University-owned television station WNEG could soon have plenty in common with former “Tonight Show” host Conan O’Brien.

And no, it has nothing to do with crazy red hair or insult comic dogs.

Following months of declining revenue and a growing deficit, the station faces the real possibility of being taken off the air mere months after it started programming from the Grady College of Journalism and Mass Communication. WNEG has already burned through most of a five-year, $5 million grant and could “hit the brick wall” by September if woeful economic trends continue.

“It all depends on what happens in between now and then,” said Michael Castengera, manager of the station now housed on the bottom floor of Grady College. “Then we’ll have to decide the next steps.”

“We’ve been in Athens effectively since January 1, and it takes time to reorient,” said Culpepper “Cully” Clark, dean of Grady College. “With all the factors, the cash has burned much quicker than we thought.”

With a fiscal year 2010 operating expense of $1.8 million and a projected annual revenue of $800,000 — which merely covers the $786,000 in staffing salaries — the station will incur a deficit of $1 million. The deficit will be drawn from what’s left of the grant.

To meet the projected revenue, the station needs $70,000 monthly in advertising revenue. However, the station underperformed in January and February, calling for an additional $60,000 drawn from “reserve” funds.

“We’re going on the basis now that we will make it through,” Castengera said. “Sales were so bad, and the economy was at its worst in December and Georgia doesn’t recover as fast as the nation. We had to tough it out.”

At its acquisition in 2008, Grady College received $5 million from the University of Georgia Research Foundation to move the station from Toccoa to Athens and start operations. The money provided for the three stages of starting the project — $1.5 million to purchase the station, $2.1 million to build it in Athens and transform operations from analog to digital and $1.9 million as an operating subsidy. The grant — meant to last five years — is near

depletion.

Shortly after the acquisition came a plunging economy and a huge death to media advertising everywhere, which caused the station to fall tens of thousands of dollars below budget month after month. Other factors — extended construction, a six-month delayed move, even theft of electronic equipment — forced managers to pull funds from upcoming fiscal years to foot the bill.

“With WNEG, before last June, we counted on the access to athletics,” Clark said. “With a same-day showing of football, you know somebody’s going to watch that again and again and all night long.”

Under contract to ESPN, football broadcasts were never available to WNEG. Station managers hoped to snag popular sports such as gymnastics, basketball and baseball to pull a large audience and advertising base. But beginning July 1, 2009, the Athletic Association reached an eight-year, $92.8 million agreement with ISP Sports for exclusive multimedia rights, including TV and digital media.

“Many reasons explain why we are where we are, but those reasons are not sufficient,” Clark said. “We have work to do.”

Considering the scenarios

In the first quarter of this year — what Castengera called “the darkest hour” — gross revenue rolled in at $59,848 for January, $54,484 for February and $44,413 for March. Castengera said funds were projected to run out by May and proposed “scenarios” in February for different ways to move forward with station operations. The options included continuing regular operations, maintaining minimal programming or completely “going dark.”

“We discussed a variety of scenarios,” Castengera said. “Everyone had to understand every possibility.”

PHOTO BY KATHERINE POSS

Scenario 1: Off the air

Under the worst case scenario, the station would shut down and nearly reduce all expenses.

“Shutting down the station completely is technically legal under Federal Communications Commission rules, but the station must return to air with programming within a year or face the loss of its license,” according to the scenario document. But a complete shutdown “may negatively impact the asset value of the station in the eyes of any potential buyers” and “may negatively affect relationships with our programming and other sources and make a ‘re-start’ harder.”

Scenario 2: Minimal programming

A second option allows the station to continue at a minimal level, maintaining basic programming with limited staff and technical support. The change would take operating costs down to $350,000, according to the documents, but raises several programming and legal questions. “Maintaining a minimal level of programming will keep an on-air presence and maintain some perception of viability for the station,” Castengera wrote. “Partnerships with other media outlets may still be possible as long as the station is on air. It is unlikely the station would be able to attract any significant advertising revenue. Our primary source of programming — This Network — may not want to continue under such circumstances.”

Scenario 3: Status quo

For now, the group decided to maintain the current staffing and programming level with the hope that advertising revenues will pick up and a partnership with a media company may come to fruition in May. This will leave $240,000 in cash reserves in the operating budget and $140,000 in the capital budget for fiscal year 2011.

“Any public announcement that WNEG is ceasing or reducing operations significantly will negatively impact advertising and programming opportunities,” Castengera wrote in the scenario documents. “Setting a time specific cut-off date of full operations will send a signal to the community at large and the business community in particular that this is not a viable operation. Advertisers will be unlikely to ‘buy time’ and revenue will drop further.”

In February, the station was “still struggling with how to create a budget for FY11,” according to e-mail memos between Castengera and Jessica Orbock, general counsel for UGARF. Castengera indicated there still isn’t a complete budget for the next fiscal year, which starts July 1.

