Send to Printer

Local TV

Introduction

By the Project for Excellence in Journalism

Local television stations usually can’t wait for presidential election years.

In normal times, they get a windfall from political advertising revenue. The Olympics are an added boost for stations affiliated with the network carrying the Games. And, typically, more stations are sold in the early months of such years, adding cash for the sellers. If the campaigns are interesting, news viewership might perk up, too.

Given the intensity of interest in the race, 2008 might have been an especially good year.

These, however, are not normal times.

The year just passed was a difficult one for local television and its newsrooms on almost every front.

The coming year looks even grimmer.

And not all of the problems can be chalked up to the weakening economy.

To begin with, viewership was flat or declined for most newscasts across all time slots.

Revenue projections kept being revised downward as the year went on and the final numbers were probably lower than in 2007, a non-election year. The local ad market was particularly hard hit, especially for cars, the industry’s biggest revenue source.  By some estimates, profit margins were cut in half.

In newsrooms, by the fourth quarter, cost cutting touched nearly everything and everyone, including some of the best known and most experienced on-air news people.
The delay in the switch to digital transmission from February 2009 to June added to financial strain; stations had to pay to keep analog equipment working and delay some digital upgrades. (See News Investment)

And looming, not at all far in the distance, is a potential shift in the relationship between networks and their affiliates that could effectively blow up the model of the local television business.

No, these are not normal times.

Audience

Introduction

By the Project for Excellence in Journalism

In 2008 local television remained the most popular source of news in America, but there were abundant signs of trouble.¹

An analysis of data from Nielsen Media Research suggests that viewership of local news declined or was flat across all timeslots, during all sweeps periods during the year.²

Evening newscasts, around the dinner hour, were hardest hit. 

And the declines were seen not only in news program aired by affiliates of the four largest networks (ABC, CBS, NBC and Fox), but by independent stations and those affiliated with smaller networks as well.All this only continues a long-term trend. In 1998, nearly two-thirds of the public (64%) told the Pew Research Center for the People & the Press that they regularly watched local television news. By 2008, that number had fallen to 52%.³

Traditionally, local television news audiences were difficult to track at a national level. Data from Nielsen Media Research are designed to help advertisers analyze stations by market, but not as group.

PEJ developed a method, using Nielsen data, to combine the numbers from individual stations into national averages by timeslot and to track the trends of those averages year to year. The data are analyzed for all the major news time slots and across all four sweeps periods — February, May, July and November.

For 2008, we analyzed not only stations affiliated with the four big networks, but also the fledgling broadcast networks CW and MyNetworkTV and stations unaffiliated with a network.⁴

Four Largest Networks’ Affiliates

Affiliates of the four major networks saw sharp audience declines in both evening and late-night news in 2008.  These ratings have declined every year PEJ has tracked them with Nielsen data, beginning in 2006.

The picture was less bleak for morning news, where ratings remained steady throughout the four sweeps months, although share declined. Evening news (around dinnertime) lost ratings in three out of four sweeps months, with declines as high as 11%.  In share they lost every month save one, when they broke even. 

In late news, after prime time, the numbers fell in all four sweeps periods.

Ratings are the percent of households watching a program at a given time among all households in the market. Share is the percent of households watching a particular program among only those households that have their televisions on. These two are the key metrics for audience in local television. Ratings give you a number for a program’s average audience. Share tells you the percentage of television viewers at that moment who are watching that program within a particular market, their market share.

The evening and late night newscasts are now roughly equal in audience size, a change from the time when the earlier programs were larger. Audiences in the morning are roughly half the size of those at night.

To understand the trends fully, it is useful to break the numbers down by timeslot.

Evening Newscasts

Changing lifestyles and shifting news habits have eroded the audience for the traditional evening and dinner hour news timeslot for years. The election year that captivated the country in 2008 offered no respite.

Local affiliate newscasts between 5 and 7 p.m., the so-called early evening timeslot, saw a drop in ratings and share in three of the four sweep months in 2008, according to our analysis.⁵

Year to year, ratings fell an average of 3.1% in February, 6.9% in July, and 11.4% in November. The lone exception was May, when ratings were up 3.6% from 2007.⁶

Despite the industry wide ratings declines for early evening newscasts, there were some signs of hope for early evening newscasts in 2008.

