sadusky

On the M&A multiple front, there have not been a lot of deals done post the kind of the debt crises. However, there was a large group of television stations that was bought by Oak Hill that was Fox properties. They bought a bunch of Fox television stations. And that multiple, any analyst on the phone has got reports out on that. But, it was a pretty good multiple. There is a couple of different ways to look at the transaction, as always, given the tax consequences, some of the digital deals that, associated with that.

But it looked like that was a pretty nice multiple, up in 13x or so. Also Raycom bought several television stations post-debt crisis from Lincoln Financial. And there were some sports contract in there as well. So, you’d ascribe some kind of value to that. But it looks like that transaction; the value of those stations was somewhere in the 13-plus times as well.

So, for the few deals that have gotten done post-debt crisis, we’re encouraged. I mean, values have held up very well. And I think even in a tough economic time, and economic cycles are always going to be boom and bust, advertisers have a tendency to hunker down, but they do advertise on outlets that are effective and they have a tendency to trim from their fringe advertising.

And clearly, television is, study after study, is something that absolutely works and is effective. So, we feel pretty good about the long-term prospect, given all the other positive attributes of these very good free cash flowing assets, including scarcity. And I think if you’re pretty diligent on the digital front as well, it doesn’t take a lot of imagination to figure out that you could certainly generate incremental revenue growth on top of core advertising.

As far as U.S. media growth for ‘08, this year, 2007 was sluggish. It was in the 1% to 1.5% range that we saw in various published studies. 2008 is projected to do better than that, somewhere in the 3% range. And so our reference is that we will certainly do better than that, especially, as I say, in the back half of the year.

And then as far as modeling out political, we’ve not given our political guidance for 2008. But Bart has continually referenced folks to 2004, indicating that we feel very good about exceeding 2004’s number, but to be cautious and not use 2006 as a benchmark, given kind of our unique placement of our television stations in heavily contested local and state races in 2006, which we don’t see that same kind of activity in ‘08, which will primarily be a presidential race in the states where we’re located.

Operator

We will go next to John Kornreich - Sandler Capital.

John Kornreich - Sandler Capital

If I’m doing my arithmetic right, your core ad revenue in the first quarter is basically flat because you’re saying you are up about $3 million. And I would guess between political and digital that would account for most of that three. Is that correct?

Bart Catalane

Obviously, we have not guided to specific line items and so, but in terms of the net revenue number we said 2% to 4%. So, if you started to work through the math, it is flattish.

John Kornreich - Sandler Capital

What was political? A couple million?

Bart Catalane

Yes, again, we haven’t given it out. I think you really got to take a look at first quarter of ‘04 and really look at that kind of comparability and just understand that the primaries, the early primaries really don’t generate a lot of political advertising. Historically, they haven’t. So it really is a back-half phenomenon, third quarter, fourth quarter is really where the lion’s share comes in.

John Kornreich - Sandler Capital

I’m sure some part of the retransmission “revenue” is ad revenue from cable operators as opposed to cash, although I am sure more than half is cash. Roughly how does that break out so far in deals you have done? And I assume that, in the digital line, you only include the cash portion of retransmission revenue and to the extent that there’s ad revenue in your retransmission agreements, that goes into the ad revenue line?

Vincent Sadusky

John, I’ll just kind of repeat our policy for retrans revenue. We do include in our digital line all incremental revenue associated with our retrans deals. Our percentage of advertising varies from 25% of our deals down to zero.

And for the deals where we have advertising revenue, we would only include the incremental piece in our digital line. What that simply means is, if we have a rate card for sponsorship of closed captioning on the air of close to zero, and there is $100,000 that gets allocated in a retransmission deal to the sponsorship of closed captioning on the air, that $100,000, we know, is incremental value. That is not advertising because that is not really the value we could have gotten from advertising.

John Kornreich - Sandler Capital

So virtually all of your retransmission “revenue” goes into the digital line?

Vincent Sadusky

Yes, correct.

Bart Catalane

That’s right.

John Kornreich - Sandler Capital

And just roughly the mix in the digital line between retrans and Internet, is it 50-50?

Bart Catalane

No, we kind of said before it’s like two-thirds retrans, one-third Internet, in that range.

Operator

And that concludes today’s question-and answer-session. At this time I would like to turn the conference back to Vincent Sadusky for any additional remarks.

Vincent L. Sadusky

Well, thank you all everyone for listening and for your continued support of LIN TV. Have a great day.

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Source: LIN TV Corp. Q4 2007 Earnings Call Transcript

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