Hubbard Broadcasting Inc. Business Information, Profile, and History

Company Perspectives

KSTP-TV Channel 5, the upper Midwest's first commercial television station, is owned by the pioneering broadcasting company Hubbard Broadcasting Inc. Channel 5 signed on the air April 27, 1948 and today remains the only locally owned locally operated broadcasting company in the Twin Cities. Eyewitness News is the station's hallmark, presenting local news, weather, and sports coverage daily for Channel 5 (ABC network affiliate) and its UHF sister station, Channel 45 (independent).

History of Hubbard Broadcasting Inc.

Hubbard Broadcasting Inc. (HBI) operates one of the few remaining large family-owned television companies in the nation. An early innovator in its market, Twin Cities-based KSTP-TV nonetheless struggles with perennial news program ratings woes. Its subsidiary United States Satellite Broadcasting Company Inc. (USSB), an object of derision in its infancy, was purchased by Hughes Electronics Corporation for $1.3 billion in 1999. Conus Communications, its satellite-based news gathering organization, fared less well, shutting down most of its operations in 2002. The Hubbard family broadcasting legacy remains in the hands of a third generation.

Roots in Local Radio and Television

Minnesota native Stanley E. Hubbard, a pioneer of commercial radio and television broadcasting, established his first radio station in 1923. "WAMD-Where All Minneapolis Dances--broadcast part-time because Hubbard had to leave the microphone every few hours to go and sell advertising," wrote Kathy Haley in a 1997 Broadcasting & Cable article.

Interested in expanding his news coverage, Hubbard started his own news gathering bureau in 1925; Associated Press and United Press International did not yet serve the fledgling radio industry. WAMD merged with KFOY in 1928 to form KSTP. Hubbard broadcast the vaudeville acts of such performers as Jack Benny and the Marx brothers, live sporting events, and educational programs.

Among the first on the scene when television technology was being introduced, Hubbard experimented with closed-circuit broadcasts beginning in 1938 using one of the first RCA cameras. RCA formally presented television to the public during the 1939 New York World's Fair. World War II slowed development of commercial television, but in 1948 KSTP-TV began broadcasting.

KSTP-TV accumulated a series of firsts in the 1950s and early 1960s: the first television station between Chicago and the West Coast; the first independently owned NBC affiliate; the first station to carry a late evening local news program seven nights a week; and the first to do all-color broadcasting. Those early days of television were filled with sensational spot news stories, and Hubbard was known for aggressively seeking them out.

Hubbard expanded beyond the Minnesota borders late in the 1950s when he acquired a radio and television station in Albuquerque, New Mexico. In 1962, Hubbard Broadcasting Inc. was formed with Stanley E. Hubbard as president and general manager and son Stanley S. Hubbard as vice-president. Stanley S. Hubbard, who had been in and around the broadcasting business since his childhood, had come on board full-time in 1951.

Stanley S. Hubbard began making his own mark on the television industry in the 1960s with an operation in St. Petersburg, Florida. "Few independent station owners made money at all in 1968 and none had succeeded in making a go of a UHF in an all-VHF market, but the younger Hubbard had WTOG turning a profit within two and a half years," wrote Haley. Hubbard transformed the station by adding a much larger transmission tower and investing in popular programming.

A Change of Leadership

Minneapolis/St. Paul was a competitive market: both radio and television stations fought for the all-important ratings leadership. In the early 1970s, KSTP was losing ground to WCCO on both fronts. Stanley S. Hubbard brought in Marion, Iowa-based media consultant Frank Magid to help turn the tide. The action, initially opposed by founder Stanley E. Hubbard, "ushered in what was perhaps KSTP-TV's most successful era," according to Sandra Earley.

Among significant changes in the TV end of the business, according to Early, were the move to "personality driven newscasts" and the switch from the standard film format to easier to use videotape. The radio station switched to a rock-and-roll format and dropped its lengthy affiliation with NBC. The control of the business had clearly shifted from father to son.