A study conducted by Nielsen Media Research and Broadcasting & Cable magazine found some stations had seen growth of up to 20% in ratings in November 2008 when compared to the same month the previous year.⁷ The study compared newscasts with ratings of at least 5 points in 56 metered markets.⁸

Among the big gainers were stations in Washington, D.C., Jacksonville, Fla., and Indianapolis.  

Wally Dean, the Broadcast/Online Director at Committee of Concerned Journalists and a consultant to this report, told PEJ that some stations have been able to boost ratings by investing in quality. “Though overall viewership is declining, it is still possible for an individual station to significantly improve its numbers,” Dean said.⁹

Average Early Evening News Ratings

Sweeps Months, 2005-2008

Design Your Own Chart

Source: Nielsen Media Research, used under license Note: Numbers represent ABC, CBS, Fox and NBC affiliates

The biggest declines came in November, even when interest remained high in news about the election and the economy. The loss in ratings that month was nearly triple that of February and May and double that of July, and share also fell.

According to analysts, there may be several elements at play. One may be the intense focus that cable gave to the election, which lured news viewers. Another is a disappointing fall entertainment lineup on the four networks.  Local news tends to get much of its audience from people staying tuned into that channel before and after their entertainment program. And yet another reason for the sharp decline may be continued impact from the writers strike, when audiences tried different programming.¹⁰

Late News

Late news, the programs that follow the end of the prime-time entertainment shows, also suffered, though not quite as much as earlier in the evening.¹¹

Late news ratings declined in every sweeps month, ranging from 3.1% in May to 8.6% in February.¹²

In share, double-digit losses occurred in every month but May, when share held steady. Even when people were tuning in late then, they were more likely than in 2007 to watching something other than local news. 

The steep February losses are at least partly attributed to the Writers Guild of America strike that stopped production of scripted television shows for 100 days from November 5, 2007, to February 12, 2008.

The strike resulted in little new entertainment programming on the broadcast networks preceding the late-night newscasts.

But the strike does not explain all of the decrease, which had been occurring in earlier years as well. The greatest loss in share occurred in November, again, a month of intense news watched by many Americans with the conclusion of the election and increasingly dire economic news. These sharp losses reinforce the findings in the evening hours that local television is continuing to lose out to both cable and the Internet.

Average Late Night News Ratings

Sweeps Months, 2005-2008

Design Your Own Chart

Source: Nielsen Media Research, used under license Note: Numbers represent ABC, CBS, Fox and NBC affiliates

Audience share lost more than 10 percent in three out of four sweeps months (the change in share in May was flat).

Early Morning

The closest thing to a bright spot in local news was early morning, although here, too, the bloom appears to be off the rose somewhat.

For early morning news (5 to 7 a.m.), the local programs that come on before the network morning shows at 7 a.m., audience figures for 2008 were flat or down.

Average Morning News Ratings

Sweeps Months, 2005-2008

Design Your Own Chart

Source: Nielsen Media Research, used under license Note: Numbers represent ABC, CBS, Fox and NBC affiliates

Ratings for all four sweeps months, February, May, July and November, were largely unchanged.

Share, meanwhile, fell (by 6%) in every sweeps period but February (when it was flat). This means that during the early morning hours, people have begun to watch other programming, possibly cable news.

Early morning had until recently been the lone growth area for many local stations around the country. In 2006, however, we found that even this had begun to suffer audience declines in both ratings and share during every sweep month. In 2007, the numbers were flat most of the year but rose in November. Thus 2008 represents a second year of basically stable ratings.

(A number of stations, particularly Fox affiliates, also extend their local morning news beyond 7 a.m., to 8 a.m. and even in some places to 9 a.m., forgoing the network morning programs.¹³ In 2008, these later morning programs saw ratings declines compared with 2007.)

