UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

Commission File Number 333-96619

Block Communications, Inc.

(Exact name of registrant as specified in its charter)

(419) 724-6257

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act: None

Securities registered pursuant to Section 12(g) of the Act: None

     Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for shorter periods that the registrant was required to file such reports), and (2) has been subject to such filing requirements for past 90 days.  Yes þ     No o

     Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  þ

     Indicate by check mark whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).  Yes o     No þ

     There is no public market for the registrant’s common equity, all of which is held by members of the Block family.

     As of March 24, 2005, there were outstanding 29,400 shares of the registrant’s Voting Common Stock and 428,613 shares of its Non-voting Common Stock.

Forward-Looking Statements

      This Annual Report on Form 10-K includes forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including statements regarding industry prospects and future results of operations or financial position, made in this Annual Report on Form 10-K are forward looking. We use words such as anticipates, believes, expects, future, intends and similar expressions to identify forward-looking statements. Forward-looking statements reflect management’s current expectations and are inherently uncertain. Our actual results may differ significantly from management’s expectations. Risks and uncertainties that could cause our actual results to differ significantly from management’s expectations are described in greater detail in “Factors That Could Affect Future Results” set forth in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Item 7 in this report.

Industry and Market Data

      In this report, we rely on and refer to information regarding the cable television, newspaper publishing and television broadcasting industries and our market share in the sectors in which we compete. We obtained this information from various industry publications, other publicly available information, market research and our own internal surveys and estimates. Industry publications generally state that the information therein has been obtained from sources believed to be reliable, but that the accuracy and completeness of the information has not been independently verified and is not guaranteed. Similarly, other publicly available information, market research and our own internal surveys and estimates, while believed to be reliable, have not been independently verified, and we make no representation as to the accuracy or completeness of such information.

      Throughout this document, circulation data for the Pittsburgh Post-Gazette is based on average paid circulation for the twelve months ended March 31, 2002, 2003 and 2004, and circulation data for The Blade is based on average paid circulation for the twelve months ended September 30, 2002, 2003 and 2004. The circulation data is based on average paid circulation as set forth in the Audit Bureau of Circulations (“ABC”) Audit Report for such period, except for The Blade’s circulation data as of September 30, 2004. The circulation data for The Blade for the period ending September 30, 2004 is calculated in accordance with the ABC rules and regulations; however, due to the availability and timing of the ABC audits throughout 2004, these numbers have not been verified in a formal audit report received from ABC.

      There are 210 generally recognized television markets, known as Designated Market Areas, or DMAs, in the United States of Amercia. DMAs are ranked in size according to various factors based upon actual or potential audience. DMA rankings in this report are from current publicly-available data based on Nielsen Media Research.

PART I

Item 1.     Business

      We are a privately held diversified media company with our primary operations in cable television, newspaper publishing and television broadcasting. We provide cable television service to the greater Toledo, Ohio metropolitan area (Buckeye CableSystem) and the Sandusky, Ohio area (Erie County CableSystem). At December 31, 2004, we had approximately 146,000 subscribers. Our systems are 100% rebuilt to 870 MHz and are basically served by a single headend. Our Toledo system is one of the largest privately owned urban cable systems in the United States. It is also one of the largest urban cable systems not owned or controlled by one of the large multiple system operators. We publish two daily metropolitan newspapers, the Pittsburgh Post-Gazette in Pittsburgh, Pennsylvania and The Blade in Toledo, each of which is the dominant publication in its market. The combined daily and Sunday average paid circulation of our two newspapers is approximately 383,200 and 590,200, respectively. We also own and operate four television stations: two in Louisville, Kentucky, and one each in Boise, Idaho and Lima, Ohio, and we are a two-thirds owner of a television station in Decatur, Illinois. We also have other communication operations including a commercial telecom business and a home security business. For the year ended December 31, 2004, we had revenues, operating income, and a net loss of $438.4 million, $8.5 million, and $6.8 million, respectively. Please refer to note 12 of the consolidated financial statements for detailed business segment information.

      Our shareholders, the Block family, have been in the media business for over 100 years. In 1926, the Block family acquired the first of the Company’s current holdings, The Blade, which was first published in 1835. We expanded our portfolio of newspapers in 1927 when we became the publisher of the Pittsburgh Post-Gazette. In 1965, we were awarded a franchise in Toledo to develop our cable system, which, with over 38 years of operating history, is one of the oldest continuously owned metropolitan cable systems in the United States. In 1972, we acquired the first of our current television broadcasting stations when we purchased WLIO in Lima.

      We have an experienced management team and are focused on improving the competitive position of our media properties as well as maximizing synergies between our cable television and newspaper publishing segments. In particular, we seek to capitalize upon our dominance of the cable and newspaper businesses in Toledo — a unique cross-ownership position for an urban market. We make extensive use of our newspaper and cable system to cross-promote our businesses at very low incremental costs. We can also offer advertisers multiple-media advertising strategies including newspaper, cable and Internet. The knowledge of our customers and markets gained from our various businesses enables us to identify our customers’ needs and tailor solutions to meet their business objectives.

      Our principal offices are located at 541 N. Superior Street, Toledo, Ohio 43660, and our telephone number is (419) 724-6257.

      Copies of this filing may be obtained at no charge by contacting Jodi Miehls at the above address.

Cable Television

      We provide cable television service to the greater Toledo metropolitan area (Buckeye CableSystem or the Toledo system) and the Sandusky, Ohio area (Erie County CableSystem). In addition to traditional cable television service, we also provide high-speed cable modem Internet access and digital cable service in both systems. Our cable television operations generated revenues and operating income of $121.2 million and $8.6 million, respectively, in the year ended December 31, 2004.

      In 2002, we completed the rebuild of Buckeye CableSystem, and in 2004 we completed the rebuild of Erie County CableSystem from a one-way coaxial cable plant to an 870 MHz hybrid fiber coaxial (HFC) two-way interactive system. The rebuild allows us to provide advanced cable services that we believe will help us maintain our dominant position in the markets we serve. These services currently include up to 304 analog and digital video and digital music channels, high-speed Internet, high-definition digital television service, video on demand service, digital video recording service, and in 2005, the systems will offer residential telephony service.

      On March 29, 2002, we completed an asset exchange with Comcast Corp. involving the exchange of our cable system in Monroe, Michigan, a lower growth area approximately 15 miles north of Toledo, for Comcast’s system in Bedford, Michigan, a Toledo suburb, plus a cash payment to us of $12.1 million. The exchange enabled us to expand our subscriber base in a contiguous high-growth suburban area we already partially served and increase the efficiency of our cable cluster by reducing the number of our headends.

      We are pursuing the following cable television strategies:

      Operate Highly Advanced and Efficient Cable Networks. We invested approximately $89 million to rebuild the Toledo system to 870 MHz. Our rebuilt system allows us to offer higher margin advanced services, such as high-speed two-way cable modem, digital, and high-definition television. The rebuild also increased channel capacity to our current 304 analog and digital video and digital music channels, which can be significantly expanded by recapturing some of our 89 analog channels and converting them to digital channels. While most cable system operators have chosen to upgrade their systems to 750 MHz, we invested in the increased bandwidth, which provides additional capacity for future services.

      All of our Toledo system subscribers are served by our advanced 870 MHz system from a single headend. In addition, our Toledo headend serves our Erie County system through a fiber interconnection. A rebuild of our Erie County system was completed in 2004. We invested approximately $14.9 million to rebuild the Erie County system to 870 MHz. The completion of the Erie County system rebuild will enable us to serve 100% of our subscribers from a single headend. While the Toledo system was initially designed to support 500 homes per fiber node, our system can easily be divided to an average of 125 homes per fiber node when demand warrants. Our Erie County system was initially designed to support 1,000 homes per fiber node and can easily be divided to an average of 250 homes per fiber node when demand warrants. This allows us to efficiently increase subscribers and provide additional advanced services without sacrificing system performance or reliability.

      Offer Local Cable Exclusive Programming. Since 1989, Buckeye CableSystem has provided its customers with a locally programmed channel, TV5, which is run in the same manner as a broadcast station- obtaining its own programming through syndications. In 1995, TV5 became the exclusive market affiliate for the WB Network, the first cable channel in the country to be so designated.

      In January 2004, Buckeye launched Buckeye Cable Sports Network (BCSN), a 24-hour per day, locally produced channel for local sports. BCSN covers men and women’s high-school, college, professional and amateur sports, mainly from the Northwest Ohio area on a live and tape-delayed basis. Buckeye believes these locally controlled and programmed channels offer a competitive advantage over other multichannel video competitors.

      Utilize Significant Marketing Power. Buckeye CableSystem benefits from our dominant position as a multi-media provider in the greater Toledo metropolitan area. We believe we are the only urban cable operator in the United States with cross-ownership of the primary newspaper in its market. The Blade provides fill-in advertising space to market our cable services and to promote our brand awareness at a very low incremental cost. We advertise our services on BCSN and 40 other cable channels — over 10,000 spots per month in 2004 — providing us an additional low-cost advertising source. We use these marketing resources to promote existing services, enhance the introduction and roll-out of new services, and build a strong competitive barrier.

      Roll-out Advanced Services. Our investment in our cable systems’ state-of-the-art cable network combined with our significant marketing power positions us to successfully roll out advanced services and further increase our revenue per subscriber. High-speed cable modem customers exceeded 37,000 at December 31, 2004, a growth of nearly 8,000 during the year. Digital cable customers exceeded 50,000 at December 31, 2004, a growth of nearly 13,000 customers during the twelve month period. In addition, Buckeye CableSystem launched high-definition digital television service in 2003 and launched video-on-demand, subscription video-on-demand service, and digital video recording service in 2004.

      Maintain Superior Customer Satisfaction. Our Service TV(R) brand embodies our total commitment to providing superior cable television service, which has resulted in high levels of customer satisfaction and retention. We strive to provide exceptional programming and signal quality, and we continuously monitor our fiber nodes and power supplies to maintain a highly reliable cable system through our Network Operations Center which is manned 24 hours a day. We also operate a call center with customer relations representatives available around the clock, maintain convenient customer service locations and offer next day, two-hour appointment windows for installation or in-home repairs. We believe our superior customer service, along with our state-of-the art cable systems, provide a significant defensive measure against direct broadcast satellite (DBS) operators.

      We offer our customers traditional cable television services and programming as well as new and advanced services currently consisting of high-speed Internet access, digital cable service, and high-definition digital television service, video on demand, subscription video on demand service and digital video recording service. We plan to continue to enhance these services by adding new programming and other advanced services as they are developed, as well as expansion of our video-on-demand and subscription video-on-demand products.

      Our basic channel line-up and additional channel offerings for each system are designed according to demographics, programming preferences, channel capacity, competition and price sensitivity. Our core cable television service offerings include the following:

      Limited Basic Service. Our limited basic service includes, for a monthly fee, local broadcast channels, including network and independent stations, limited satellite-delivered programming, local public, government, and leased access channels. In addition, our Buckeye CableSystem offers BCSN and WB TV5 as part of the limited basic service.

      Expanded Basic Service. Our expanded basic service includes, for an additional monthly fee, various satellite-delivered networks such as CNN, MTV, USA Network, ESPN, Lifetime, Nickelodeon and TNT.

      Premium Service. Our premium services are satellite-delivered channels consisting principally of feature films, original programming, live sports events, concerts and other special entertainment features, usually presented without commercial interruption. HBO, Cinemax, Showtime, The Movie Channel and STARZ are typical examples. Such premium programming services are offered both on a per-service basis and as part of premium service packages designed to enhance customer value.

      The significant expansion of bandwidth capacity resulting from the rebuild of our systems allows us to expand the use of multichannel packaging strategies for marketing and promoting premium and niche programming services.

