A Weather Window
Timing May Be the Key to the Battens' Offer of Landmark

By Frank Ahrens
Washington Post Staff Writer
Friday, January 11, 2008

At a reunion of former Associated Press chairmen last summer at the Virginia Beach home of Frank Batten, the octogenarian Landmark Communications media mogul peppered his guests with questions about the sorry state of the newspaper industry.

Not once did he let on that anything big could be brewing at the closely held, private company he had built over the past half-century, said those in attendance. There was little mention of the cash cow that Batten had created for Landmark that had largely taken over the company -- cable television's Weather Channel.

Which is why many in the industry were caught by surprise last week when Norfolk-based Landmark announced that it would consider putting its marquee property up for sale, possibly along with the rest of the company.

Officially, Landmark said it would commence a strategic review, but such reviews typically end in full or partial sales or radical restructuring. Tribune Co. launched a strategic review in 2006 that ended with the publicly traded company going private under the chairmanship of a commercial real estate billionaire last year.

Privately, Landmark is saying that it would consider selling the company as a whole or in pieces.

Landmark started more than 100 years ago as a group of small papers around the Norfolk-Hampton Roads area of southeastern Virginia assembled by Batten's uncle, Samuel L. Slover. It is now a diverse media company with 9,000 employees and more than $2 billion in revenue last year.

Batten passed control of the company to his son, Frank Batten Jr., 49, who holds much of the company's voting stock. The elder, colorful Batten is described throughout the industry as a consummate newspaper publisher-owner, able to publish journalistically sound newspapers that turn a profit. Now 80, the elder Batten has recovered from a recent hip fracture; he had a bout with cancer years ago.

By his admission in previous interviews, Batten Jr. has been less involved in the newspaper side of the company and keeps a lower profile than his father, who also is known for his philanthropy, giving $100 million to the University of Virginia last year. The younger Batten is said to be very interested in new media technology. He declined to comment for this article.

Two other key players at Landmark are Vice Chairman Richard F. Barry III and President Decker Anstrom.

Barry has been a trusted adviser to the Battens for years. He negotiated the 2006 split of a trade publication partnership with Cox Enterprises. Anstrom was a member of the Carter White House and former head of the cable lobby. He became president of the Weather Channel in 1999 and has risen with the Weather properties within the company .

Trusts bearing Batten Jr.'s name control 55 percent of the company's voting shares, according to a filing at the Federal Communications Commission. Batten Sr. administers a trust in the name of Fay Slover, deceased widow of Landmark's founder, that controls 35 percent of the company's votes, the document says.

In addition to the (Norfolk) Virginian-Pilot, the Greensboro (N.C.) News & Record and several smaller papers, such as the Annapolis Capital, Landmark owns two television stations, a small broadband business and Q Interactive, an Internet marketing company.

But Landmark's biggest business, by revenue and name recognition, is in weather.

The Weather Channel is seen in 97 percent of all U.S. cable and satellite homes. Perhaps more valuable, from an advertising-growth perspective, is its Web site, Weather.com. The site is attracting 30 million unique visitors per month, putting it in the Web's Top 20 sites, according to Nielsen/NetRatings. SNL Kagan media analyst Derek Baine estimates that Weather.com will generate $130 million in revenue this year.

The elder Batten started the Weather Channel as a hare-brained idea in 1982. It nearly folded for lack of ad revenue until cable operators offered to pay for the channel, which was unusual at the time. Batten's 2002 book, "The Weather Channel: The Improbable Rise of a Media Phenomenon," chronicles the channel's life.

The Weather Channel's U.S. success has not translated as well overseas, however. Landmark shuttered a European Weather Channel attempt in 1998.

"People in Europe don't care about the weather as much as people in the U.S.," Barry said in an interview this week.

As a private company, Landmark will not break out the revenue of its individual units, Barry said. The company and each of its units are profitable, he said. Barry would not divulge Landmark's debt load; because privately held companies eschew the public markets, they often carry a high debt-to-cash-flow ratio. The private takeover of Tribune, for instance, loads that company with $13 billion in debt.

To show the weight of the Weather properties within Landmark, industry estimates place their value at as much as $5 billion. The value of all the newspapers could be as little as $1 billion, according to estimates.

Landmark will not say why it began the strategic review process, only that the reason will become apparent "in due course," Barry said, acknowledging that the cryptic statement only heightens curiosity. In a 2005 interview with his Virginian-Pilot, Batten Jr. said the company had no intention to sell its weather, newspaper or television properties.

"My hunch is that Frank Batten Jr. decided while there will never be a poor time to sell Weather.com, for the larger daily papers, the values will never get higher," said Forrest "Frosty" Landon, former executive editor of Landmark's Roanoke Times and a nonvoting shareholder.

Landon said he and other shareholders recently received a one-page letter from the company saying the process would probably take several months and a sale price would depend on the lending climate at the time.

With the decision to open itself to a possible sale, Landmark joins a growing list of venerated family newspaper companies that are changing their ownership structure, forced to do so by tough times in the industry.

Once cash-spewing near-monopolies, U.S. newspapers have been losing readers for 20 years and advertising revenue for nearly as long, as former readers turn to the Internet and other sources of news and information. Newspaper ownership has been in turmoil. Some public companies have gone private, to remove themselves from the quarterly performance requirements of Wall Street. Others, such as Freedom Communications, have brought in private-equity owners to prop up failing family enterprises. Some have sold to moneyed bidders, notably Dow Jones, which sold to Rupert Murdoch's News Corp. last year.

Industry analysts agree that it's a lousy time to try to sell newspapers, but it may be the perfect time to sell the weather properties.

It's rare when a so-called "beachfront property" cable channel comes on the market -- the most recent example came in October, when NBC Universal bought the Oxygen channel. But few channels are seen in as many homes as the Weather Channel, and its sudden availability has piqued interest among media giants.

Time Warner, the world's largest media company, is looking at the channel. It would fit into the company's Turner Broadcasting division, said a source close to the situation who spoke on the condition of anonymity because no offer has been made.

Likewise, cable giant Discovery Communications of Silver Spring will look at the Weather Channel, but the initial price being bandied about may be too steep for the company, which had two significant acquisitions in 2007, said a source close to Discovery who also requested anonymity because the company has not made a bid.

A more likely buyer could be News Corp. or NBC Universal, which already are battling over cable news and cable business news. Neither has a national cable weather presence but both own a number of local television stations that could use the Weather Channel's resources for their local broadcasts and the Weather Channel's (and its Web site's) advertising revenue to offset station operating cost.

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