Midday News

Noon broadcasts (noon to 1 p.m.) have become increasingly popular among audiences, and network affiliates continue to add these newscasts to their schedule. Ratings and share for the timeslot are somewhat more stable than others excluding morning news, which held steady from 2007.

When Fox developed a fourth network of local news affiliates around the country, it developed a strategy of airing news during what had been the last hour of prime time — 10 p.m. Eastern and Pacific time and 9 p.m. Mountain and Central.

In 2008, these prime-time newscasts also declined in viewership, a sign that the problem for news has more to do with than when local broadcast news is airing. The declines appeared both in the 9 p.m. slots in the middle of the country, and the 10 p.m. slot on the coasts. And the later hours suffered even more.

New Timeslots: Changing Schedules

Some local stations have been experimenting with shifting the time they air news around the dinner hour, offering newscasts an hour earlier or a half-hour later than the usual evening timeslot, in the hopes of catching more people. But in 2008 at least, this time shifting seemed to bring little success.

From 4 to 5 p.m., ratings declined an average of 6% in every month except November.
And for the 7-to-7:30 p.m. time-slot, when some local stations were adding newscasts to follow the national network news broadcasts, the loss was roughly three times that.¹⁴

Only about three dozen affiliate stations experimented with this time slot in 2008, and judging by the numbers, the path is not promising.

How widespread is the phenomenon of stations changing their schedules for news?

The evidence suggests that this trend was limited in 2008.

In 2007 PEJ analyzed data for stations affiliated with ABC, CBS, Fox and NBC networks in the top 25 designated market areas in the U.S. Findings indicated that under 25% of affiliated stations did some shifting of their news schedules, with the majority of changes coming in the morning hours.¹⁵

For 2008, PEJ expanded this analysis to include independent stations and those that are CW and MyNetworkTV affiliates to better assess schedule shifting in a broader universe of stations.¹⁶

In all, just 8 of the 168 stations studied (or just 5%) did some time shifting. The time changes occurred throughout the day, with three stations shifting morning programs, three shifting early evening programs and one each shifting midday and late news broadcasts.

Thus even in absolute numbers, fewer stations were found to have time-shifted news in 2008 in a larger universe of stations than in 2007 among just the four larger network affiliates. And losses in ratings and share during these alternative times may lead to even fewer changes in 2009, or possibly less news on programming schedules over all.

Rather than change the hours at which news aired, in 2008, local television stations were more likely to add or subtract newscasts altogether. A total of 37 newscasts debuted in 9 markets. Half of the new programs (19) were added by affiliates of the four large networks, in 13 markets. In all, independent stations added nine newscasts in five markets. CW added a newscast in each of five markets (plus two in Chicago), and MyNetworkTV added a newscast in each of four markets. MyNetworkTV cut two morning newscasts in Miami.  Another practice that has grown in recent years is the production of newscasts for other stations in the same market.  Sharing or selling newscasts generates additional revenues for stations and allows a station to shift schedules across channels without altering its own schedule.

Robert Papper, chairman of the journalism department at Hofstra University, estimates that 200 stations air news that is not produced in-house.¹⁷

But Papper sees signs that this is slowing, mostly due to economic factors associated with purchasing newscasts from other stations and lower returns from advertising in general. “The numbers [of stations getting newscasts from others] grew pretty quickly,” Papper said. “But in tough economic times, the number appears to have stabilized — for now.”

Another factor that might change how and when news is watched is the adoption of digital television technology by the public. With more viewers tuned into digital, stations have the ability to broadcast news programming on as many as three channels — a main channel plus two subchannels. Should subchannels gain a substantial audience in 2009, stations could simply rebroadcast or add new newscasts on the subchannels, obviating the need to shift or reshuffle their schedules or program on other stations. 

Audiences at Affiliates of Smaller Networks

Local stations affiliated with the four large networks operate in nearly all of the 210 television markets tracked by Nielsen Media Research and get the lion’s share of audience for news.

But two other types of stations air news in some markets.

The first group comprises independent stations, those not affiliated with major network systems. The second group is made up of stations affiliated with two fledgling networks, CW and MyNetworkTV, both of which were begun in 2006.

It is worth looking at these stations ’ ratings to get a larger sense of the universe of local news viewers.