      Pay-Per-View Service. Our pay-per-view services allow customers to pay to view a single showing of a feature film, live sporting event, concert or other special event, on an unedited, commercial-free basis.

      Buckeye CableSystem offers advanced analog cable services to customers who do not subscribe to the higher priced digital cable service. This service utilizes a converter box that is substantially less expensive than a digital box. Buckeye’s advanced analog services include:

      Digital video technology offers significant advantages. Most importantly, this technology allows us to greatly increase our channel offerings through the use of compression, which converts one analog channel into six to 12 digital channels. The implementation of digital technology has significantly enhanced and expanded the video and other service offerings we provide to our customers.

      Buckeye’s customers currently have available digital cable programming services that include:

      Digital cable services are available to 100% of our subscribers.

      Our broadband cable networks enable data to be transmitted up to 90 times faster than traditional telephone modem technologies. This high-speed capability allows cable modem customers to receive and transmit large files from the Internet in a fraction of the time required when using the traditional telephone modem. It also allows much quicker response times when surfing the Internet, providing a richer experience for the customer. In addition, the two-way cable modem service offered by our systems eliminates the need for a telephone line for Internet service, is always activated, and does not require a customer to dial into the Internet service provider and await authorization.

      We offer four tiers of service that provide different speeds and features to meet the needs of any customer desiring internet service. Our high-speed internet access service is available to 100% of our customers.

      We receive revenue from the sale of local advertising on satellite-delivered channels such as CNN, MTV, USA Network, ESPN, Lifetime, Nickelodeon and TNT. We also sell advertising on our local channels, WB TV5 and BCSN. Six of the channels we insert advertising on are zoned, which allows for more targeted advertising to reach three specific targeted geographic areas. We have an in-house production facility and a sales force covering our markets. Advertising sales accounted for 7.4% of our combined cable revenue for the year ended December 31, 2004.

      Residential Telephone Service. We plan on offering residential telephone service during the first quarter of 2005 utilizing internet protocol (IP) technology from the customer’s premise to our headend. At the headend, the call will be connected to the public switched telephone network for transport to the called party. Various service packages will be offered which may include long distance and calling features such as caller ID, voice mail, and call forwarding.

      Interactive Services. Our rebuilt cable networks have the capacity to deliver various interactive television services not currently provided, such as the following:

      Our cable revenues are derived primarily from the monthly fees our customers pay for cable services. Our rates vary by the market served and by the type of service selected and are usually adjusted annually. As of December 31, 2004, our monthly fees for expanded basic cable service were $39.99 for Toledo (Buckeye) and $39.15 for Erie County. Effective February 1, 2005, we increased our average monthly fees for expanded basic service to $41.99 for Toledo (Buckeye) and $41.40 for Erie County. A one-time installation fee is charged to new customers, but may be waived during certain promotions. We believe our rate practices are in accordance with the FCC guidelines and are consistent with industry practices.

      Our service offerings vary by market. The current monthly price ranges for our cable services on a stand-alone basis are as follows:

      We also offer packages of cable services at discounts from the stand-alone rates for each individual service.

      The following table sets forth selected financial, operating and technical information regarding our cable systems:

      Greater Toledo Metropolitan Area. As of December 31, 2004, Toledo’s system passed approximately 224,200 homes and served approximately 128,200 basic subscribers. The 26 franchises served by Buckeye have a combined population of approximately 554,000. With a population of 655,530, the three-county Toledo Metropolitan Statistical Area is the 69th largest MSA in the country. Toledo’s major non-governmental employers include ProMedica Health Systems, Mercy Health Partners, Daimler-Chrysler, Bowling Green State University, The University of Toledo, General Motors, and the Medical College of Ohio. Other significant Toledo-based companies include Dana Corporation, Owens-Illinois and Pilkington Glass.

      Sandusky, Ohio. As of December 31, 2004, our Erie County system passed approximately 29,700 homes and served approximately 17,700 basic subscribers. The 11 franchises served by our Erie County system have a combined population of approximately 79,500. Sandusky’s major non-governmental employers include Cedar Fair/ Cedar Point, Delphi Automotive System, Visteon Automotive Systems, Lear Automotive, Tenneco and Firelands Community Hospital.

      The architecture of Toledo’s 870 MHz HFC system consists of approximately 2,217 miles of coaxial cable and 1,397 miles of fiber optic cable, passing approximately 224,200 households and serving approximately 128,200 customers. The system includes a single headend. The new headend was completed at the beginning of 1997 to coincide with the beginning of the system rebuild. Thirteen hubs located throughout the greater Toledo metropolitan area are connected by redundant fiber-optic cable rings back to the master headend, thereby reducing the frequency and size of service outages. From each of these thirteen hubs, fiber-optic cable extends to nodes, each serving on average 500 homes. Coaxial cable connects the node to each customer’s home or building.

      The system was also designed to provide a clean migration path to future system needs by allowing additional spectrum to be allocated to interactive services as conditions require. The system provides for 12 strands of fiber to each node with two strands activated and 10 strands reserved for future services. Moreover, the 500-home fiber nodes can easily be divided to an average of 125 homes per fiber node when demand warrants. As more individualized services are offered, this additional bandwidth will reduce the need for future construction and will provide great flexibility in our provision of services to our customers.

      The rebuilt system currently offers 89 analog video channels on our advanced analog service and approximately 304 analog and digital video and digital music channels on our digital cable service, including 15 high definition digital channels. Additional channels are allocated to support video on demand sessions. The system offers the ability to significantly increase channel capacity by recapturing some of the analog channels and converting them to digital channels.

      We monitor all of the fiber nodes and power supplies in Toledo’s cable network 24 hours per day, seven days per week, providing reliable service and high customer satisfaction. The cost of this monitoring is shared by our cable and commercial telecom operations. In addition, we have a supporting power system that was built to provide battery backup for four to six hours in the event of a local power outage. For more extended power outages, generators can be used to provide power indefinitely. This is critical as “always on” services such as cable modems and other two-way telecommunications services become more prevalent.

      Our Erie County system is an 870 MHz two-way interactive system. The system uses fiber-optic cable to extend to nodes, each designed to serve 1,000 homes per node. Coaxial cable connects the node to each customer’s home or building. The Erie County system receives programming and services through the Toledo headend, via a fiber interconnect, thereby reducing operating costs.

      Buckeye markets its cable services through the use of our dominant advertising resources in the greater Toledo metropolitan area. Because of our advertising strength, most of Buckeye’s cable television service sales result from customer and potential customer inquiries. We invest a significant amount of time, effort and financial resources in the training and evaluation of our marketing professionals and customer relations representatives. Our customer sales representatives use their frequent contact with our customers as opportunities to sell our new services. As a result, we can accelerate the introduction of new services to our customers and achieve high success rates in attracting and retaining customers. Buckeye also has its own telemarketing staff for outbound sales calls and a door-to-door sales team utilizing in-house and outsourced personnel. Erie County markets its cable services through use of its advertising availability rights on its cable channels for spot advertising, as well as through bill inserts, direct mail and radio and print media advertising.

      We believe that providing a large selection of conveniently scheduled programming is an important factor influencing a customer’s decision to subscribe to and retain our cable services. To appeal to both existing and potential customers, we devote considerable resources to obtaining access to a wide range of programming. We determine channel offerings in each of our markets by reviewing market research and examining customer demographics and local programming preferences. We contract with suppliers to obtain programming for our systems, payment for which is typically based on a fixed fee per customer per month. These contracts are typically for a fixed period of time and are subject to negotiated renewal. We purchase the majority of our cable programming through the National Cable Television Cooperative (“NCTC”). This organization aggregates more than 14 million cable subscribers for the purpose of obtaining programming at volume-based discounts. We also purchase programming directly from suppliers who do not have agreements with the NCTC or if they can provide better terms than through the NCTC.

      Along with the rest of the cable industry, we have felt the impact of increasing programming costs. Programming is our cable systems’ largest cash operating expense. Our basic cable programming costs increased by 11.4% and 6.4% in 2004 and 2003, respectively. This is primarily due to increasing costs for sports programming, including the programming costs associated with BCSN, and our need for new channels to match satellite competition. Because of our size, we are unable to negotiate the more favorable rates that are granted to large national multiple system operators.

      In 1989, Buckeye launched TV5, a locally programmed channel that is run in the same manner as a broadcast station — obtaining its own programming through syndicators, arranging for coverage of local and regional sports contests and doing its own independent marketing. TV5 was conceived to provide us with a competitive advantage should an overbuilder become active in our service area. In 1995, TV5 became the exclusive market affiliate for the WB network, the first cable channel in the country to be so designated. Its popularity continues to increase. Buckeye has contracted to provide WB TV5 to cable operators in other cities in the Toledo DMA, which adds to its popularity and provides more viewers for advertising.

      Buckeye also operates a Community Channel on which locally produced programming is shown free of charge if it is deemed of sufficient interest. In addition to programming provided by outsiders, Buckeye provides live coverage of Toledo City Council meetings. We have also offered to cablecast a select number of council and trustees meetings from other franchise areas.

      In January 2004, the Toledo system launched BCSN, a 24-hour per day, locally produced channel for local sports. BCSN covers men’s and women’s high school, college, professional and amateur sports, mainly from the Northwest Ohio area, on a live and tape delayed basis. Buckeye believes local programming such as BCSN offers a competitive advantage over direct broadcast satellite competitors.

      Cable television systems are constructed and operated under fixed-term, non-exclusive franchises or other types of operating permits granted by local governmental authorities. Franchises typically contain many conditions, such as:

      Certain provisions of these local franchises are subject to limits imposed by federal law.

      We hold a total of 37 franchises. These franchises require the payment of fees to the issuing authorities ranging from 3% to 5% of gross revenues (as defined by each franchise agreement) from the related cable system. The Cable Communications Policy Act of 1984 (“1984 Cable Act”) prohibits franchising authorities from imposing annual franchise fees in excess of 5% of gross annual revenues and permits the cable television system operator to seek renegotiation and modification of franchise requirements if warranted by changed circumstances that render performance commercially impracticable.

      Buckeye has 26 franchises, most of which have 20 year terms, and 99% of Buckeye’s subscribers are covered under agreements that expire after 2016. Erie County has a total of 11 franchises and 98% of Erie County’s subscribers are covered under agreements with expiration dates in 2011 or thereafter.

      The 1984 Cable Act and the Cable Television Consumer Protection and Competition Act of 1992 (“1992 Cable Act”) provide, among other things, for an orderly franchise renewal process, which limits a franchising authority’s ability to deny a franchise renewal if the incumbent operator follows prescribed renewal procedures. In addition, the 1984 and 1992 Cable Acts establish comprehensive renewal procedures, which require, when properly elected by an operator, that an incumbent franchisee’s renewal application be assessed on its own merits and not as part of a comparative process with competing applications. Upon a franchise renewal request, however, a franchise authority may seek to add new and more onerous requirements upon the cable operator, such as significant upgrades in facilities and services or increased franchise fees, as a condition of renewal. We believe that our relationships with local franchise authorities are excellent.

      Cable television systems face competition from alternative methods of distributing video programming and from other sources of news, information and entertainment. These include off-air television broadcast programming, direct broadcast satellite, newspapers, movie theaters, live sporting events, interactive online computer services and home video products, including VCRs and DVDs. The extent to which a cable television system is competitive depends, in part, upon that system’s ability to provide, at a reasonable price to customers, a greater variety of programming and other communications services than those available off-air or through alternative delivery sources and upon superior technical performance and customer service.

      Off-Air Broadcast Television. Viewers who do not wish to pay for television programming have the option of receiving broadcast signals directly from local television broadcasting stations. The extent to which a cable system competes with over-the-air broadcasting depends upon the quality and quantity of the broadcast signals available by direct antenna reception compared to the quality and quantity of such signals and alternative services offered by the cable system. Viewers in the service area of Buckeye’s system are able to receive over-the-air signals of varying quality from up to 13 broadcast stations, and viewers in the service area of our Erie County system are able to receive such signals from up to 16 broadcast stations.

