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By the Project for Excellence in Journalism

Analysts were divided over what direction TV stations’ revenues would take in 2005. Coming off a presidential election and Olympics the year before, a flat or slightly down year would be typical for the industry. That could be even more pronounced given that the 2004 election-year revenues had exceeded expectations, hitting record levels.

But there was something more ominous in the numbers as well. The data also show that news contributed less than before to station revenues — and that newsroom profitability in 2004 hit an all-time low.1

2005 Projections

Over all, the forecasts for 2005 were modest for what remains an enormously profitable industry, with its pre-tax margins of 40% and even 50%.

Veronis Suhler Stevenson, a market research firm that analyzes media, projected that total advertising revenue for local TV stations would rise just slightly, to approximately $26 billion, in 2005, up 1.6% from $25.6 billion the year before. Local advertising would make up $14.8 billion of the total, while national spot advertising would be approximately $11 billion. That would represent a 1.8% growth year to year for such national advertising, and slightly less, 1.4%, for local.2

TV Station Advertising Revenues
2003 – 2005, All Figures in Billions of Dollars

Year National Spot Local Spot Total
2005 (est.)

Source: Veronis Suhler Stevenson 2005-2009 Industry Forecast, p.232

Projections by the other major market research source for the industry, the Television Bureau of Advertising (TVB), however, were for a downturn. As of June 2005, TVB’s analysis of TNS Media Intelligence/CMR’s estimates for the top 100 markets indicated that local broadcast TV’s revenues were down 4.3% for the first quarter compared to the year before. By January 2006, TVB indicated that 2005 third-quarter local revenues were down by 11.7% compared to 2004. The drop was attributed to the fact that the core business growth that was supposed to counteract the lack of political advertising did not materialize. The biggest drop in advertising was in political spending, down by more than half from 2004.3

Still, the local TV business continued to be a lucrative one. To get a clearer sense of that, it is useful to break down the revenue sources of local television by looking at the last year for which complete data are available, 2004.

Revenue in 2004

The campaign and Olympic year of 2004 was a good one for local TV station revenue.

It grew by more than 9%, according to data from BIAfn of 756 local TV stations across the country, from approximately $23.5 million to $25.6 million. That was a big improvement over 2003, when station revenue declined year to year (by 1.7%) from $23.9 million to $23.5 million.4

Financially, big markets dominated. According to the BIA figures, the top 25 markets earned 60% of the total revenue of all markets.5

Advertising Revenues

The bulk of revenues that local stations generate come from advertising sales, so much so that this figure alone offers a good indicator of a station’s economic health. (Other components of station revenue include trade and barter, production and promotional revenues).6

The long-standing rule of thumb is that even-numbered years are better for the local TV business. This is known as the even-year feast, odd-year famine cycle. The rule is tied to the fact that inevitably, more spending occurs during the Olympics, political campaigns and (most lucrative of all) presidential election campaigns.7

Advertising revenue comes from two major sources for local TV stations: national and local spot advertising.

National spot advertising accounts for approximately 45% of local television revenues. Companies that want to advertise in many parts of the country, but not all, purchase such ads. Companies that want to reach, say, the New England and Gulf Coast regions need multiple-market advertising, but don’t need advertising on national networks. National spot advertising, then, helps advertisers reach the specific areas they want to reach, and is a cheaper option than the broadcast networks.

Local spot advertising is placed by companies that are in the same market as the station. As an example, local car-dealers or service professionals buy local spots targeted to their specific clientele (this could be as specific as one county). Local spots bring in about 55% of station revenues.