Independent Stations

The number of independent stations, those not affiliated any network, is now quite small.   Depending on the timeslot, only 17 to 25 markets have independent stations with large enough news audiences for Nielsen to track. That small sample of stations makes the data about ratings and share more volatile.¹⁸

What the data show, however, is a trajectory even less promising for news than on the large network affiliates.

Independent stations saw ratings and share numbers flat or falling in every time period studied.

In the early evening news block, ratings for these unaffiliated stations were flat in every sweeps month except July, when ratings fell 0.2 ratings points to 0.3. Share fell by half in May, July and November from the year before. It was flat in February.

In the late news block, ratings fell by double digits in every sweeps month, some as great at 22%. Share was mixed, flat during two periods, down precipitously in two others.

And early-morning ratings were down throughout the year compared to 2007 and share dropped through most of the year.

CW and MyNetworkTV

The second group of these nonmajor network affiliates is made up of stations affiliated with CW and MyNetworkTV, both of which were started in 2006. In 2008, some stations in the two networks added news.   The CW Network is a joint venture between CBS Corporation, former owners of the defunct UPN and Warner Bros. (which owned the defunct WB television network). MyNetworkTV is owned by Fox and also includes many former UPN and WB stations.

However, only 15 CW stations and 6 MyNetworkTV stations have large enough audiences for Nielsen Media to track, according to data from the ratings company.
Like independent stations, CW and MyNetworkTV stations, many of which were in operation for less than two years at the end of 2008, get much lower ratings and a smaller audience share when compared to affiliates of ABC, CBS, Fox and NBC. But unlike independent stations, a majority of which produced their own newscasts, many CW and MyNetworkTV affiliates air news produced by other stations, mainly from those in their market, but sometimes from those in other markets.

For example, WTVQ, the ABC affiliate in Lexington, Ky., re-airs some of its newscasts on the MyNetworkTV channel in the same market, but at different times than its own newscasts. This practice of sharing newscasts allows the ABC affiliate to compete with other affiliated station newscasts, including the market-leading Fox affiliate, WDKY, while airing ABC national entertainment programming on its own station.¹⁹

Stations affiliated with the ION Media network, a small number of Fox affiliates, CW and MyNetworkTV stations most often run news produced by other stations.²⁰

On average, audiences for these new affiliate newscasts are slightly bigger than those of independent stations, according to Nielsen Media Research data. MyNetworkTV stations generally have lower ratings and a smaller percentage of share than independents, according to Nielsen Media Research data.

In 2008, CW and MyNetworkTV stations began expanding the number of newscasts aired, with a handful of stations adding news programming in the evening, when most syndicated entertainment programming traditionally airs on the main networks.
Additionally, a few more stations aired news in the noon hour, between 4 and 5 p.m. and from 10:30 to 11:30 p.m.

But most nonmajor station affiliates broadcast news in four timeslots, in the morning from 5 to 7 a.m. and 8 to 9 a.m., and in the late evening from 9 to 10 p.m. and from 10  to 10:30. Still, the number of CW and MyNetworkTV stations that Nielsen tracks is relatively small compared with samples of major network affiliates.  

The results for this growing group of newscasts are mixed. Ratings in the mornings (5 a.m. and 7 a.m.) fell throughout the year. Evening ratings were more divided.

Footnotes

1. Pew Research Center, Biennial News Consumption Survey, August 17, 2008

2. The four sweep months are when Nielsen Media Research measures television audiences to help the industry determine advertising rates for television stations

3. Pew Research Center, Biennial News Consumption Survey, August 17, 2008

4. We took Nielsen data for all the stations affiliated with the four biggest local television networks in all designated market areas, called DMAs. That gave us the ratings and share for an average local newscast in each time slot in each sweep month. According to Nielsen Media Research, the DMA “identifies an exclusive geographic area of counties in which the home-market television stations hold a dominance of total hours viewed.” There are 210 DMAs in the United States. See Nielsen Media Research Web site, http://www.nielsenmedia.com.