      Direct Broadcast Satellites. The fastest growing method of satellite distribution is by high-powered direct broadcast satellites utilizing video compression technology, which provides programming comparable to our digital cable service. Direct broadcast satellite service can be received virtually anywhere in the United States through small rooftop or side-mounted dish antennae that are generally not subject to local restrictions on location and use. Direct broadcast satellite service is presently being heavily marketed on a nationwide basis by DirecTV and EchoStar. Both of these providers offer service, including local broadcast channels, in the Toledo and Erie County markets, and have entered into national agreements with incumbent local exchange carriers, SBC and Verizon, to begin reselling their services. Direct broadcast satellite systems offer multichannel video programming packages which are similar to our packages of video services.

      Competing Franchises. Cable television systems generally operate pursuant to franchises granted on a non-exclusive basis. Franchising authorities may not unreasonably deny requests for additional franchises and may operate cable television systems themselves. Well-financed businesses from outside the cable television industry (such as the public utilities that own the poles to which cable is attached) may become competitors for franchises or providers of competing services. In the Toledo market, Buckeye faces cable competition from Adelphia in a few outlying areas where the two systems have overbuilt plant passing approximately 15,500 homes, or approximately 7% of the total homes passed by our Toledo cable system. We believe that the capital costs of matching Buckeye’s rebuilt system, together with our advertising dominance, exclusive locally produced sports channel (BCSN), and our customer service reputation, pose a formidable competitive barrier. In its market, Erie County does not currently face competition from competing cable operators.

      Satellite Master Antenna Television Systems (SMATV). Cable television operators also face competition from private satellite master antenna television systems that serve condominiums, apartment and office complexes and private residential developments. As long as they do not use public rights-of-way, satellite master antenna television systems can interconnect non-commonly owned buildings without having to comply with many of the local, state and federal regulations that are imposed on cable television systems. There are a few SMATV systems in the Toledo area serving apartments and mobile home parks. We are not aware of any SMATV operators in our Erie County service area.

      Local Multipoint Distribution Service. Local multipoint distribution service, a new wireless service, can deliver over 100 channels of programming directly to consumers’ homes. It is uncertain whether this spectrum will be used to compete with franchised cable television systems.

      Multichannel Multipoint Distribution Systems. Multichannel multipoint distribution systems use low power microwave frequencies to transmit video programming over the air to customers. Wireless distribution services provide many of the same programming services as cable television systems, and digital compression technology is likely to increase significantly the channel capacity of their systems.

      Local Exchange Carriers. The Telecommunications Act of 1996 (“1996 Telecom Act”) allows local exchange carriers and others to compete with cable television systems and other video services in their telephone service territory, subject to certain regulatory requirements. Unlike cable television systems, local exchange carriers are not required, under certain circumstances, to obtain local franchises to deliver video services and are not subject to certain obligations imposed under such franchises. Local exchange carriers use a variety of distribution methods, including both broadband wire facilities and wireless transmission facilities within and outside of their telephone service areas. Local exchange carriers and other telephone companies have an existing relationship with the households in their service areas and have substantial financial resources.

      Other New Technologies. Other new technologies, including video programming via broadband internet connections, may compete with cable television systems. Advances in communications technology, as well as changes in the marketplace and the regulatory and legislative environments, are constantly occurring. We are not, therefore, able to predict the effect that current or future developments might have on the cable industry or on our operations. See “Forward-Looking Statements.”

      We first began to offer broadband Internet access in mid-1999. As of December 31, 2004, we had approximately 37,700 broadband Internet subscribers, primarily in the Toledo area. Competition for broadband Internet services in our markets includes digital subscriber line services provided by or through local telephone exchange carriers and wireless broadband Internet services provided by wireless communications companies. Digital subscriber line technology, known as DSL, allows Internet access to subscribers over conventional telephone lines at data transmission speeds comparable to those of cable modems, putting it in direct competition with cable modem service.

      Numerous companies, including telephone companies, have introduced DSL service, and certain telephone companies are seeking to provide high-speed broadband services, including interactive online services, without regard to present service boundaries and other regulatory restrictions. DSL and wireless broadband services are offered in some portions of our service area. We are unable to predict the likelihood of success of these competing broadband Internet services. However, we believe that our technology, local customer service reputation and ability to package bundled video and Internet services will provide us with competitive advantages.

      Our broadband Internet services also compete for customers with traditional slower-speed dial-up Internet service providers, commonly known as ISPs. Traditional dial-up ISP services have the advantages of lower price, earlier market entry, and in some cases nationwide marketing and proprietary content. We believe that over time the rapid development of rich broadband content will persuade more and more customers of the advantages of a broadband connection.

      A case is pending in the United States Supreme Court, and two rulemaking proceedings are pending at the FCC, the results of which will determine the regulatory treatment of Internet access offered by cable companies over cable plant, including the power of local governments to regulate the service and to require the payment of franchise fees on the service, and whether cable companies must allow internet-service competitors access to cable plant. We are unable to predict the outcome of this proceeding or its effects upon our business.

Newspaper Publishing

      Our two daily metropolitan newspapers, the Pittsburgh Post-Gazette and The Blade, are the dominant newspapers in their respective markets. Our newspapers have a combined daily and Sunday average paid circulation of approximately 383,200 and 590,200, respectively. We believe the leading positions of our newspapers result from our long standing presence, our commitment to high standards of journalistic excellence and integrity, and our emphasis on local news, local impacts of national and international news, and service to our communities. Our newspapers have received many national and regional awards for editorial excellence. Our newspaper publishing operations generated revenues and an operating loss of $257.5 million and $419,000, respectively, in the year ended December 31, 2004. We are pursuing the following newspaper publishing strategies:

      Founded in 1786, the Pittsburgh Post-Gazette is the leading newspaper in Pittsburgh and Western Pennsylvania and has a long history of service and journalistic excellence. The Post-Gazette has more than twice the circulation of any other newspaper in the Pittsburgh Metropolitan Statistical Area (MSA). The Post-Gazette has a daily average paid circulation of approximately 243,800 and a Sunday average paid circulation of approximately 406,300, resulting in penetration of approximately 40% daily and 59% Sunday in the Pittsburgh city zone (Pittsburgh and nearby suburbs). Our dominant market position allows us to capture advertising revenue significantly greater than that of any other newspaper in this market.

      The Post-Gazette is a morning daily and Sunday newspaper covering 16 counties in Western Pennsylvania, Northern West Virginia and Western Maryland, including the greater Pittsburgh metropolitan area. With a population of 2.4 million, the six-county Pittsburgh MSA is currently the 22nd largest MSA in the United States. The population of the 16-county area served by the Post-Gazette is approximately 2.9 million. Pittsburgh’s major non-governmental employers include UPMC Health System, US Airways, West Penn Allegheny Health System, the University of Pittsburgh, PNC Financial Services Group and United States Steel Corporation. Other significant Pittsburgh-based companies include H.J. Heinz Company, PPG Industries, Federated Investors, Alcoa and FreeMarkets.

      The following table sets forth certain circulation, advertising lineage and operating revenue information for the Post-Gazette for the past three years:

      The Post-Gazette concentrates on local and regional news of Pittsburgh and Western Pennsylvania and has 236 full-time and 41 part-time editors, reporters and photographers on its staff. It draws upon the news reporting facilities of the major wire services and, with The Blade, maintains a three-person bureau in Washington, D.C. The Post-Gazette also maintains a news bureau in Harrisburg, Pennsylvania, the state capital, and five local news bureaus in the Pittsburgh metropolitan area.

      The Post-Gazette publishes and prints all of its newspapers at its facilities in downtown Pittsburgh, and then utilizes 16 depots located throughout the greater Pittsburgh area for distribution. Sophisticated computer systems are used for writing, editing, composing and producing the printing plates used in each edition. The Post-Gazette has six letterpress presses with new color flexo units on each press. The flexo units provide state-of-the-art color to the fronts and backs of most sections. Daily inserts are assembled at our downtown facility. Sunday inserts are assembled at a separate plant, five miles from our downtown plant, and transported directly to our distribution centers. We are in the process of a reconfiguration and renovation of our press lines and mailroom that will be completed in early 2005.

      The Post-Gazette is distributed primarily through independent home delivery carriers and single-copy dealers. Home delivery accounted for approximately 76% of circulation for the daily editions and approximately 59% of circulation for the Sunday edition during 2004. The newsstand price is $0.50 for the daily paper and $1.50 for the Sunday edition. Annual rates for direct payment subscriptions are $143.00 (effective October 1, 2003) for daily and Sunday, $96.20 for Friday, Saturday and Sunday, $78.00 for Sunday only and $78.00 for Monday through Friday.

      Founded in 1835, The Blade is the leading newspaper in Northwest Ohio by average paid circulation and has a significant influence on the civic, political, economic and cultural life of its subscribers and the communities it serves. The Blade is the oldest continuing business in Toledo and has no significant newspaper competition. The Blade has a daily average paid circulation of approximately 139,300 and a Sunday average paid circulation of approximately 183,900, resulting in penetration in the Toledo city zone (Toledo and nearby suburbs) of approximately 50% daily and 63% Sunday, the highest Sunday city zone penetration rate of any newspaper in Ohio. This combination of high circulation and penetration is central to our success in attracting advertising and maintaining our dominant share of market revenue.

      The Blade is a morning daily and Sunday newspaper covering 14 counties in northwest Ohio and southeast Michigan, including the greater Toledo metropolitan area. With a population of 655,530, the three-county Toledo MSA is currently the 69th largest MSA in the United States. The combined population of the 14-county area served by The Blade is approximately 1,280,000. Toledo’s major non-governmental employers include ProMedica Health Systems, Mercy Health Partners, Daimler-Chrysler, Bowling Green State University, The University of Toledo, General Motors, and the Medical College of Ohio. Other significant Toledo-based companies include Dana Corporation, Owens-Illinois, HCR ManorCare and Pilkington Glass.

      The following table sets forth certain circulation, advertising lineage and operating revenue information for The Blade for the past three years:

      The Blade concentrates on local and regional news of northwest Ohio, and extensive coverage of state government. It has 149 full-time and 15 part-time editors, reporters and photographers on its staff. It draws upon the news reporting facilities of the major wire services and, with the Post-Gazette, maintains a three-person bureau in Washington, D.C. The Blade also maintains a news bureau in Columbus, Ohio, the state capital, and three local news offices in the Toledo metropolitan area.

      The Blade publishes and distributes all of its newspapers from its printing facility in downtown Toledo to eight distribution centers throughout the metropolitan Toledo area. Sophisticated computer systems are used for writing, editing, composing and producing each edition. The Blade has three color flexo presses, each with nine press units, which produce state-of-the-art color, and clean, clear images. Daily and Sunday inserts are assembled at a downtown facility near The Blade’s main production plant.

      The Blade is distributed primarily through independent home delivery carriers and single-copy dealers. Home delivery accounted for approximately 80% of circulation for the daily editions and approximately 74% of circulation for the Sunday edition during 2004. The newsstand price is $0.50 for the daily paper and $1.50 for the Sunday edition. Annual subscription rates are $143.00 for daily and Sunday, $83.20 for Sunday only and $74.88 for daily only.

      Substantially all of our advertising revenues are derived from local, national, and classified advertisers. Advertising rates and rate structures vary between our newspapers and are based, among other things, on advertising effectiveness, local market conditions, circulation, readership and type of advertising (whether classified, national or retail). Our advertising revenues are not reliant upon any one company or industry, but rather are supported by a variety of companies and industries, including department stores, realtors, car dealerships, grocery stores and other local businesses. Our largest single advertiser accounted for 3.5% of our publishing segment’s total net advertising revenues in 2004.