According to the latest figures, 2004 proved the even-year adage by bringing in a bounty of revenue for local stations.8 Advertising revenues (the sum of national and local spots) increased over all by 9% to $25.6 billion. Unprecedented political advertising, particularly in the congressional races, fueled the spike. The national spot market benefited most, growing 10% to $10.9 billion in 2004. The local spot market wasn’t far behind, boosted by automotive, financial and real estate advertising. It grew 8.5% to $14.6 billion.9 Veronis Suhler Stevenson had forecast (in 2004) national spot and local spot growth of 8.5% and 6.8%, respectively.10

Other market research agencies confirmed the pattern of growth and ebb in revenues. According to the Television Bureau of Advertising (TVB), local TV ad revenue grew by 12% in the top 100 markets in 2004. It put the figure at $18.3 billion (1% better than the bureau’s 10-11% forecast). Further, the bureau noted that all of the top 10 advertisers in local broadcast, nine of which were the major automotive companies, posted increases in 2004.11

TVB also released its forecast for the television industry’s next two years at its annual Forecast Conference in September 2005. According to its projections, total spot revenues would grow between 6.1% and 7.9% in 2006. Local spot was projected to grow between 2.9% and 5.1% and national spot by 10.5% to 11.7%.12 If growth matches the projections, it would be in line with the odd-even-year cycle of local advertising. But the fact that the projections are more modest than those for previous even years may be a cause of concern for the local market — especially with the added threat of local cable.

Local Cable Advertising

Traditionally, cable systems were confined to national advertising, but that has changed over the last few years. Factors such as consolidation of markets and new technology have enabled cable systems to carry the same advertisement on a group of systems at once.

And local cable advertising has been flourishing. According to the latest Veronis Suhler report, it grew at an annual compound rate of 10% from 1999 to 2004. For 2004 to 2009, it is projected to grow at a rate of almost 15%. By comparison, local spot ad revenue for local broadcast stations grew at a rate of 3% annually from 1999 to 2004 and is expected have an annual compound rate of growth of just 3.8% until 2009.1

Growth of Local Spot Advertising vs. Local Cable Advertising
2000 – 2008, Percentage Growth

Year Local Spot Local Cable
2008 (est.)

Source: Veronis Suhler Stevenson 2005-2009 Industry Forecast

One reason for the increased profitability of local cable is the growing number of “interconnects.” The term refers to linkages that multiple cable systems have formed to allow advertisers to air ads simultaneously across all participating systems in a TV market. Interconnects represent a challenge to local broadcast station revenue in part because they can offer rates that are a fraction of what individual stations charge; the cable systems make money by aggregating their revenues from ads on some 30 or 40 different channels.

The impact that the interconnects will have on local station economics will become clearer in 2006, but it is bound to become a more important consideration for local TV economics in the years to come.

Newsroom economics

While local stations made money in 2004, how much was the newsroom contributing to the growth? According to data, not as much as it used to. The latest results, such as those of the Radio-Television News Directors Association (RTNDA/BSU) survey, presented a cautious economic picture for local news in 2004.13

The survey found that the amount newsrooms contribute to total revenue saw roughly a three percentage-point decline in 2004. For the year, news accounted for 42.8% of station revenue, down from 46.1% the year before.14

Percentage of Station Revenue Produced by News
2002 – 2004, All Stations

Year Average Percentage

Source: RTNDA/Ball State University Surveys. Based on survey responses of news directors

According to the survey, news divisions in the top 25 markets contribute less of total revenue than those in smaller markets. That is slightly deceiving, however. Most of the difference might be coming from the independent stations in the top 25 markets that produce news, including Spanish-language stations. While there are no hard data to support that, it is worth considering that their contribution would be much smaller than that of the stations affiliated with the four top networks.

The most striking finding of the survey was that “news profitability” (i.e., newscasts that were making a profit) hit an all-time low in 2004. The report showed that the number of news directors reporting a profit fell by almost 14 percentage points from the previous year. Of the 1,223 stations that participated in the survey, only 44.5% of the news directors reported that they earned a profit. This was down from 58.4% from the year before.

