|By the Project for Excellence in Journalism
Changes in Ownership
The ownership landscape for local TV news was stable in 2005 and is expected to remain so until the regulatory environment in Washington is clarified.
At the risk of restating the familiar, the Bush Administration took power in 2001 declaring its intention to relax the rules limiting how many stations a company could own, and perhaps eliminating the cross-ownership rules that prohibited companies from buying radio, TV and newspaper properties in the same city. But legal challenges and a political backlash against some of the actions of the former FCC chairman, Michael Powell, effectively froze the rules as they were. The TV industry, though, still appears poised for quick action if the rules change.
As a report by the market research firm BIAfn on the revenue for the top 10 station groups from 2000 to 2004 noted, “In order to grow revenues, many television groups have had to continue to expand into new markets or add stations in existing markets.”1
Who are the big names at the local television level? The biggest parent companies by revenue, in order, are Rupert Murdoch’s News Corp., NBC Universal, Viacom International Inc, Tribune Company and the ABC/Disney group.
Source: BIA Media Access Pro, August 2005
Some prominent names shook up the local television scene in 2005 and early 2006, as some companies split apart or left the business while others consolidated their assets.
One of the biggest names in U.S. television, CBS, saw the completion of its split with Viacom in 2005 and in early 2006 caught the industry by surprise by announcing a new network in partnership with Time Warner.
CBS/Viacom, an offshoot of Viacom International Inc., was the largest U.S. television network in terms of revenue.2 In June 2005, Viacom split its cable and broadcast divisions into two separate companies. Its broadcast networks retained the name CBS Corporation, while the cable operations were placed under the banner Viacom Inc. It now consists of CBS Television and UPN (broadcast television), the CBS Television Stations Group at the local level, and Showtime (cable television). It also has varied operations in other media businesses, including radio (CBS Radio), digital media (CBS Digital Media Group and CSTV) and theme parks (Paramount Parks). (See also Network Ownership).
The local television group consists of 39 stations, reaching 15 of the top 20 American television markets. The total comprises 21 owned-and-operated CBS stations, 15 UPN-affiliated stations, 1 WB station and 2 stations not affiliated with the major networks.3
The split cleared the way for Viacom to separate its high-growth assets, namely its cable networks and movie studio, from its more mature businesses, its broadcast-TV and radio stations. In other words, Viacom was seen to be splitting its booming business (cable entertainment) from the not-so-profitable (local and broadcast TV). Richard Greenfield, an analyst with the Wall Street firm Fulcrum Global Partners, believed that while “the split wasn’t a ’cure-all’ for the malaise affecting Viacom and the broader media sector” outside the Internet it would increase the company’s lagging stock value.4
With the split a reality, the CBS leadership was under pressure to show results from the broadcast portions — especially UPN, which has struggled not just to make money but was also to attract top talent. Time Warner’s WB network, although doing better than UPN, has also been struggling to find a niche for itself. In January 2006, CBS and Time Warner’s Warner Bros. Entertainment announced that they would be merging and dissolving the two networks to replace them with a new network called the “CW.”
The CW Television Network was announced as a fifty-fifty partnership between the two parents (Tribune Co., which owned a 22 percent stake in the WB, gave up its interest and would not have any stake in the new channel) to be launched in September 2006. Operations at the WB and UPN will shut down, with the new network relying on existing programming from both. The two companies will share equally in profits and costs of all future programming on the new network. They are hoping that a stronger program lineup and removal of a competitor will make the CW a more effective player in the local TV market.
The contraction of the two networks will likely shake up the local television scene. The biggest impact might be on Fox, which faces the prospect of losing valuable programming. It owns UPN affiliates in six of the top 10 markets, and in each the CW affiliation will go to the Tribune-owned WB stations. Fox reacted to the news by announcing the launch of its own broadcast network, “My Network TV’ in late February 2006.5
In the mid-size markets, the CW is still determining which owner the stations will affiliate with.6 While it’s too early to decide what impact the shift in affiliations will have on news operations, the new network will undoubtedly be an important factor in the local TV scenario of 2006.