      The contributions of retail, classified and national advertising to third-party advertising revenues for the past three years were as follows:

      The Post-Gazette’s Internet Web site, post-gazette.com, reaches over 2.1 million unique users per month with over 26 million page views. The Blade’s Internet Web site, toledoblade.com, reaches over 430,000 unique users per month with over 3.8 million page views. Each site contains breaking news, summaries of articles from the print editions, information produced specifically for the Web site and portions of the classified advertising from the print editions. The Web sites contribute to our revenues by expanding our classified marketplace and providing new partnership and advertising opportunities for retailers.

      We face competition for advertising revenue from television, cable, radio, the Internet and direct-mail programs, as well as competition for both advertising and circulation from suburban neighborhood, local and national newspapers and other publications. In addition, we face competition from outlying county daily newspapers. One of the outlying county newspapers in the Pittsburgh area, the Greensburg Tribune Review of Westmoreland County, competes with us with an Allegheny County edition called the Pittsburgh Tribune Review. Competition for advertising is based on circulation levels, readership demographics, advertising rates and advertiser results. Competition for circulation is generally based upon content, journalistic quality and price.

      Newsprint and ink are our newspaper publishing segment’s largest expense after labor costs and accounted for $32.7 million, or 12.7%, of the segment’s operating expenses in 2004. During 2004, we used approximately 59,400 metric tons of newsprint in our production processes at an estimated total cost for newsprint of approximately $30.6 million, based on a weighted-average price per ton of $514.96. In the last three years, our weighted average cost per ton of newsprint has varied from a low of $443 per metric ton in 2002 to a high of $515 per metric ton in 2004.

      All of our newsprint is supplied under a long-term sole-supplier contract expiring at the end of 2006. Pricing under the contract varies with market prices. The sole supplier contract provides for discounted pricing.

      In addition to maximizing layout efficiency and minimizing waste, The Blade and the Post-Gazette completed a page width reduction project during the third quarter of 2002 and the fourth quarter of 2004, respectively. We estimate the completion of both projects will reduce our estimated annual newsprint consumption by approximately 7%. If the Post-Gazette initiative had been completed by January 1, 2004, we would have realized savings of approximately $1.6 million in newsprint costs for the year ended December 31, 2004. Since the presses were converted gradually throughout 2004, actual savings approximated $735,000.

      Newspaper companies tend to follow a distinct and recurring seasonal pattern, with higher advertising revenues generally occurring in the second and fourth quarters of each year as a result of increased advertising activity during the Easter holiday and spring advertising season and during the Thanksgiving and Christmas periods. The first quarter is historically the weakest quarter for advertising revenues.

Television Broadcasting

      We acquired the first of our current television broadcasting stations in 1972, when we purchased WLIO in Lima, and currently own and operate four television stations. We are also a two-thirds owner of a fifth station, which is managed by LIN Television under a management services agreement. Our television stations are diverse in network affiliation with two Fox stations, one NBC station, one ABC station and one UPN station. We have a duopoly in Louisville, Kentucky (the 50th largest DMA) through our ownership of the Fox and UPN stations. In the year ended December 31, 2004, our television broadcasting operations generated revenues and operating income of $39.4 million and $3.1 million, respectively.

      We own the following broadcast properties:

      We seek to maintain a distinct identity at each of our stations by creating quality local programming, such as local news and sports coverage, and by actively sponsoring and promoting community events. This focus positions us to increase our share of local advertising revenues, which are generally more stable than national advertising revenues and which we impact directly through our own local sales force. We believe that with stronger revenue conditions and continued cost reduction efforts, along with effective local programming, we can increase operating margins.

      The following is a description of each of our stations and their markets. In the description, information concerning estimates of population, audience share and television households has been derived from November 2004 information and estimates provided by Nielsen, and, in the case of our Louisville stations, from information in the public domain, including information and estimates based on Nielsen ratings from 2002-2003. All other information is based on station estimates derived from local sources. In the description, the term “commercial station” means a television broadcasting station and does not include non-commercial television stations, cable program services or networks, or stations that do not meet the minimum Nielsen reporting standards and the term “audience share” means the audience share from 5:00 a.m. to 5:00 a.m. as reported in the Nielsen Media Research.

      Louisville, Kentucky is the 50th-largest DMA in the United States, with a population of approximately 1.5 million and approximately 638,000 television households. The average household income in the Louisville DMA is approximately $46,300. Total market revenues in the Louisville DMA in 2004 were approximately $102 million. Cable penetration in the market is estimated to be 63%. In March 2001, we acquired from Kentuckiana Broadcasting, the assets of WFTE, which we had previously operated under a local marketing agreement. Based on historic performance and our current knowledge of the Louisville market, we believe WDRB is fourth in the Louisville DMA in audience share and WFTE is fifth. There are five other commercial television stations, owned by Liberty Corporation, Cascade Broadcasting, Word Broadcasting, Belo Corp. and Hearst-Argyle TV, and three public television stations licensed within the Louisville DMA.

      Champaign-Springfield and Decatur, Illinois is the 82nd-largest DMA in the United States, with a population of approximately 954,300 and approximately 378,600 television households. The average household income in this DMA is approximately $43,000. Total market revenues for television in this DMA in 2004 were approximately $40.3 million. Cable penetration in the market is estimated to be 71%. In March 2000, we acquired a two-thirds interest in WAND from LIN Television. LIN continues to own a one-third interest in WAND and provides management services. For the November 2004 ratings period, WAND ranked third in its market with an audience share of 10%. There are five other commercial television stations, owned by Nexstar Broadcasting Group, Sinclair Broadcast Group, Acme Television and Bahakel Communications, and four public television stations licensed within the Champaign-Springfield and Decatur DMA.

      Boise, Idaho is the 122nd-largest DMA in the United States, with a population of approximately 600,000 and approximately 224,000 television households. The average household income in the Boise DMA is approximately $44,500. Total market revenues in the Boise DMA in 2004 were approximately $32 million. Cable penetration in the market is estimated to be 40%. For the November 2004 ratings period, KTRV ranked fourth in its market with an audience share of 6%. There are five other commercial television stations, owned by Fisher Broadcasting, Journal Broadcasting Group, Banks Broadcasting, Belo Corp., and Boise Telecasters, L. P., and one public television station licensed within the Boise DMA.

      Lima, Ohio is the 194th-largest DMA in the United States, with a population of approximately 143,000 and approximately 60,000 television households. The average household income in the Lima DMA is approximately $41,737. Total market revenues in the Lima DMA in 2004 were approximately $9.8 million. Cable penetration in the market is estimated to be 73%. For the November 2004 ratings period, WLIO ranked first in its market with an audience share of 29%. There are four other commercial television stations, a Fox, CBS, and a UPN low-power affiliate owned by TV 67, Inc., and a full-power Christian television station, WTLW-TV 44, licensed to American Christian Television Services.

      Television station revenues are primarily derived from local, regional and national advertising and, to a lesser extent, from commercial production activities. Advertising rates are based upon a variety of factors, including a program’s popularity among the viewers an advertiser wishes to attract, the number of advertisers competing for the available time, the population and demographic makeup of the market served by the station, the availability of alternative advertising media in the market area and the effectiveness of the station’s sales force. Rates are also determined by a station’s overall ratings and share in its market, as well as the station’s ratings and share among particular demographic groups which an advertiser may be targeting. Advertising revenues are positively affected by the size and strength of local economies, national and regional political election campaigns, and certain events such as the Olympic Games or the Super Bowl. Because television stations rely on advertising revenues, declines in advertising budgets, particularly in recessionary periods, adversely affect the revenues of television stations.

      All network-affiliated stations are required to carry spot advertising sold by their networks, which reduces the amount of advertising spots available for sale by our stations. Our stations can sell all of the remaining advertising to be inserted in network programming and all of the advertising in non-network programming excluding barter, retaining the revenues received from these sales. In 2004, approximately 95% of our broadcasting revenues came from the sale of time to national, local and regional, and political advertisers. Approximately 62% of our broadcast revenues came from local and regional advertising, 27% came from national advertising, 6% came from political advertising and our remaining revenues came from network compensation payments under our network affiliate agreements and miscellaneous sources. A national syndicated program distributor will often retain a portion of the available advertising time for programming it supplies in exchange for no fees or reduced fees charged to the stations for such programming. These arrangements are called barter programming.

      Local and Regional Sales. Local and regional advertising time is sold by each station’s local sales staff who call upon advertising agencies and local businesses, which typically include car dealerships, retail stores, fast food franchisers and restaurants. Compared to revenues from national advertising accounts, revenues from local advertising are generally more stable and more controllable. We seek to attract new advertisers to television, and to increase the amount of advertising time sold to existing local advertisers, by relying on experienced local sales forces with strong community ties, producing news and other programming with local advertising appeal and sponsoring or co-promoting local events and activities.

      National Sales. National advertising time is sold through national sales representative firms which call upon advertising agencies, whose clients typically include automobile manufacturers and dealer groups, telecommunications companies and national retailers (some of which may advertise locally).

      Whether or not a station is affiliated with one of the four major networks (NBC, ABC, CBS or Fox) has a significant impact on the composition of the station’s revenues, expenses and operations. Except for Fox, a major network affiliate receives a significant portion of its programming each day from the network. Our stations are affiliated with their networks pursuant to an affiliation agreement, with the exception of our Fox stations that are governed by affiliation agreements that remain unsigned. WDRB and KTRV are affiliated with Fox; WAND is affiliated with ABC; WLIO is affiliated with NBC; and WFTE is affiliated with UPN. Upon the expiration of WAND’s affiliation agreement with ABC in September 2005, we believe WAND will become a NBC affiliate.

      Our affiliation agreements provide the affiliated station with the right to broadcast programs transmitted by the network with which it is affiliated. In exchange, the network has the right to sell a substantial majority of the advertising time during these broadcasts. In addition, for each hour that the station elects to broadcast network programming, the network pays the station a fee (with the exception of Fox and UPN), specified in the affiliation agreement, which varies with the time of day. Typically, “prime-time” programming generates the highest compensation payments. Currently, however, our Fox affiliates are paying compensation to the network for the right to broadcast Fox programming. We expect the trend towards reverse compensation to impact our other affiliates in the future.

      Our ABC affiliation agreement for WAND expires on September 4, 2005. The NBC affiliation agreement for WLIO expires on December 31, 2010. Our UPN affiliation agreement for WFTE expires on January 12, 2008.

      The digital television, or DTV, transmission system delivers video and audio signals of higher quality (including high definition television) than the existing analog transmission system. DTV also has substantial capabilities for multiplexing (the broadcast of several programs concurrently) and possibly data transmissions. Digital television will require consumers to purchase new televisions that are capable of receiving and displaying DTV signals, or have a digital converter that can receive DTV signals and convert them into analog signals for display on existing receivers, or subscribe to cable which should continue to provide analog signals for many years. Many of the Federal Communications Commissions (FCC) deadlines relating to DTV may be determined by the public acceptance and the penetration of consumer sets to receive digital television, and are subject to FCC periodic review.

      In April 1998, the FCC assigned each licensed television station a second broadcast channel on which to provide DTV service. In general, the DTV channels assigned to television stations are intended to allow stations to have their DTV coverage area replicate their analog coverage area, although a number of variables will ultimately determine the extent to which a station’s DTV operation will provide such replication.

      By May 1, 2002, all commercial television station licensees were required to complete construction and commence operating DTV facilities except to the extent that the FCC extended the deadline and allowed temporary low power operations in certain cases. WAND and KTRV are operational at a full power level and have met all FCC requirements.

