Hyper-Local in DMA No. 05

PRESQUE ISLE, MAINE As part of its strategy to acquire local market winners, Gray Television has put the wheels in motion to acquire WAGM-TV in Presque Isle, Maine, for $10.25 million in cash from the station's long-time owner, NEPSK, Inc. The deal which is subject to regulatory approval is expected to close in the third quarter of 2015.

WAGM-TV, which is both a CBS and Fox affiliate, is one of the highest rated local television stations in the United States. For example, its CBS NewsSource 8 6 p.m. local newscasts had the highest average ratings across all television stations in the U.S. in the last four major non-Olympics sweeps periods (February 2015, November 2014, May 2014, and November 2013).

We decided to buy WAGM-TV because of how well they're operating and serving their local community, said Kevin Latek, Gray's senior vice president of business affairs in the Washington, DC office of Atlanta-based Gray Television, Inc. By investing our resources in this station, we hope to help them provide more in-depth news, advance technologically and take it to the next level.

We've been buying local TV stations that are very successful. They're typically the number-one station in their market, and leaders in local news, sports and weather, Latek said. WAGM-TV is an ideal fit for our station portfolio.

CAPABLE MANAGEMENT

Crediting WAGM's management team for the station's exceptional performance, Latek said that Gray has no plans to make any personnel changes at the station after the acquisition is finalized.

WAGM's management team happens to be all-women, including: Chief Operating Officer Carole M. Kozloski, Chief Financial Officer Cathy Donovan, National Sales Manager/Program Director Linda Connolly, News Director Kelly O'Mara, Office Manager Susan Willett and Station Manager/General Sales Manager Kelly Landeen.

Many of our employees have been with our station for 20 or 30 years, and we've been promoting the right people at the right time, Landeen said. The synergy and cooperation of our management team has been crucial to our success and what we stand for in the community.

Since we're the only TV station in our market, news is definitely the most important part of the station, Landeen added. Our news team has a very high profile in the community and they're well attuned to what Maine viewers want to see. Members of the NewsSource 8 team, including Sports Director Rene Cloukey and Chief Meteorologist Ted Shapiro, have become widely recognized, trusted personalities in the local market.

MARKET CHALLENGES

Providing hyper-local coverage of news, sports and events can be challenging due to the vast geographical area WAGM serves. The market, which is DMA No. 205, covers an area equivalent to the states of Connecticut and Rhode Island combined, and there are additional viewers in the western portion of the Canadian province of New Brunswick.

National news services don't know this market as well as we do, Landeen said. You definitely have to live and work here to know the people, politics and values of this community. That's why our local news service is so valuable to this region.

But, keeping up with digital technology has been a struggle for us, Landeen said. So we're particularly excited about the Gray acquisition because their support and buying power is definitely going to open up digital platforms for us to distribute our content to the online and mobile world.

MULTIPLATFORM INITIATIVE

On behalf of its local stations, Gray Television has aggressively pursued a variety of digital media opportunities. Gray was the first affiliate group to enter into a TV Everywhere agreement with NBC, which will bring the live, linear streams of its NBC channels to mobile devices for cable, satellite and telco subscribers. Gray also recently launched a number of its CBS affiliated stations on CBS All Access, CBS' subscription video on demand and live streaming service.

It's important that we explore these approaches with our network partners and learn with them what works best in the mid-sized and small markets that we serve, Latek said. We would expect that WAGM, and the other CBS station we're buying in Twin Falls, will both be launching CBS All Access sooner rather than later.

Latek is referring to KMVT-TV, which is the highest rated and highest grossing television station in Twin Falls, Idaho (DMA No. 192) according to Nielsen and BIA data. The acquisition, which was announced in March 2015 for $17.5 million in cash, has been approved by the FCC and is scheduled to close in the near future.

When all of its pending acquisitions are finalized, Gray will have 28 CBS, 24 NBC, 16 ABC, and 10 Fox affiliated channels, in 44 local TV markets, comprising 8 percent of the nation's TV households. WAGM carries Fox on its primary channel in SDTV and CBS on its secondary channel in HDTV.

With every station that we've acquired over the past 18 months, of which there have been about two dozen, we've retained the network affiliations, added multicast channels and made capital investments, Latek said. For Gray, buying market leaders like WAGM is essential for the long-term because it means these stations will survive even as the industry goes through a spectrum auction and other major changes.

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