On another front, Emmis Communications, a smaller local television company in the news, sold 13 of its 16 television channels by January 2006.7 Why did it leave the local TV business? Emmis had entered the field seven years ago, anticipating that cable operators would begin paying broadcast companies for the rights to local station signals, and that it would be able to pull together new content and sell it to digital subscribers as a low-cost alternative to cable TV. Neither event came to pass. Others attributed the sales to the company’s investors, who viewed its traditional radio businesses as a more attractive proposition than its television entities. Nevertheless, the revenue from the sales left analysts feeling good about the local television market as a whole. The company sold the first nine of its stations for $481 million over their book value.8
The sell-off wasn’t all good news for local news, however. The group sold the stations to the private equity firm Blackstone Group and, as part of the deal, stations were immediately notified about the employee cuts. On- and off-air employee layoffs and cutbacks were announced at stations in Oregon (KOIN 6), Kansas (KSNW TV) and Hawaii (KHON 2).
The FCC Regulations
The local television industry continued experience regulatory uncertainty in 2005. The media ownership issue was so divisive that the FCC shelved the issue for a long time; its members couldn’t even agree on a process to consider it (please see the 2005 Annual Report for a history of the ownership rules). In October 2005, it kicked off a much-delayed nationwide round of town hall meetings or with the general public on possible solutions to the issue, which it planned to follow up with the court-ordered review of its rules in early 2006.
Some of the delay can be attributed to the FCC. The FCC is governed by five commissioners, three from the president’s party and two from the opposition party. They are confirmed by the Senate for 5-year terms, and the president appoints one of them as the chairperson. Nowadays that means that on any bill, the Republicans have the advantage of a 3-2 vote. However, this majority has been missing for some time at the FCC.
Republican Kevin Martin, commissioner since 2001, moved up to succeed Michael Powell as chairman when Powell left the FCC in March 2005.9 The resulting vacancy left the FCC one member short — and thus split for most of the year with Martin and Kathleen Abernathy on the Republican side facing the Democrats Michael Copps and John Adelstein. The vacant Republican spot was not filled until November 2005, when Deborah Tate was nominated by the President. But Abernathy’s term expired the same month, perpetuating the split. In February 2006, attorney Robert McDowell was nominated to fill the GOP seat left vacant by Abernathy.
All the shuffling suggested that new ownership rules were to emerge before the 2006 ended, but it was also possible that Martin’s staff was already working on a plan behind the scenes that would be presented as a fait accompli as soon as all three Republican commissioners were aboard. The FCC is also expected to take up several hot-button issues, including indecency on broadcast television and advanced communications services.
The Sinclair Broadcast Group, which created a lot of publicity during the 2004 presidential campaign for its plan to air an anti-John Kerry documentary on its stations, became much less of a story in 2005. The group, among the 10 largest in local television, announced in October 2004 that it would show the documentary “Stolen Honor,” widely considered so controversial that advertisers were pulling ads and investors were complaining. Sinclair modified its plan, broadcasting instead a program about the documentary’s allegations. Activists had said they would challenge Sinclair’s station licenses as they come up for renewal before the FCC, but in 2005 at least, there were no media reports of any new developments. Sinclair made news in 2005 and early 2006 when it closed down three local news operations (with plans for more).
Fox Network: Expanding locally
Fox saw some significant developments at the local television level in 2005. At the end of the year, News Corp. owned 35 local stations in 26 markets across the U.S., reaching approximately 45% of the country. It owned both FOX and UPN affiliates in the top three media markets (New York, Los Angeles and Chicago) and other duopolies in six more of the top 20 markets.
In August 2005, Roger E. Ailes, chairman of the cable channel Fox News since its inception, was given the additional title of chairman of Fox Television Stations. His deputy at Fox News, Jack Abernathy, was earlier made CEO. Further, Shari Berg, a high-ranking Fox News executive, was promoted to a newly created job, senior vice president of news operations for Fox television stations. Berg also remained the head of news operations at the Fox News channel. In her dual role, she was expected to ensure collaboration and operational synergy between the cable news channel, the local news stations, and the larger Twentieth Century Television.