      In compliance with the FCC’s order, the three stations, WDRB, WFTE and WLIO, have constructed low power facilities and these stations are on the air operating under a Station Temporary Authorization, which permits low power operation. The low power construction complies with FCC rules and policies regarding digital television transmission build out and implementation.

      The FCC will periodically review the progress of the DTV rollout and establish a deadline mandating when low power systems must be upgraded to full power signals that provide digital coverage to a broadcaster’s entire analog coverage area. The FCC’s current mandates require WDRB to be upgraded to a full power signal by June 30, 2005, and WLIO and WFTE to be upgraded to full power signals by June 30, 2006.

      Once a station has begun broadcasting its DTV signal, it may continue to broadcast both its analog and DTV signals until December 31, 2009, after which, subject to certain conditions described below, the FCC expects to reclaim one of the channels and broadcasters will operate a single DTV channel allocation. This date may be advanced by congressional legislation. Starting April 1, 2003, commercial station operators must simulcast at least 50 percent of the video programming broadcast on their analog channel on their DTV channel. The required simulcast percentage increases annually until April 1, 2005, when an operator must simulcast 100 percent of its programming on its analog and DTV channels. The final retirement date on analog television will be another periodic review decision made by the FCC. At this mandated date the broadcaster must vacate one channel and return it to the FCC for further assignment or auction.

      Another aspect of digital implementation is that the networks are now providing program content in not only digital but in Digital High Definition format. Currently, WDRB, WAND and KTRV are providing High-Definition pass through. In order for our other stations to pass the High Definition programming to our viewers, we will have to upgrade our microwave and parts of our digital transmitters and add additional equipment to our studios to permit passage of this higher quality video programming. This is driven by the network contracts and public and business pressures.

      We estimate that approximately $4.4 million of capital expenditures after December 31, 2004 will be necessary to meet the DTV requirements discussed above for all of our stations.

      Television broadcasting stations face competition for advertising revenue, audience share and programming. Our competitive position depends, in part, on our signal coverage and assigned frequency and is materially affected by new and changing technologies, laws and regulations passed by Congress and federal agencies, including the FCC and the Federal Trade Commission, and other entertainment and communication industries.

      Our stations compete for advertising revenues with other television broadcasting stations in their respective markets and, to a lesser extent, with other advertising media such as radio stations, local cable systems, newspapers, magazines, outdoor advertising, yellow page directories, and direct mail operations serving the same market. We also indirectly compete with national television networks for national advertising.

      All television stations together compete for viewership, generally against other activities in which one could choose to engage rather than watch television. Individual stations compete for audience share with other stations on the basis of program popularity, which has a direct effect on advertising rates. A portion of our broadcast programming is supplied by the network affiliated with our station and during that time period, our ability to attract viewers is dependent on the performance of the network programming. During non-network time periods, we broadcast a combination of self-produced news, public affairs and other entertainment programming including syndicated programs. The development of new methods of video transmission, and in particular the growth of cable television and DBS, has significantly altered competition for audience share in the television industry by increasing the number of channels available to viewers. Home entertainment systems such as VCRs, DVRs, DVDs, and television game devices also compete for audience share. Future sources of competition include the transmission of video programming over broadband Internet and specialized “niche” programming targeted at very narrowly defined audiences.

      In acquiring programming to supplement network programming, network affiliates compete with other broadcasting stations in their markets. Competition for programming involves negotiating with national program distributors or syndicators that sell first-run and rerun packages of programming. Our stations compete for exclusive access to off-network reruns (such as “Friends”) and first-run products (such as “Jeopardy”) in their respective markets. Time Warner, Viacom and News Corp., each of which has a television network or cable broadcast stations, also own or control major production studios, which are the primary source of programming for the networks. It is uncertain whether in the future such programming, which is generally subject to short-term agreements between the studios and the networks, will be made available to broadcast stations not affiliated with the studio. Television broadcasters also compete for non-network programming unique to the markets they serve. As such, stations strive to provide exclusive news stories, unique features such as investigative reporting and coverage of community events, and to secure broadcast rights for regional and local sporting events.

      For more than a decade, our Louisville stations had the local broadcast rights for the University of Louisville football and men’s basketball games. Our rights expire after the 2004-2005 basketball season. These rights will not be renewed. In 2004, our Louisville stations reported net revenues and operating income related to the broadcast of University of Louisville events totaling $1.8 million and $624,000, respectively.

Other Operations

      Buckeye TeleSystem, Inc. is a competitive local exchange carrier which provides facilities-based business telephony primarily in the Toledo market serviced by Buckeye CableSystem. Our business telecom system offers services ranging from business voice lines to high bandwidth data lines to mid- to large-size businesses. Buckeye TeleSystem generated revenues and operating income of $17.7 million and $2.5 million, respectively, for the year ended December 31, 2004.

      Corporate Protection Services (CPS), based in Toledo, designs and installs residential security and fire alarm systems primarily in Toledo but also in other locations throughout the country. From its Toledo monitoring facility, CPS provides 24-hour monitoring services for security systems in Toledo and elsewhere. For the year ended December 31, 2004, CPS generated revenues and an operating loss from continuing operations of $2.4 million and $679,000, respectively. For the year ended December 31, 2003, the loss from discontinued operations of $956,000, before tax, includes revenues of $3.1 million, operating expenses of $3.7 million, and loss on disposal of assets of $333,000.

      Community Communication Services, Inc. (CCS) provided printing and door-to-door delivery of advertising circulars in the greater Toledo metropolitan area. For the year ended December 31, 2003, the loss from discontinued operations of $461,000 includes revenues of $151,000, operating expenses of $377,000, and a loss on disposal of assets of $236,000. CCS had no operating activity during 2004.

      During 2003, we reorganized various operations within the non-reportable other communications segment. Effective May 31, 2003, we suspended the operations of Community Communication Services, Inc. Effective December 31, 2003, we sold the net assets of certain divisions of Corporate Protection Services, Inc. and ceased operating those divisions. The disposed divisions were previously involved in the sale, installation, and testing of commercial security and fire protection systems. CPS will continue to provide sales, installation, and monitoring of residential security and fire protection systems. We feel the residential model compliments the residential services offered by our other companies. We do not expect this reorganization to have a material impact on our liquidity, financial condition, or continuing results of operations.

Regulation

      The cable television industry is regulated by the FCC, some state governments and substantially all local governments. In addition, various legislative and regulatory proposals under consideration from time to time by the Congress and various federal agencies have in the past, and may in the future, materially affect us and the cable television industry. The following is a summary of federal laws and regulations materially affecting the growth and operation of the cable television industry and a description of certain state and local laws. We believe that the regulation of the cable television industry remains a matter of interest to Congress, the FCC and other regulatory authorities. There can be no assurance as to what, if any, future actions such legislative and regulatory authorities may take or the effect thereof on us.

      The principal federal statute governing the cable television industry is the Communications Act of 1934, as amended. As it affects the cable television industry, the Communications Act has been significantly amended on three occasions: by the 1984 Cable Act, the 1992 Cable Act and the 1996 Telecom Act. The 1996 Telecom Act altered the regulatory structure governing the nation’s telecommunications providers. It removed barriers to competition in both the cable television market and the local telephone market. Among other things, it also reduced the scope of cable rate regulation.

      The FCC is the principal federal regulatory agency with jurisdiction over cable television. It has adopted regulations covering such areas as cross-ownership between cable television systems and other communications businesses, carriage of television broadcast programming, cable rates, consumer protection and customer service, leased access, indecent programming, programmer access to cable television systems, programming agreements, technical standards, consumer electronics equipment compatibility, ownership of home wiring, program exclusivity, equal employment opportunity, consumer education and lockbox enforcement, origination cablecasting and sponsorship identification, political programming and advertising, advertising during children’s programming, signal leakage and frequency use, maintenance of various records, and antenna structure notification, marking and lighting. The FCC has the authority to enforce these regulations through the imposition of substantial fines, the issuance of cease and desist orders and/or the imposition of other administrative sanctions, such as the revocation of FCC licenses needed to operate certain transmission facilities often used in connection with cable operations. A brief summary of certain of these federal regulations as adopted to date follows.

      Rate Regulation. Where a cable television system is not subject to effective competition, the rates for the basic service tier (the lowest level of cable programming service which must include local broadcast channels and public access channels) may be regulated by the local franchising authority at its option. Rates for cable programming service tiers, which generally include programming other than the channels carried on the basic service tier, and for programming offered on a per-channel or per-program basis, are not subject to governmental regulations. If local franchising authorities choose to regulate basic service rates, they may order reductions and, in certain circumstances, refunds of existing monthly rates and charges for associated equipment. In carrying out their rate regulatory authority, however, local officials are subject to certain FCC standards such as the obligation to evaluate rates in accordance with FCC approved benchmark formulas or cost-of-service showings. Future rates of regulated cable systems may not exceed an inflation-indexed amount, plus increases in certain costs beyond the cable operator’s control, such as taxes, franchise fees and increased programming costs. Cost-based adjustments to these capped rates also can be made in the event a cable television operator adds or deletes channels. There is also a streamlined cost-of-service methodology available to justify a rate increase for “significant” system rebuilds or upgrades. With the exception of one franchise covering 59 cable subscribers, we are currently not being regulated for basic services, installation and equipment rates in any of our franchise areas.

      A rulemaking proceeding has been pending at the FCC since June 2002, in which the FCC is examining many issues related to its cable rate regulation rules and considering whether any existing regulations should be eliminated or revised in an attempt to streamline the regulatory process while still providing protection to consumers. We are unable to predict the outcome of this proceeding or its effects upon our business.

      Existing regulations require cable television systems to permit customers to purchase video programming on a per channel or a per program basis without the necessity of subscribing to any tier of service, other than the basic service tier.

      Carriage of Television Broadcasting Signals. The 1992 Cable Act contains signal carriage requirements which allow full-power commercial television broadcasting stations that are “local” to a cable television system (i.e., the system is located in the station’s designated market area) to elect every three years whether to require the cable television system to carry the station, subject to certain exceptions, or whether the cable television system will have to negotiate for “retransmission consent” to carry the station. The next election between must-carry and retransmission consent will occur October 1, 2005. A cable television system is generally required to devote up to one-third of its activated channel capacity for the carriage of local commercial television stations whether pursuant to the mandatory carriage requirements or retransmission consent requirements of the 1992 Cable Act. Local non-commercial television stations are also given mandatory carriage rights, subject to certain exceptions, on cable systems with the principal head-end located within the larger of: (i) a 50-mile radius from the station’s city of license or (ii) the station’s Grade B contour (a measure of signal strength). Unlike commercial stations, noncommercial stations are not given the option to negotiate retransmission consent for the carriage of their signal. In addition, cable television systems have to obtain retransmission consent for the carriage of all “distant” commercial broadcast stations, except for certain “superstations” (i.e., commercial satellite-delivered independent stations such as WGN). To date, compliance with the “retransmission consent” and “must carry” provisions of the 1992 Cable Act has not had a material effect on us, although this result may change in the future depending on such factors as market conditions, channel capacity and similar matters when such arrangements are renegotiated. In February 2005, the FCC reaffirmed its January 2001 decision that its must-carry rules do not apply to digital signals while analog signals that are subject to must-carry are still being broadcast, and broadcasters do not have mandatory must-carry rights for their digital signals.