“The accounting folks and I have a bunch of worksheets, with a lot of different numbers but also with a lot of blank lines,” Castengera said in an e-mail to The Red & Black on April 8.

To Jeffry Netter, professor of finance, this isn’t unusual.

“This is analogous to a business in financial trouble and not that surprising,” he said last week. “The TV station isn’t a business like Exxon or something. It’s dependent on other sources of funds. The University also isn’t sure of its budget yet because of state revenue, and those decisions are being made this week.”

Netter called this type of uncertainty a “cost of financial distress.”

“When you’re not certain of your cash situation, it’s hard to run the station,” he said. “Managers and workers are not sure what to do, and advertisers are hesitant to make a contract when you look shaky.”

Even the foundation which purchased the station is “taking it quarter by quarter now,” said David Lee, UGARF executive director.

“Obviously we’re concerned the station has spent money faster and hasn’t been able to build revenue as quickly,” Lee said. “None of the projections originally about what would happen have come to pass, so we’re all a bit wary about making projections now.”

Lee pointed out his concern that researchers might worry about the ties between UGARF and WNEG in terms of funding. The $5 million grant was a limited and defined investment, and Lee wants University researchers to be assured that UGARF resources are struggling due to other factors.

“The $5 million is a significant sum of money but not so large to change the fortunes of UGARF. It’s of the magnitude that we’ve put into other projects over the years and is not excessive with respect to individual investments and programs,” Lee said. “It is in no way responsible for the fact that we don’t have as much money to support other research activities right now.”

Still full steam ahead

Despite seemingly impossible budget numbers, administrators are pushing forward. As the new fiscal year approaches, Castengera projects improvement.

“Now it looks like we’re going to be able to make it longer, beyond September or October,” Castengera said April 5. “And the longer we can continue and get more advertising — like political advertising from candidates — the longer we’ll be here.”

The station has heard from the Roy Barnes campaign, which advertised with WNEG in the past, and has gotten a “few nibbles” from other campaigns. Castengera hopes to hear more from hosting both the Democratic and Republican gubernatorial debates in January and February.

Castengera said calls from new advertisers — a development agency in Franklin, N.C., looking to draw tourists and University entities such as the Georgia Center — are leaving them hopeful. With the College of Public Health and the Hugh Hodgson School of Music expressing interest in generating programming, he also sees the station getting closer to producing more original local programming.

“It’s still a struggle, but we’re finally getting traction,” Castengera said. “With the workers and reporters, we tell them we have a lot of issues and they need to know them, but management is trying to make it work.”

Waiting out the transition period is nerve-wracking for the reporters at times, said Amelia Hines, a general news reporter who joined the station in Toccoa after graduating from the University in 2006.

“We do our job and hope we have the job security with that based on merit,” she said. “When we hear things are tight and the station isn’t doing so great, there’s not much we can do. Like all University employees, we’re furloughed. Not knowing what’s next is worrisome.”

In an interview Thursday, Castengera and Clark seemed hesitant to predict “what’s next” but said they have “ideas with possibilities” as September approaches.

Castengera bought ads on Wednesday from HSBT — the University’s student-run advertising team of Grady College students — and plans to produce the “way cool” ideas of social marketing across campus and on Athens Transit with the slogan “non-stop news, weather and sports.”

One idea is to make WNEG’s programming more “news intensive” and be “all news, all the time” during prime time hours, Castengera said. During the 6 p.m. to midnight programming hours, the 6 p.m. broadcast would be continuously re-broadcast until 10 p.m., when it would be updated and re-broadcast until midnight. Castengera and Clark also discussed involving student-generated content.

“In the world we’ve been living through, we are not alone with financial troubles,” Clark said. “Every little idea helps, and we’re getting traction. We’re definitely not leaving stones unturned.”

Another idea includes partnering with media companies — such as Turner Broadcasting (who just recently signed a deal with none other than Conan O’Brien). Clark declined to talk about the options still in negotiation. A partnership with Raycom Media already fell through after some professors became concerned the station’s space would be shared without charging rent. Others objected when students in a newly-created “Digital Hub Internship” would work for free. Clark declined to explain why or when the partnership possibility ended but continues to remain positive about other prospects. He’s no stranger to the idea of starting a station on a university campus, after all.

Clark helped to start a station at the University of Alabama while dean of the journalism school in 2001, but he said the experience so far has been “completely different.”

“A station already existed in Tuscaloosa but moved when it lost a CBS affiliation,” he said. When the university purchased it, residents and advertisers already had a “comfort level” with a station. Although the station’s success never soared, Clark saw the potential of the Northeast Georgia market and mentioned the possibility of bringing a station to the University during his earliest interviews for Grady College’s dean position.

“Every step we take opens the door to revenue, and possible partnerships could help push the timeline back,” Clark said. “We’re feeling pretty confident.”

WNEG e-mails, fiscal year budgets, payroll