A 1981 Broadcasting magazine article estimated Hubbard Broadcasting's worth at $200 million or more. The Hubbards owned three television and five radio stations, a marine radio-supply company, a production company, and a 148-room Miami Beach hotel. While often soundly criticized regarding their treatment of employees, the Hubbards were "held in generally high regard by other station owners," wrote Karl Vick in a March 1981 Corporate Report Minnesota article.

In 1984, continuing in their tradition of industry firsts, Hubbard Broadcasting initiated a satellite news gathering organization independent of the big three networks: ABC, CBS, and NBC. Conus (Continental U.S.) Communications bought and leased satellite transponders and then offered satellite access and newsfeeds to member stations. F&F Productions, a Hubbard subsidiary specializing in remote production, built the first satellite news gathering truck using the new Ku-band satellite technology.

Live offsite broadcasts became a practical reality for smaller stations. The C-band satellite systems in use at the time required huge receivers and were tightly regulated by the Federal Communications Commission (FCC) due to their disruptive effect on other signals, and ground-based microwave signals had a limited range and needed a clear pathway. Conus gained 60 member stations within the first few years of operation.

Direct Broadcast Satellite

Stanley S. Hubbard was a true believer in the efficacy of satellite broadcasting, and his horizons expanded beyond news gathering applications. Back in 1981, when Hubbard Broadcasting was granted one of the first direct broadcast satellite (DBS) licenses, he had begun formulating plans for an advertising-supported home satellite service. The satellite-to-home concept had been tossed around since the early 1960s when Congress created the Communications Satellite Corp. (COMSAT).

The public effort to build a commercial television system around satellite technology failed due to lack of outside support and COMSAT was disbanded in the mid-1980s. Prudential Insurance, General Instrument, and shopping center developer Francesco Galesi formed United Satellite Communications in 1983 but had fewer than 10,000 subscribers when it folded a few years later, according to a 1991 Forbes article by Graham Button. SkyCable was shut down in June 1991. However, Hughes continued to develop the technology and linked up with Hubbard.

United States Satellite Broadcasting (USSB), a subsidiary of Hubbard Broadcasting formed in 1981, was also having trouble getting its satellite service off the ground. USSB reformulated its earlier plan to include a mix of advertising, subscription, and pay-per-view programming to be transmitted via two RCA satellites and launched by 1988. Unfortunately, lack of financing foiled the endeavor. Many of the most promising potential investors were already involved in cable, a direct competitor to the satellite service, and others doubted Hubbard could succeed where much larger contenders had failed.

Yet Hubbard persisted. Nationwide Mutual Insurance, Pittway Corp. (a fire alarm maker), and media investor Burt Harris came aboard as investors in the late 1980s. Technological advances improved the odds for success. Digital compression hiked the number of television channels that could be carried by a single transponder, and higher-powered satellites allowed receiver size to be greatly reduced.

In 1991, General Motors' Hughes Aircraft sold five of 16 transponders on its broadcast satellite to Hubbard in a deal valued at more than $100 million. DBS skeptics were quick to point out the market was already largely wired for cable service, and the initial cost to the consumer, about $700 for a receiving dish and signal converter, was much higher than cable. Furthermore, unlike cable, DBS did not transmit local programming.

Hubbard and other DBS supporters declared the higher capacity digital signals provided far better sound and picture quality than the standard analog signal used by cable and broadcast television. Cable companies themselves were gearing for costly upgrades to fiber optic cable which would carry digital signals and boost channel capacity. Moreover, many cable customers had grown frustrated with persistent service problems.

Thomson Consumer Electronics, a division of France-based Thomson S.A., developed and produced the 18-inch receiver and the converter under the RCA brand name. The consumer-friendly dish could pick up both USSB and Hughes's DirecTV signals. Competitor Primestar, which began service in 1990, required a higher-priced, larger, professionally installed dish and offered fewer channel choices.