      Renewal of Franchises and Franchise Fees. The 1984 Cable Act established renewal procedures and criteria designed to protect incumbent franchisees against arbitrary denials of renewal. While these formal procedures are not mandatory unless timely invoked by either the cable television operator or the franchising authority, they can provide substantial protection to incumbent franchisees. Even after the formal renewal procedures are invoked, franchising authorities and cable television operators remain free to negotiate a renewal outside the formal process. Nevertheless, renewal is by no means assured, as the franchisee must meet certain statutory standards. Even if a franchise is renewed, a franchising authority may impose new and more onerous requirements such as upgrading cable-related facilities and equipment and complying with voluntary commitments, although the municipality must take into account the cost of meeting such requirements. In the case of franchises in effect prior to the effective date of the 1984 Cable Act, franchising authorities may enforce requirements contained in the franchise relating to facilities, equipment and services, whether or not cable-related. The 1984 Cable Act, under certain limited circumstances, permits a cable operator to obtain modifications of franchise obligations. Franchises have generally been renewed for cable television operators that have provided satisfactory services and have complied with the terms of their franchises. Franchising authorities may also consider the “level” of programming service provided by a cable television operator in deciding whether to renew. For alleged franchise violations occurring after December 29, 1984, franchising authorities have the right to deny renewal because of an operator’s failure to substantially comply with the material terms of the franchise even if the franchising authority has “effectively acquiesced” to such past violations. The franchising authority is, however, precluded from denying renewal unless the franchising authority has provided the cable operator with notice and the opportunity to cure, or in any case in which it is documented that the franchising authority has waived its right to object, or in which the cable operator gives written notice of a failure or inability to cure and the franchising authority fails to object within a reasonable time. Courts may not reverse a denial of renewal based on procedural violations found to be “harmless error.” Historically, we have not experienced any material problems renewing our franchises for our cable television systems. We are not aware of any current or past material failure on our part to comply with our franchise agreements. We believe that we have generally complied with the terms of our franchises and have provided quality levels of service.

      Franchising authorities may generally impose franchise fees of up to 5% of a cable television system’s annual gross revenues, excluding revenues derived from telecommunications services. In addition, state and local governments may also be able to exact some compensation for the use of public rights-of-way. In March 2002, the FCC ruled that cable modem service, which provides high-speed access to the Internet, is not a cable television service. Since that initial ruling, the question of whether cable companies are legally authorized to collect franchise fees on cable-modem service and pass those fees on to local governments has been widely debated and has become the subject of litigation. Like virtually every other cable company in the country, we have stopped collecting these fees.

      Channel Set-Asides. The 1984 Cable Act permits local franchising authorities to require cable television operators to set aside certain television channels for public, educational and governmental access programming. The 1984 Cable Act further requires cable television systems with thirty-six or more activated channels to designate a portion of their channel capacity for commercial leased access by unaffiliated third parties to provide programming that may compete with services offered by the cable television operator. The 1992 Cable Act requires leased access rates to be set according to a formula determined by the FCC.

      Copyright Matters. Cable systems must obtain copyright licenses for programming and television signals they carry. Copyright authority for programming on non-broadcast networks typically is obtained from the networks in question, and copyright authority for programming originated locally by the cable system must be obtained directly from copyright holders. The Copyright Act provides a blanket license for copyrighted material on television stations whose signals a cable system retransmits. Cable operators can obtain this license by filing semi-annual reports and paying a percentage of their revenues as a royalty fee to the U.S. Copyright Office, which then distributes the royalty pool to copyright holders. For larger cable systems, these payments vary with the numbers and type of distant television stations the system carries. From time to time, Congress considers proposals to alter the blanket copyright license, some of which could make the license more costly.

      Pole Attachments. The Communications Act requires the FCC to regulate the rates, terms and conditions imposed by public utilities for use of utility poles and conduit space unless state authorities have certified to the FCC that they adequately regulate pole attachment rates, as is the case in Ohio and Michigan where the Company’s cable systems operate. In the absence of state certification, the FCC regulates pole attachment rates, terms and conditions only in response to a formal complaint. Where states such as Ohio and Michigan regulate pole attachments, they generally do so by following the FCC’s substantive rules. The Communications Act also requires that a utility provide cable systems and telecommunications carriers with nondiscriminatory access to any pole, conduit or right-of-way controlled by the utility.

      The FCC’s pole attachment rate formulas govern the maximum rate certain utilities may charge cable operators and telecommunications carriers for attachments to the utility’s poles and conduits. Effective February 2001, a formula now governs the maximum attachment rate for companies providing telecommunications services, including cable operators, which results in a higher maximum attachment rate for telecommunications services compared to cable services. The increase in attachment rates applicable to telecommunications services resulting from the FCC’s new rate formula will be phased in over a five-year period.

      In early 2002, the U.S. Supreme Court affirmed that the FCC’s authority to regulate rates for attachments to utility poles extended to attachments by cable operators and telecommunications carriers that are used to provide Internet service or wireless telecommunication service. This development protects cable television operators that also provide Internet access services from facing more onerous rates, terms and conditions imposed by utilities for pole attachments. But the FCC has also initiated a proceeding to determine whether it should adjust certain elements of the current rate formula. If adopted, these adjustments could increase rates for pole attachments and conduit space.

      A series of federal appellate decisions on the FCC’s rate formulas and policies have provided more certainty and clarity for cable operators as they negotiate with utility companies.

      Local Television/ Cable Cross-Ownership Rule. In February 2002, the Court of Appeals for the District of Columbia Circuit vacated the FCC’s rule prohibiting any cable television system (including all parties under common control) from carrying the signal of any television broadcasting station that has a predicted service area that overlaps, in whole or in part, the cable system’s service area, if the cable system (or any of its attributable principals) has an attributable interest in the television station. On remand, the FCC eliminated the rule.

      Local Exchange Carriers/ Cable Television Cross-Ownership. The 1996 Act generally restricts local exchange carriers and cable operators from holding more than a 10% financial interest or any management interest in the other’s operations within their service area or from entering joint ventures or partnerships with cable operators in the same market. These “buy-out” restrictions are subject to four general exceptions, which include population density and competitive market tests. The FCC may waive the buyout restrictions if it determines that:

      General Ownership Limitations. The Communications Act generally prohibits the Company from owning and/or operating a Satellite Master Antenna Television System (SMATV) or a wireless cable system in any area where the Company provides franchised cable service. However, the cable/SMATV and the cable/wireless cable cross-ownership rules are inapplicable in any franchise area where the operator faces “effective competition,” or where the cable operator owned the SMATV system prior to the 1992 Cable Act. In addition, the FCC’s rules permit a cable operator to offer service through SMATV systems in the operator’s existing franchise area so long as the service is offered according to the terms and conditions of the cable operator’s local franchise agreement.

      Other Statutory Provisions. One of the underlying competitive policy goals of the 1992 Cable Act is to limit the ability of vertically integrated program suppliers to favor affiliated cable operators over unaffiliated program distributors. Consequently, with certain limitations, federal law generally:

      The Communications Act requires cable operators, upon the request of a subscriber, to scramble or otherwise fully block any adult channel the subscriber does not wish to receive. The Communications Act also contains restrictions on the transmission by cable operators of obscene or indecent programming. A three-judge federal district court determined that certain statutory restrictions regarding channels primarily dedicated to sexually oriented programming were unconstitutional, and the United States Supreme Court recently affirmed the lower court’s ruling.

      The Communications Act and the FCC’s rules also include provisions concerning, among other things:

      Inside Wiring Regulations. The FCC adopted cable inside wiring rules to provide specific procedures for the disposition of residential home wiring and internal building wiring where a subscriber terminates service or where an incumbent cable operator is forced by a building owner to terminate service in a multiple dwelling unit (MDU) building. These rules are intended to facilitate competition. Unless operators retain rights under state statutory or common law to maintain ownership rights in the wiring, MDU owners could use these new rules to pressure cable operators without MDU service contracts to either sell, abandon or remove internal wiring carrying voice as well as video communications and to terminate service to MDU subscribers.

      Consumer Equipment. The FCC adopted regulations to implement provisions of the 1992 Cable Act regarding compatibility between cable systems and consumer electronics equipment. The 1996 Act directed the FCC to establish only minimal standards regarding compatibility between television sets, video cassette recorders and cable systems. Pursuant to this statutory mandate, the FCC adopted rules to assure the competitive availability of customer premises equipment, such as set-top converters or other navigation devices, which are used to access services offered by cable systems and other multichannel video programming distributors. The FCC’s rules allow consumers to attach compatible equipment to the Company’s cable facilities, so long as the equipment does not harm the Company’s network, does not interfere with the services purchased by other subscribers and is not used to receive unauthorized services. Effective July 1, 2000, cable operators were required to separate security from non-security functions in subscriber premises equipment by making available modular security components that would function in set-top units purchased or leased from retail outlets. The requirement to separate security and non-security functions is inapplicable to equipment that uses only an analog conditional access mechanism and that is incapable of providing access to any digital transmission or other digital service. Effective July 1, 2006, the Company will be prohibited from selling or leasing new navigation devices or converter boxes that integrate both security and non-security functions. The Company, however, will not be required to discontinue the leasing of older converters that include integrated security functions if those converters were provided to subscribers before July 1, 2006.

      The FCC has also issued an order preempting state, local and private restrictions on over-the-air reception antennas placed on rental properties in areas where a tenant has exclusive use of the property, such as balconies or patios. But tenants may not install such antennas on the common areas of multiple-dwelling units, such as on roofs. This order limits the extent to which multiple-dwelling unit owners can enforce certain aspects of multiple-dwelling unit agreements that otherwise would prohibit, for example, placement of direct broadcast satellite television-receiving antennas in multiple-dwelling unit areas, such as apartment balconies or patios, under the exclusive occupancy of the tenant.

      Federal statutes and regulations impose a number of restrictions on the manner in which cable-television operators can collect and disclose data about individual customers. The 1984 Cable Act requires that the system operator periodically provide all customers with written information about its policies regarding the collection and handling of data about customers, their privacy rights under federal law, and their enforcement rights. If a cable television operator was found to have violated these requirements, it could be required to pay damages, attorney fees, and other costs. The 1992 Cable Act strengthened certain of these requirements, and others were modified by the Electronic Communications Privacy Act of 2001. We believe we are in compliance with all applicable federal statutes and regulations regarding customer privacy.

      Cable television systems generally are operated pursuant to nonexclusive franchises, permits or licenses granted by a municipality or other state or local government entity. The terms and conditions of franchises vary materially from jurisdiction to jurisdiction. Franchises generally contain provisions governing fees to be paid to the franchising authority, length of the franchise term, renewal, sale or transfer of the franchise, territory of the franchise, design and technical performance of the system, use and occupancy of public streets and number and types of cable television services provided. The 1992 Cable Act prohibits exclusive franchises and allows franchising authorities to regulate customer service and rates. States and local franchising authorities may adopt certain restrictions on cable television systems ownership.

      Franchising authorities in Michigan may operate their own multichannel video distribution system without a franchise. Ohio recently enacted legislation placing many of the same restrictions on municipalities that private cable systems operate under. The Ohio law includes provisions outlining equal franchise agreements, restrictions on selling cable TV outside the municipality, advance notice of building a municipal cable system, full cost accounting language and establishment of an arbitration process for private sector/governmental cable disputes.

      The foregoing summarizes the material cable television industry regulations with which we must comply. However, it does not purport to describe all present and proposed federal, state and local regulations and legislation relating to the cable television industry, some of which are subject to judicial and legislative review and change, and their impact on the cable television industry or us cannot be predicted at this time. In particular, the FCC is constantly considering and reconsidering, and often proposing to change, the entire body of regulations that apply to the cable television industry. The status of the FCC’s activity is therefore constantly fluid, and can be definitively determined at any moment only by reviewing the FCC’s own records. The content and timing of any regulatory action the FCC may take cannot be predicted.