Local TV News Profitability
All Stations, 1996 – 2004
Design Your Own Chart
Source: RTNDA/Ball State University Surveys
Based on survey responses of news directors

The percentage of profitable newsrooms began to decline after 1997, when two thirds of news directors said they were showing a profit. By 2001 and 2002, just over half were doing so. On the other hand, comparing 2004 with the last eight years, there’s been a jump of approximately 21% in the number of stations that say they are losing money. Indeed, the number of news directors reporting a loss in 2004 was the highest the survey has ever recorded, at 12.1% (the previous high was 11.2% in 2002).15

The differences in profitability between the network affiliates are striking. Over the last two years, the highest percentage of stations reporting a profit were those affiliated to the Fox Network. The percentage rose from 63% in 2003 to 67% in 2004. ABC affiliates, on the other hand, were the least likely to show a profit, down to 44.1% from 64.9% in 2003. ABC’s numbers seem to be a reflection of its poor performance during prime time (link to Network TV Audience). But the past two years have been a difficult time for local news in general, with a number of local newscasts being canceled because they failed to build a sufficient audience.16 The Sinclair Group, one of the largest TV station groups in the U.S., seemed to be getting out of the news business in 2005. It shut down news operations in Birmingham, Pittsburgh and Milwaukee, and there were reports that it might do the same in other cities.17

If we look at profitability by market size, the largest and the smallest markets seem to perform similarly, with a third of each reporting profits. The markets in the middle were more profitable. But again, independent stations and/or Spanish-language stations tend to be concentrated in the large populations centers. Separating their results from those of the four big networks’ affiliates would dramatically change the numbers. It could also account for the anomalous fact that the top 25 markets show a profit rate lower than the smaller markets.

Newsroom Profitability by Market Size
2003 vs. 2004, All Percentages

Reporting Profit
Breaking Even
Reporting Loss
Mkt 1-25
Mkt 26-50
Mkt 51-100
Mkt 101-150
Mkt 151+

Source: RTNDA/Ball State University Surveys. Based on survey responses of news directors


In the universe of newsroom profitability, the data show three worlds: The rich generally are those in the top 25 markets. The poor, although that term may be a relative one, are the bottom 151. And a lot of stations are in between. While the majority of news directors recorded profits, the middle-tier stations — markets 51-100 — were also showing greater losses that the previous year (6% to 11%), and those are numbers that emerged during the robust year of 2004.

The message here may be that newscasts that are on the fringes of viewership — the sixth, seventh or eighth-ranked local news stations in the largest markets and the fourth, fifth or sixth-ranked stations in medium markets — are in jeopardy.


1. Research data for this section were gathered from BIA Financial Network, the Television Bureau of Advertising and the Veronis Suhler Stevenson Communication Industry Forecast 2005-2009.

2. Veronis Suhler Stevenson, “Growth of TV advertising expenditures,” Veronis Suhler Stevenson Communication Industry Forecast 2005-2009, p. 234.

3. Television Bureau of Advertising, “Broadcast TV’s Ad Revenues Up 1.0% in 1st Quarter,” TVB Web site, June 10, 2005 . Also see Television Bureau of Advertising, “Minus Political Dollars, Local Broadcast TV Revenues Down 11.7% in 3rd Quarter,” TVB Web site, January 6, 2006.

4. The Project uses the BIAfn data to calculate estimated station revenue. Since there are hundreds of local TV stations in the U.S. , the report (like all previous annual reports) short-lists only those that actually have news directors (to see if they produce local news), are commercial and viable. Spanish-language stations are not included. Further, the exact tally of stations cannot be the same every year. Stations constantly change ownership and/or are shutting down, and news directors are not permanent features of local stations — they may be added or removed from the staff. This year, our analysis included 756 local stations.

5. BIAfn Media Access Pro Database, Station Revenues for 2004.

6. BIAfn TV industry Overview, 2005.

7. Indeed, election ad spending for 2004, estimated at $1.6 billion, accounted for 80% of the revenue increase in local TV stations. See the 2005 State of the News Media Annual Report for more information.

8. 2004 figures and 2005 estimates from the Veronis Suhler Stevenson Communication Industry Forecast, 2005-2009

9. Veronis Suhler Stevenson, “Growth of TV advertising expenditures,” Veronis Suhler Stevenson Communication Industry Forecast 2005-2009, p. 234.