Although they shared a satellite and receiving system, USSB and DirecTV were in competition for subscribers. DirecTV had more channels at its disposal than USSB, but Hubbard quickly acquired the right to carry popular premium channels such as Home Box Office (HBO), Showtime, Cinemax, and the Movie Channel. USSB planned to offer the All News Channel, a joint venture between Conus and Viacom International, as well. DirecTV got the jump on rural distribution when the National Rural Telecommunications Cooperative purchased the right to market the service to electric and phone customers. Areas that were not wired for cable were an important source of customers for both companies.

USSB began broadcasting satellite television service in June 1994 aided by funds from Microsoft cofounder Paul Allen, Dow Jones & Company, and Wall Street investor George Soros. More than a half million receiving systems were sold in the first year, making DBS the fastest-selling new consumer electronics product in U.S. history. USSB signed on more than 300,000 subscribers. Hubbard's vision had become a reality. He received further recognition for his accomplishments in 1995, when he and his late father were handed the Distinguished Service Award from the National Association of Broadcasters for their work in radio, television, and DBS.

The once scorned DBS became the darling of investors. In January 1996, AT&T paid $137.5 million for 2.5 percent of DirecTV, and MCI Communications Corp. and News Corp. paid $682.5 million for a DBS license. The activity boosted the value of satellite broadcasters' stock just as USSB prepared to make an initial public offering (IPO). USSB raised $224.1 million in February. The newly public company was valued at more than $3 billion, and the Hubbard family held more than 50 percent of the shares.

Expectations were sky high. But the early phenomenal growth rate cooled. USSB stock price fell steadily from a high of about $37 shortly after the IPO to about $11 per share just over a year after the offering. USSB lost $237 million in its first two and one-half years of operation. "The skeptics are again ascendant. Wall Street analysts, who have recently called for the sale of USSB, say that the company's value lies in the five transponders it owns on a satellite, not in its 1.2 million subscribers," Sandra Earley wrote in a May 1997 article.

While new satellite companies geared up--EchoStar Communications (DISH Network) merged with ASkyB and MCI Communications Corporation announced a partnership with News Corp. in 1997--cable remained USSB's main competition. The Digital Satellite Systems (DSS) which USSB shared with DirecTV were found in about 3.3 million U.S. households at the end of 1997 compared with tens of millions of cable subscribers. USSB continued to fine-tune its service in order to place itself in the best possible position in the market and contracted with Lockheed Martin for additional satellites.

Back Down to Earth

By this time, a third generation of Hubbards was engaged in the family enterprise. Stanley E. Hubbard II served as president and CEO at USSB. Robert W. Hubbard led the television operation. Ginny Hubbard Morris headed the KSTP-FM and AM radio operations. Two other siblings also held spots on the HBI board. Hubbard concerns included KSTP-TV and Conus Communications in Minneapolis/St. Paul; seven television stations located in Minnesota, New Mexico, and New York; a television production company in Florida; and USSB and the radio stations.

Expanding use of digital technology, and the entry of electric utilities and telephone companies into market were among the changes taking place in the industry as the century wound down. Fifty-year-old KSTP-TV faced this new climate on the heels of a decade-long streak of third place finishes in the Twin Cities news market. A new team had been set in place to turn the tide.

"Could we give the station a facelift?," asked Vice-President and General Manager Ed Piette in the Star Tribune (Minneapolis) in April 1998. "Yes, we could. But if you put a new coat of paint on a wall, does that make the wall any stronger or any better? It has to have strength in the foundation. We believe we're putting strength in the foundation for the next 50 years."

In January 1999, Hughes Electronics Corporation acquired USSB for $1.3 billion. The Hubbard family's stake in the deal was estimated at $674 million, according to the Star Tribune. Hughes owned DirecTV, the nation's largest satellite broadcasting company.

The new century brought an economic and advertising slowdown in its wake. The situation worsened with the terrorist attacks on the United States on September 11, 2001. Carrying around-the-clock coverage from ABC News, KSTP-TV halted advertising for 36 hours. When regular programming resumed, some big advertisers in the market, such as Northwest Airlines, decided to cease their ad campaigns through year-end. Moreover, local stations' coverage of the events had racked up additional costs, and the prospect of U.S. retaliation against the attackers created further uncertainty.

