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Brier Dudley offers a critical look at technology and business issues affecting the Northwest.

June 22, 2011 at 10:02 PM

Mystery bidder on Seattle TV station: Michael Dell

Computer tycoon Michael Dell may soon have another Seattle connection, besides being one of Microsoft’s biggest customers.

Dell is the mystery buyer bidding on a Seattle TV station that will be auctioned through a bankruptcy proceeding on June 30.

A corporation linked to the investment company that handles the Dell family fortune submitted a “stalking horse” bid for Seattle’s KFFV TV, offering $3.45 million for the 20-year-old station. That sets the opening price for the company, meaning others have to bid higher when the auction begins.

KFFV’s main channel number is 44 and its primary content is Spanish language TV Azteca. It operates four digital channels that carry informercials and content in Mandarin, Cantonese and Korean. It has about six employees at an office south of downtown Seattle.

The station is owned by North Pacific International Television, a husband-and-wife company that filed for bankruptcy protection in January 2010. Since then the husband, Kenneth Casey, died and his wife, Charlene, decided to sell, according to her lawyer, Nate Riordan.

Meanwhile, Dell’s investment company has been shopping for TV stations. Earlier this month its subsidiary, OTA Broadcasting, paid $8 million for San Francisco-area station KTLN. It had been owned by Christian Communications of Chicagoland, according to a report by trade publication RBR.com.

Riordan confirmed that OTA is the stalking horse bidder for KFFV. A spokesman for Dell’s MSD Capital declined to comment.

Dell probably isn’t trying to become a media mogul, or use stations to broadcast infomercials for Dell computers.

It’s more likely that his investment team is making a real estate play. The stations have swaths of spectrum, which the FCC is planning to reclaim and auction off to companies developing wireless broadband networks.

Details aren’t final and TV broadcasters aren’t keen on the plan, but stations giving up spectrum would be compensated with proceeds from the auctions.

Depending on the deals offered to TV stations, their spectrum could be worth far more than the broadcasting business at small outfits like KFFV. Those businesses aren’t hugely profitable and face the same advertising challenges affecting other media companies.

“Quite frankly, they get a lot of competition from cable,” said Frank Higney, a Tuscon, Ariz., broker handling the KFFV sale.

Higney said the value of independent, local stations plummeted when the digital TV format was adopted. The stations used to be valuable to companies wanting to add additional channels in their local market. With the digital format, they can simply add additional subchannels — such as 4.1 and 4.2.

“If this were 10 years ago my stalking horse wouldn’t be $3.5 million, it would be $35 million,” he said.

Higney suspects that OTA is “looking at a different business model.” He knows of at least four companies making spectrum plays. Their plan is to “run the stations at a modest profit with the hope of something coming in the FCC spectrum auction.”

“They’re not buying this because they want to be independent television owners in Seattle,” he said. “They’re buying it because they recognize there’s value in holding an FCC license and holding spectrum.”

Dell may have pole position, but others have expressed interest in KFFV, Higney said.

“There are a lot of different entities, individuals showing interest, but whether they show up to bid is another question,” he said.

If nobody else bids, someone’s going to be telling Dell, “Dude, you’ve got a Seattle TV station.”

Comments | More in | Topics: Billionaire techies

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