      The following is a brief discussion of certain provisions of the Communications Act of 1934, as amended, and the FCC’s regulations and policies that affect the business operations of television broadcasting stations. For more information about the nature and extent of FCC regulation of television broadcasting stations you should refer to the Communications Act of 1934 and the FCC’s rules, public notices, and rulings. Over the years Congress and the FCC have added, amended and deleted statutory and regulatory requirements to which station owners are subject. Some of these changes have a minimal business impact, whereas others may significantly affect the business or operation of individual stations or the broadcast industry as a whole. The following discussion summarizes certain federal requirements concerning the television broadcast industry that currently are in effect.

      License Grant and Renewal. Television broadcasting licenses are granted for a maximum term of eight years and are subject to renewal upon application to the FCC. The FCC is required to grant an application for license renewal if during the preceding term the station served the public interest, the licensee did not commit any serious violations of the Communications Act or the FCC’s rules, and the licensee committed no other violations of the Communications Act or the FCC’s rules which, taken together, would constitute a pattern of abuse. The vast majority of renewal applications are routinely renewed under this standard. If a licensee fails to meet this standard, the FCC may still grant renewal on terms and conditions that it deems appropriate, including a monetary forfeiture or renewal for a term less than the normal eight-year period.

      During certain limited periods after a renewal application is filed, interested parties, including members of the public, may file petitions to deny a renewal application, to which the licensee/renewal applicant is entitled to respond. After reviewing the pleadings, if the FCC determines that there is a substantial and material question of fact whether grant of the renewal application would serve the public interest, the FCC is required to hold a trial-type hearing on the issues presented. If, after the hearing, the FCC determines that the renewal applicant has met the renewal standard, the FCC must grant the renewal application. If the licensee/renewal applicant fails to meet the renewal standard or show that there are mitigating factors entitling it to renewal subject to appropriate sanctions, the FCC can deny the renewal application. In the vast majority of cases where a petition to deny is filed against a renewal, the FCC ultimately grants the renewal without a hearing.

      No competing application for authority to operate a station and replace the incumbent licensee may be filed against a renewal application unless the FCC first determines that the incumbent licensee is not entitled to license renewal.

      In addition to considering rule violations in connection with a license renewal application, the FCC may sanction a station licensee at any time during the license term for failing to observe FCC rules and policies, including the imposition of a monetary forfeiture.

      The FCC prohibits the assignment or the transfer of control of a broadcasting license without prior FCC approval.

      The federal rules and regulations that govern broadcast ownership are currently the subject of intensive litigation. In June 2004, the Court of Appeals for the Third Circuit reversed and remanded to the FCC for further consideration a number of new regulations that the FCC had promulgated, finding that the FCC’s consideration of the issues had not been adequate. A number of parties have asked the United States Supreme Court to review the appellate-court’s decision. We cannot predict the outcome of litigation, or of the regulatory proceedings that are sure to follow.

      Ownership Attribution. FCC rules establish limits on the ownership of broadcast stations. The ownership limits apply only to attributable interests in a station licensee that are held by an individual, corporation, partnership or other entity. In the case of corporations, officers, directors and voting stock interests of five percent or more (twenty percent or more in the case of qualified investment companies, such as insurance companies and bank trust departments) are considered attributable interests. For partnerships, all general partners and non-insulated limited partners are attributable. Limited liability companies are treated the same as partnerships. Under its “equity/debt plus” rule, the FCC attributes otherwise non-attributable interests held by a party who also provides over fifteen percent of a station’s total weekly broadcast programming or who has an attributable interest in a radio station, television station, or daily newspaper in the same market. Subject to the equity/debt plus rule, a minority voting interest in a media property is not cognizable if there is a single holder of more than 50 percent of that media property’s outstanding voting stock. Finally, the FCC attributes (i.e., counts towards the local ownership limits) another in-market broadcast station to the licensee of a broadcast station who provides more than 15 percent of the other station’s weekly broadcast programming pursuant to a local marketing agreement or a time brokerage agreement.

      Local Ownership (Duopoly Rule). Prior to August 1999, no party could have attributable interests in two television stations if those stations had overlapping service areas (which generally meant one station per market), although the FCC did not attribute local marketing agreements involving a second station with an overlapping service area. In August 1999, the FCC adopted new rules which allowed the ownership of two stations in a single market (defined using Nielsen Media Research’s DMAs) if (1) the two stations do not have overlapping service areas, or (2) after the combination there are at least eight independently owned and operating full-power television stations and one of the commonly owned stations is not ranked among the top four stations in the DMA. The FCC will consider waivers of the rule to permit the ownership of a second market station in cases where the second station is failed, failing or unbuilt. The United States Court of Appeals rejected the FCC’s rules and remanded the matter to the FCC for further rulemaking. Several parties are seeking Supreme Court review of this decision. The old rules remain in effect.

      None of the markets in which we currently operate stations have the eight or more independently owned television stations that allow a person to own two stations in the market. We own two stations in the Louisville market under a permanent waiver granted by the FCC. Under the current FCC regulations, our duopoly in the Louisville market cannot be transferred intact without an additional waiver.

      National Ownership. There is no nationwide limit on the number of television stations that a party may own. But the FCC has maintained a rule that no party may have an attributable interest in television stations which, in the aggregate, reach more than 35% of all U.S. television households. In calculating the national audience reach, ownership of a VHF station is counted as reaching 100% of the households in such station’s market, and ownership of a UHF station is counted as 50% of the households in such station’s market. The stations we own have a combined national audience reach of approximately 1% of television households. In February 2002, the U.S. Court of Appeals for the District of Columbia Circuit determined that the FCC’s statutorily required biennial review of its national ownership rule had been arbitrary and capricious, and it, therefore, remanded the rule to the FCC for its further review and consideration. On remand, the FCC raised the aggregate limit to 45%. But Congress then acted, in January 2004 passing a statute that set the aggregate limit at 39%.

      Radio Television Cross-Ownership Rule. The “one-to-a-market” rule limits the common ownership or control of radio and television stations in the same market. In August 1999, the FCC amended its rules to increase the number of stations that may be commonly owned, subject to standards based on the number of independently owned media voices that would remain in the market after the combination. In markets with at least twenty independently owned media outlets, ownership of one television station and up to seven radio stations, or two television stations (if allowed under the television duopoly rule) and six radio stations is permitted. If the number of independently owned media outlets is fewer than twenty but greater than or equal to ten, ownership of one television station (or two if allowed) and four radio stations is permitted. In markets with fewer than ten independent media voices, ownership of one television station (or two if allowed) and one radio station is permitted. In calculating the number of independent media voices, the FCC includes all radio and television stations, independently owned cable systems (counted as one voice if cable is generally available in the market), and independently owned daily newspapers which have circulation that exceeds five percent of the households in the market. On June 2, 2003, the FCC slightly modified its rule. The Third Circuit remanded the matter to the FCC, and affected parties are seeking Supreme Court review. In the meantime, the old rules are in effect.

      Local Television/ Cable Cross-Ownership Rule. In February 2002, the Court of Appeals for the District of Columbia Circuit vacated the FCC’s rule prohibiting any cable television system (including all parties under common control) from carrying the signal of any television broadcasting station that has a predicted service area that overlaps, in whole or in part, the cable system’s service area, if the cable system (or any of its attributable principals) has an attributable interest in the television station. On remand, the FCC eliminated the rule.

      Local Television/ Newspaper Cross-Ownership Rule. In September 2001, the FCC launched a formal proceeding examining whether to retain, modify or eliminate the television/newspaper and radio/newspaper cross-interest rules prohibiting any party from having an attributable interest in a television station and a daily newspaper if the television station’s Grade A signal contour encompasses the entire community in which the newspaper is published. (A similar rule applies to radio/newspaper combinations.) In June 2003, the FCC substantially modified its rule to permit common ownership in most markets. The Third Circuit rejected the FCC’s rules and remanded the matter to the FCC. That decision has been appealed to the United States Supreme Court.

      Foreign Ownership Restrictions. The Communications Act restricts the ability of foreign entities or individuals to own or hold certain interests in broadcast licenses. As a holder of several broadcast licenses, we are restricted from having more than one-fourth of our stock owned or voted directly or indirectly by non-U.S. citizens or their representatives, foreign governments, representatives of foreign governments, or foreign corporations.

      Cable “Must-Carry” or Retransmission Consent Rights. Every three years, television broadcasters are required to make an election whether they choose to exercise their “must-carry” or retransmission consent rights in connection with the carriage of their analog signal on cable television systems within their DMA. The most recent election was made by October 1, 2002, and is effective for the three-year period beginning January 1, 2003.

      If a broadcaster chooses to exercise its must-carry rights, it may request cable system carriage on its over-the-air channel or another channel on which it was carried on the cable system as of a specified date. A cable system generally must carry the station’s signal in compliance with the station’s carriage request, and in a manner that makes the signal available to all cable subscribers. However, must-carry rights are not absolute, and whether a cable system is required to carry the station on its system, or in the specific manner requested, depends on a number of variables such as the number of activated channels of the cable system, the number of subscribers served by the cable system, the strength of the station’s signal at the cable system’s headend, the extent to which the station’s programming duplicates the programming of another station carried on the system, and other factors.

      If a broadcaster chooses to exercise its retransmission consent rights, a cable television system which is subject to that election may not carry the station’s signal without the broadcaster’s written consent. This generally requires the cable system and television station operator to negotiate the terms under which the television station will consent to the cable system’s carriage of the station. There is, however, a risk associated with a station electing to exercise its retransmission consent rights in that a cable operator may lawfully refuse to carry the broadcaster’s station on its cable system if the parties cannot agree to the terms of such carriage. Our stations generally have elected to exercise their retransmission consent rights and have entered into retransmission consent agreements with local cable operators.

      In February 2005, the FCC reaffirmed its January 2001 decision that its must-carry rules do not apply to digital signals while analog signals that are subject to must-carry are still being broadcast, and broadcasters do not have mandatory must-carry rights for their digital signals.

      Direct-to-Home Satellite Services and Must-Carry. In November 1999, Congress enacted the Satellite Home Viewer Improvement Act of 1999, or SHVIA. This statute authorizes providers of direct broadcast satellite services such as Direct TV and EchoStar to carry the signals of local television stations within such stations’ local markets (“local-into-local” service). In addition, SHVIA imposes must-carry requirements on satellite providers with respect to the markets in which they provide local-into-local service. Television stations in such markets may elect between must-carry and retransmission consent in a manner similar to that applicable in the cable context. In 2004, the law was extended by the Satellite Home Viewer Extension and Reauthorization Act of 2004.

      Under federal copyright law, satellite providers may retransmit the signal of an out-of-market broadcast network affiliate to “unserved” households. An “unserved” household is one that cannot receive, using a conventional outdoor rooftop antenna, a “Grade B” or better signal of a local television station affiliated with the same network as the out-of-market television station. Satellite providers generally are not permitted to import distant network signals to any subscribers other than those that qualify as “unserved” residential households.

      Network Affiliate Issues. FCC rules impose restrictions on network affiliation agreements. Among other things, such rules prohibit a television station from entering into any affiliation agreement that:

      The FCC is currently reviewing its rules governing the relationship between television broadcasting networks and their affiliates under a long-pending formal inquiry and a more recent petition filed by trade associations representing affiliates of some of the broadcast networks. We are unable to predict when and how the FCC will resolve these issues.

      Other Regulations Affecting Broadcast Stations. General. The Communications Act of 1934 requires broadcasters to serve “the public interest.” Since the late 1970s, the FCC gradually has relaxed or eliminated many of the more formalized procedures it had developed to promote the broadcast of certain types of programming responsive to the needs of a station’s community of license. However, television station licensees are still required to present programming that is responsive to community problems, needs and interests and to maintain certain records demonstrating such responsiveness. The FCC may consider complaints from viewers concerning programming when it evaluates a station’s license renewal application, although viewer complaints also may be filed and considered by the FCC at any time. There are other FCC rules and policies, and rules and policies of other federal agencies, that regulate matters such as the ability of stations to obtain exclusive rights to air syndicated programming, cable and satellite systems’ carriage of syndicated and network programming on distant stations, political advertising practices, application procedures and other areas affecting the business or operations of broadcast stations.