The continuing post-9/11 downturn led to layoffs, wage freezes, and canceled local news programs. The Twin Cities broadcast market revenue was in a double-digit decline. Hubbard was forced to downscale ambitious growth plans for KSTC-TV, acquired in 1999.

Conus Communications staff also felt the ax in 2001, but news of more drastic changes came the next year. Hubbard planned to shut down most of Conus's operations by January 2003, phasing out satellite and production services business, television news service, and 24-hour news. The company would continue to sell satellite time to television stations and offer a video archive service. Terry O'Reilly, Conus president, attributed the change to media consolidation and the advertising climate, according to the Star Tribune. A rash of local stations dropped the fee-based service during the tough economic times. Moreover, since the founding of Conus many local stations had acquired their own satellite trucks.

Former Conus employees purchased the company's satellite services division, the Business Journal reported in January 2003. The division's activities ranged from web-casting to field producing. The company, for example, had provided early coverage of the Senator Paul Wellstone plane crash in northern Minnesota to Fox News, CNN, and CBS. The Conus News Service and the All News Channel operations had shut down in the fall of 2002. Conus, which also sold video clips to producers, had redirected its energy toward developing television network programming for DirecTV.

The FCC loosened ownership rules on media companies in 2003, opening the door for realignment of the industry. Prognosticators envisioned a paring down of independents including Hubbard Broadcasting, which was undergoing some stress.

During the previous three years, Hubbard Broadcasting had spent $81 million on the acquisition of two television stations and an AM/FM radio station, Eric Wieffering reported for the Star Tribune in June 2003. Audience building led to three years of losses. Hubbard was among a rare breed, which included independent stations in Boston, San Francisco, Seattle, and Atlanta. Media conglomerates, such as Viacom, Gannett, Fox, and Walt Disney, owned most major market television stations. On the radio side, ownership was even more concentrated. Texas-based Clear Channel Communications owned more than 1,200 radio stations nationwide, seven of them in the Twin Cities.

Wieffering wrote, "Hubbard's oldest son, Stanley, 42, said the new FCC regulations might present more of an opportunity than a threat, opening up the possibility of more acquisitions of TV or radio stations in some markets. Son Robert Hubbard agreed: 'I don't think the new rules are going to materially affect our ability to be competitive. At the end of the day, it's business as usual.'" Business as usual for the Hubbards included coming up with new ideas. Stanley E Hubbard was in the process of raising $100 million to fund a new cable and satellite service, Moviewatch.

Ed Piette, general manager of KSTP-TV, left the station for rival WCCO, owned by Viacom Inc., in 2003. Continuing to lag behind in news ratings, KSTP hired Ed Asner, who played news director Lou Grant on The Mary Tyler Moore Show to create some buzz in 2004. Low rankings translated to lower revenue. Top-ranked KARE-TV brought in $4,000 for a 30-second ad during the 10 p.m. news versus just about $1,400 for KSTP-TV, according to the Star Tribune. While increasingly costly to produce, news programming could bring in as much as half of a station's total advertising revenue.

In 2005, Forbes estimated Stanley S. Hubbard's worth at about $1.2 billion. The magazine also noted the 2006 debut of Hubbard Broadcasting's new venture Moviewatch, expected to serve 26 million homes.

Principal Competitors

Clear Channel Communications, Inc.; Granite Broadcasting Corporation; Sinclair Broadcast Group, Inc.

Chronology

• Key Dates
• 1923 Stanley E. Hubbard establishes his first radio station.
• 1925 Company forms news gathering bureau.
• 1948 Company begins television broadcasting.
• 1951 Son Stanley S. Hubbard comes on board full-time.
• 1962 Hubbard Broadcasting Inc. is formed.
• 1981 United States Satellite Broadcasting (USSB) is formed.
• 1984 Company initiates a satellite news gathering service, Conus.
• 1991 Company buys transponders aboard Hughes satellite.
• 1994 Company begins broadcasting satellite television service.
• 1996 USSB goes public.
• 2002 Conus shuts down most of its operations.
• 2006 Moviewatch is expected to serve 26 million homes.