10. Veronis Suhler Stevenson, “2004 industry forecast compared with actual growth,” Veronis Suhler Stevenson Communication Industry Forecast 2005-2009, p. 233.

11. Katy Bachman, “TVB: TV ad revenues grew by 12 percent in 2004”, Media Week Web site, March 17, 2005. Also see “TVB Forecasts Spot TV to Grow 6.1-7.9% in 2006,” TVB Web site, September 8, 2005.

12. Veronis Suhler Stevenson, “Growth of Television Advertising Expenditure,” Veronis Suhler Stevenson Communication Industry Forecast, 2005-2009, p. 234.

13. Every year the RTNDA, in conjunction with Ball State University (BSU), publishes a survey of news directors that looks at the economic trends at local stations. Conducted by Bob Papper, the survey is a good tool to analyze economic and investment trends in local newsrooms. It is released in RTNDA’s monthly magazine, Communicator.

14. Bob Papper, Ball State University , Personal Interview, February 5, 2006 . According to Papper, this trend differs by network affiliation. Fox affiliates get a smaller percentage of their revenues from news than ABC, CBS and NBC affiliates; and all other commercial stations get a fraction of their revenue from news compared to the network affiliates.

15. Bob Papper, “News Staffing and Probability Survey,” RTNDA Communicator, October 2005. Of the remaining news directors, 24.2% said they were breaking even while 19.2% did not answer/ did not know.

16. Stations like KVTV in Laredo, Tex., and KGWC in Casper, Wyo. shut down their news operations in 2005 citing poor ratings. It was the second time that both the news operations had been canceled. Both had been reinstated in 2004, but didn’t get enough viewers to sustain themselves. Associated Press, “Laredo TV Station drops newscast, staff,” Fort Worth Star Telegram, January 4, 2006; and Associated Press, “Casper Television Stations cancels evening news broadcast,” Billings (Mont.) Gazette, January 5, 2006.

17. Tim Cuprisin, “Channel 18’s 9 p.m. News Might Sign Off,” Milwaukee Journal Sentinel, January 16, 2006. Online:

18. Jonathon Berr, “Ad spending growth slows; web, cable, Spanish media doing best,” Orlando Sun-Sentinel, September 5, 2005.

19. BIA Financial Network, “BIA Financial Network Reports that Hispanic Television Stations Continue to Grow in Numbers and in Shares”, Press Release, June 16, 2005.

20. Allison Romano, “Special Report: Hispanic Television Summit ,” Multichannel News, October 17, 2005 . According to the U.S. Census Bureau, the national Hispanic population has grown from 35.6 million in 2000 to 41.3 million in 2005. That is five times faster than for non-Hispanics, and it is projected that by 2010, Hispanics will make up 15% of the total U.S. population.

21. Allison Romano, “Special Report: Hispanic Television Summit ,” Multichannel News, October 17, 2005.

22. Ibid. In 1992, 38% of Hispanics watched Spanish TV while 62% watched English-language networks. By mid-2005, however, the numbers watching Spanish TV grew to 55% and those watching English-language TV fell to 45%. Also, see “Media Consumption Study,” Hoy & TNS Market Development, October 11, 2005. Study showed that among Hispanics, Spanish remains the preferred language across media for obtaining news information.

23. Jay Sherman, “NBCU Puts up Four Stations for Sale ,” Television Week, January 9, 2006.

24. Ibid.

25. Spanish newscasts were introduced in cities like Orlando , Charlotte , N.C. , Salt Lake City , San Antonio , Phoenix , and Atlanta.

26. “Demand for Spanish language news content rising rapidly; Hispanic journalists and news stations registered on the NewsMarket jumps 250%,” PR News Wire, August 25, 2005.

27. John Eggerton, “DTV Bill Signed into Law,” Broadcasting & Cable, February 8, 2006 . HD Update, “Shut-Off Date Is (Finally) Official”, Broadcasting & Cable, February 9, 2006 .