      Public Interest Programming. Broadcasters are required to air programming addressing the needs and interests of their communities of license, and to place quarterly “issues/programs lists” in their public inspection files reporting such programming.

      Children’s Television Programming. The Children’s Television Act of 1990 limits the permissible amount of commercial matter that may be broadcast during children’s programming, and it requires each television station to present “educational and informational” children’s programming. The FCC has adopted license renewal processing guidelines effectively requiring television stations to broadcast an average of three hours per week of children’s educational programming. The FCC has ruled that the essential children’s programming requirements will apply separately to each of the digital programming streams that a broadcaster distributes.

      Closed Captioning/ Video Description. The FCC has adopted rules requiring closed captioning of broadcast television programming. By January 1, 2006, subject to certain exceptions, television broadcasters must provide closed captioning for 100% of their programming.

      Television Violence. Under the 1996 Telecommunications Act, the television industry developed a voluntary program ratings system that the FCC subsequently approved. In addition, the 1996 Telecommunications Act requires that all television license renewal applications contain summaries of written comments and suggestions concerning violent programming that were received by the station during the license term.

      Decency. Several bills are pending in Congress that would increase the monetary penalties, and also make license forfeiture a possible penalty, for the broadcast of indecent material.

      Equal Employment Opportunity. In April 1998, the U.S. Court of Appeals for the D.C. Circuit concluded that certain affirmative action requirements of the FCC’s Equal Employment Opportunity (“EEO”) regulations were unconstitutional. The FCC responded to the court’s ruling in September 1998 by suspending certain reporting requirements and commencing a proceeding to consider new rules that would not be subject to the court’s constitutional objections. The FCC did not suspend its general prohibition on employment discrimination based on race, color, religion, national origin or sex. In January 2000, the FCC adopted new EEO rules, but the same court struck down these rules in January 2001. The FCC thereafter suspended its new rules. On November 20, 2002, the FCC issued its Second Report and Order and Third Notice of Proposed Rulemaking on the subject of EEO rules applicable to broadcasters, which is the FCC’s effort to craft constitutional rules in the aftermath of the January 2001 court ruling. The FCC’s new EEO rules became effective March 10, 2003. It is impossible to predict the effect of these Rules, or whether they will survive judicial challenge.

      Restrictions on Broadcast Advertising. The advertising of cigarettes on broadcast stations has been banned for many years. The broadcast advertising of smokeless tobacco products has more recently been banned by Congress. Certain Congressional committees have examined legislative proposals to prohibit or severely restrict the advertising of beer, wine, and liquor. We cannot predict whether any proposal will be enacted into law and, if so, what the final form of such law might be. The elimination or restriction of advertisements for beer and wine could have an adverse effect on our stations’ revenues and operating profits.

      Digital Television. The digital television, or DTV, transmission system delivers video and audio signals of higher quality (including high definition television) than the existing analog transmission system. DTV also has substantial capabilities for multiplexing (the broadcast of several programs concurrently) and data transmission. Digital television will require consumers to purchase new televisions that are capable of receiving and displaying DTV signals or adapters to receive DTV signals and convert them into analog signals for display on existing receivers.

      In April 1998, the FCC assigned each licensed television station a second broadcast channel on which to provide DTV service. In general, the DTV channels assigned to television stations are intended to allow stations to have their DTV coverage area replicate their analog coverage area, although a number of variables will ultimately determine the extent to which a station’s DTV operation will provide such replication.

      By May 1, 2002, all commercial television station licensees were required to complete construction and commence operating DTV facilities except to the extent that the FCC extended the deadline in certain cases. Our stations are in compliance with the deadlines applicable to them.

      We estimate that approximately $4.4 million of capital expenditures after December 31, 2004 will be necessary to meet the DTV requirements for all of our stations.

      Once a station begins broadcasting its DTV signal, it may broadcast both its analog and DTV signals until December 31, 2006, after which, subject to certain conditions described below, the FCC expects to reclaim one of the channels and broadcasters will operate a single DTV channel. Starting April 1, 2003, commercial station operators must simulcast at least 50 percent of the video programming broadcast on their analog channel on their DTV channel. The required simulcast percentage increases annually until April 1, 2005, when an operator must simulcast 100 percent of its programming on its analog and DTV channels.

      Channels now used for analog broadcasts range from 2 through 69. The FCC designated Channels 2 through 51 as the “core” channels which will be used for DTV broadcasts. However, because of the limited number of core DTV channels currently available, the FCC assigned many stations DTV channels above Channel 51 (Channels 52 through 69) for use during the transition period from simultaneous digital and analog transmission to DTV only operation. At the end of the transition period these stations will have to change their DTV operation to one of the DTV core channels. This has created three categories of television stations with respect to their analog and DTV channel assignments: (1) stations with both their analog and DTV channels within the “core” channels; (2) stations with either an analog or DTV channel inside the core and the other outside the core; and (3) stations with both their analog and DTV channels outside the core. All of our stations currently fall within the first or second group; none of our stations have both analog and DTV channels outside the core. Stations with both their analog and DTV channels inside the core will be required to select which of the two channels they will use for permanent DTV operation at the end of the transition period. The FCC has not yet established the permanent DTV channel selection process for stations (including one of our stations) that fall into the second group.

      The Communications Act provides that under certain conditions the DTV transition period may be extended beyond December 31, 2006. The transition is to be extended in any market in which one of the following conditions is met: (1) a station licensed to one of the four largest networks (ABC, CBS, NBC and Fox) is not broadcasting a digital signal and that station has qualified for an extension of the FCC’s DTV construction deadline; (2) digital-to-analog converter technology is not generally available in the market; or (3) fifteen percent or more of the television households in the market do not subscribe to a multichannel video programming distributor (cable, direct broadcast satellite) that carries the digital channel of each of the television stations in the market broadcasting a DTV channel, and do not have at least one television receiver capable of receiving DTV broadcasts or an analog television receiver equipped with a digital-to-analog converter capable of receiving DTV broadcasts. We cannot predict whether the DTV transition period will be extended in any of our markets.

      Television stations that are broadcasting both analog and DTV signals may continue to elect either must-carry status or retransmission consent for their analog signals, but they may only choose retransmission consent for their digital signals. A television station may assert must-carry rights for its DTV signal if it only operates a DTV signal or if it returns its analog channel to the FCC and converts to DTV operations only.

      The exercise of must-carry rights by a television station for its DTV signal applies only to a single programming stream and other program-related content. If a television station is concurrently broadcasting more than one program stream on its DTV signal, it may select which program stream is subject to its must-carry election. Cable systems are not required to carry Internet, e-commerce or other ancillary services provided over DTV signals if those services are not related to the station’s primary video programming carried on the cable system. The same DTV carriage rules are generally applicable to satellite providers with respect to markets in which they provide local-into-local service.

      Television station operators may use their DTV signals to provide ancillary services, such as computer software distribution, Internet, interactive materials, e-commerce, paging services, audio signals, subscription video, or data transmission services. To the extent a station provides such ancillary services, it is subject to the same regulations as are applicable to other analogous services under the FCC’s rules and policies. Commercial television stations also are required to pay the FCC five percent of the gross revenue derived from all ancillary services provided over their DTV signal for which the station received a fee in exchange for the service or received compensation from a third party in exchange for transmission of material from that third party, not including commercial advertisements used to support broadcasting.

      Proposed Legislation and Regulations. Congress and the FCC currently have under consideration, and may in the future adopt, new laws, regulations and policies regarding a wide variety of matters that could affect, directly or indirectly, the operation and ownership of our stations. In addition to the changes proposed and noted above, other matters that could affect our broadcast properties include technological innovations affecting the mass communications industry such as spectrum allocation matters (including assignment by the FCC of channels for additional television stations), low power television stations, and multichannel video program service providers (including cable television, direct broadcast satellite and wireless cable systems).

      The foregoing summarizes the material television broadcasting industry regulations with which we must comply. However, it does not purport to describe all present and proposed federal, state and local regulations and legislation relating to the television broadcast industry, some of which are subject to judicial and legislative review and change. The impact of any such development on the television broadcast industry or on us cannot be predicted at this time.

Employees

      As of December 31, 2004, we had approximately 3,000 full-time and part-time employees. Of these, approximately 463 were employed in cable television, 2,080 in newspaper publishing, 338 in television broadcasting and 121 in other operations and general corporate.

      Substantially all non-management employees of our newspapers are represented by various labor unions. The current labor agreements with the seven unions with a total of 13 bargaining units representing the employees of the Post-Gazette run through December 31, 2006. Four unions with a total of eight bargaining units represent the employees of The Blade under labor agreements that run through March 21, 2006. We believe that our relations with our newspaper employees are good.

      In addition to our newspaper employees, as of December 31, 2004, we had approximately 140 employees in our cable television and related companies who were represented by the Brotherhood of Teamsters under four separate collective bargaining agreements. Those four agreements expire, respectively, in January 2007, May 2007, October 2008, and October 2009. Our relations with each of these four units are harmonious. We believe that overall our employee relations are good.

Item 2. Properties

      Our principal executive offices are located at 541 N. Superior Street, Toledo, Ohio.

      The types of properties required to support cable television operations include offices, operations centers and hub sites where signals are received and distributed, and related warehouse space. The types of properties required to support newspaper publishing include offices, facilities for printing presses and production and storage, and depots for distribution. The types of properties required to support television broadcasting stations include offices, studios, transmitter sites and antenna sites. A station’s studios are generally housed with its offices. The transmitter sites and antennas are generally located in elevated areas to provide optimal signal strength and coverage.

      The following table sets forth certain information regarding our significant properties:

Cable Television

Publishing

Television Broadcasting

Miscellaneous

      Many of these properties are subject to liens securing our senior credit facilities.

Item 3.     Legal Proceedings

      In the ordinary course of our business, we are involved in a number of lawsuits and administrative proceedings. While uncertainties are inherent in the final outcome of these matters, management believes, after consultation with legal counsel, that the disposition of these proceedings should not have a material adverse effect on our financial position, results of operations or liquidity.

Item 4.     Submission of Matters to a Vote of Security Holders

      None.

PART II

Item 5.     Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

      Shares of our Class A and Voting and Non-voting Common Stock are owned 100% by members of the Block family and are not publicly traded. There are four holders of our Voting Common Stock, 29 holders of our Non-voting Common Stock and 11 holders of our Class A Stock.

      We declare and pay cash dividends on our Class A and Common Stock. During each of the years ended December 31, 2004 and 2003, we paid $75,000 and $1.1 million of dividends on Voting Common Stock and Non-voting Common Stock, respectively. We also paid $63,000 of dividends on Class A Stock in each of the years ended December 31, 2004 and 2003. The frequency and amount of dividend payments are determined by the Board of Directors and reviewed quarterly. The covenants within our senior credit facilities limit the amount of annual cash dividends to $2.0 million or 50% of excess cash flow, which ever is higher but not greater than $3.0 million per year. Our future dividend policy will be determined by the Board of Directors on the basis of various factors, including our results of operations, financial performance, and capital requirements.

      There were no repurchases of equity securities by the Company or any affiliated purchases during the fourth quarter of 2004.

Item 6.     Selected Financial Data

      The following table sets forth our financial data and other operating information. The financial data was derived from our consolidated financial statements. The financial data and other operating information that follows is qualified in its entirety by reference to, and should be read in conjunction with, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the financial statements and related notes included elsewhere in this Annual Report on Form 10-K.

BLOCK COMMUNICATIONS, INC. AND SUBSIDIARIES

SELECTED CONSOLIDATED FINANCIAL DATA