Those changes emphasize the focus News Corp. has on its U.S. news business, where it hopes to emulate the success of the cable channel in the local television market as well. Variety magazine noted that Ailes was grafting the Fox News cable channel’s style of operations onto the network of 35 local stations. More significantly, it was noted that “the centerpiece of Fox-under-Ailes will be expanded local news.”10 Abernathy was heard saying that he had plans to incorporate production values that are the hallmark of Fox News into the local news operations as well. He also hinted that talent deals could lead to the sharing of local and national personalities between the Fox News Channel and local stations. The first evidence of the policy emerged in January 2006, when two Fox News channel anchors shifted to the weekday local evening newscast on Fox-owned WNYW-TV, Channel 5. The station had been struggling to get an audience for its 6 p.m. newscast for a number of years, and the new team was designed to boost attention to the lineup.11
“We think the future of local stations is in news and information,” Abernathy explained. “We want to program the stations more like channels, which means having blocks of [compatible] programming that can supplement local news.” He pointed to the new syndicated Geraldo at Large with the Fox News Channel reporter Geraldo Rivera as a prime example of the kind of show that would provide strong lead-ins and bookends to local station news.12
The Fox News channel was also in the process of making itself into a network-style engine, and there were strong rumors that Fox News planned a daily national evening newscast (see Cable TV News Investment). Until now, the standard Fox model was network and local morning shows, similar to the big three networks, and a one-hour late newscast at 9 p.m. (central) and 10 p.m. (East and West Coast). The late Fox newscast did not compete with the 11 p.m. newscasts of the big three networks. That may change if Fox adopts the more traditional network model. Some press accounts speculated that Berg was put in a dual role in anticipation of her taking charge of the evening newscast. The idea of a Fox-branded national newscast has some appeal for local stations that have been looking at higher programming costs and the scarcity of new sitcoms to hit the syndication market.13
In December 2005, Fox launched its first local 11 p.m. newscast, in Tampa on WTVT, Channel 13. Local media noted that the show was stylistically very much like the cable channel, with slick production values and striking visuals. It is too early to assess the move, but it will bear watching to see how many local newscasts emerge and how audiences respond. The St. Petersburg Times TV critic Chase Squires differentiated the newscast from the main Fox cable channel’s as more “straightforward… even though it employs similar patriotic looking visuals.”14
Another area where Fox News may try to help their local stations gain share in their markets would be to improve its morning newscasts, which take on the more established “Today,” “Good Morning America” and “The Early Show.”
So while it is still early in the new Fox regime, one thing seems certain: given the impact Fox had on the cable scene, its interest in local stations is bound to change the landscape of local television news.15
3. CBS Corporation Company Profile, online at: http://www.cbscorporation.com/our_company/index.php
5. John M. Higgins, “The Battle for Fifth Place,” Broadcasting & Cable, February 27, 2006.
6. January 30, 2005 edition of Television Week; January 30, 2005 edition of Broadcasting & Cable; BIA Subscription News Commentary, “Upheaval in the Lineup of Local Television Stations,” BIAfn, January 25, 2006; See also Andrew Wallenstein & Kimberly Speight, “Syndie Biz Could Pop as Prime Slots Open,” Hollywood Reporter, January 25, 2006.
7. Emmis Communications Press Release, “Emmis Completes Sale of Four Additional Television stations,” Yahoo Finance Web site, January 27, 2006.
8. Geoff Dougherty, “Emmis Communications sells 9 TV stations for $ 681M,” The Chicago Tribune, August 23, 2005.
9. Paul Davidson, “Martin Known as Consensus Builder,” USA Today, October 30, 2005. In an agency that was sharply polarized under its previous chairman, Michael Powell, Martin managed to win a string of bipartisan 4-0 votes in 2005.
10. Michael Learmonth, “Jolly Roger’s Grand Plan,” Variety, October 16, 2005 .
11. “To Stop Drag, New Anchors,” New York Daily News, January 13, 2006 .
12. Katy Bachman, “Fox Buffs Up Local News,” Media Week, October 10, 2005 .
14. Chase Squires, “News at the Speed of Light,” St. Petersburg Times, December 14, 2005 .
15. Michael Learmonth, “Jolly Roger’s Grand Plan,” Variety, October 16, 2005 .