5. For early evening news, PEJ examined data for newscasts between 5 and 7 p.m. in the Central and Mountain time zones and 6 to 8 p.m. in the Eastern and Pacific zones. For late news, we took 11 to 11:30 p.m. in the Eastern and Pacific zones and 10 to 10:30 p.m. in the Central and Mountain zones. Fox stations generally air news at 10 p.m. in the Eastern and Pacific zones and 9 p.m. in the Central and Mountain zones.

6. The evening news broadcast in February 2008 had an average rating of 3.4 points.

7.David F. Carr, “Growing Ratings Despite (Because Of?) Down Economy,” Broadcasting & Cable, March 4, 2009

8. Metered markets are local markets (of which there are 56) where Nielsen Media Research uses set-tuning meters, which report set usage, or People Meters, which report both set usage and persons viewing information. In the majority of markets (154) handwritten diaries are used to track viewing trend and viewer demographics four times a year, during sweeps months. 

9. Wally Dean, e-mail communication with PEJ, February 4, 2009.

10. David Bauder, “Tough economic news is good for evening newscasts,” Associated Press, February 3, 2008

11. For late news, PEJ examined 10 to 10:30 p.m. in the Central and Mountain time zones and 11 to 11:30 p.m. in the Eastern and Pacific zones.

12. In February, ratings decreased 0.3 ratings point, from 3.5 in 2007 to 3.2 in 2008. In May, ratings were down by 0.1 ratings point, from 3.2 in 2007 to 3.1 in 2008. In July, ratings were down by 0.1 ratings point, from 2.8 in 2007 to 2.7 in 2008. In November, ratings were down by 0.1 ratings point, from 2.7 in 2007 to 2.6 in 2008.  

13. Fox airs a nationally broadcast morning program of its own, the Morning Show with Mike and Juliet, in 68 markets, that begins at 9 a.m. A few CBS affiliates that decline to use the Early Show feed from the network air local news during these hours.

14. There are instances when the network news itself airs at 7 p.m., such as the NBC news broadcast in Washington, D.C.

15. While it does not constitute time shifting per se, stations can also generate revenue by producing news for other stations in the market at different times than their own newscasts. More than 200 stations in the United States now purchase newscasts from other places.

16. From data licensed from Tribune Media Services, PEJ examined newscasts schedules of one weekday in November 2008 and compared it with the corresponding weekday in 2007 for all stations in the top 25 DMAs.

17. According to Papper, about 770 stations produced news as of February 2009.

18. Over all, stations not affiliated with a major network get lower ratings and a smaller share of the audience when compared with stations affiliated with ABC, CBS, Fox and NBC. Thus increases and decreases in ratings and share from year to year are generally more volatile than those of affiliate news programs, which get higher ratings and a bigger share of audience.   Since the total number of stations is small, it is hard to draw broad conclusions about the health and future of independent local news programming and local networks. A spike or decline in one market can heavily impact the ratings or share numbers for that month.

19. Scott Sloan, “WTVQ aims at Fox by launching 10 p.m. news,” Lexington Herald-Leader, December 5, 2008. Online at: http://www.kentucky.com/181/v-print/story/616039.html.

20. It should noted that because the audience for CW and MyNetworkTV news is too small in most markets for Nielsen to measure, results reported here each type of affiliate are based on a small sample of markets, and should be interpreted cautiously. Timeslots noon to 1 p.m., 4-5 p.m., 7to 7:30 p.m., 10 to 10:30 p.m. were not examined for CW and MyNetworkTV either because a valid comparison could not be made, or estimates were based on data from fewer than five stations.

21. Share tells a station how it is performing compared with the other stations in the local area. Ratings give a sense of the total audience and are used by advertisers to determine what price they are willing to pay for an ad on the particular program. James Webster, Patricia F. Phalen and Lawrence W. Lichty, (2000) Ratings Analysis: The Theory and Practice of Audience Research, Lawrence Erlbaum Associates.

Economics

Introduction

By the Project for Excellence in Journalism

In a difficult year for media generally, local television stations were hardly immune. Revenue from campaign advertising failed to meet expectations and did not make up for spending cuts from other advertisers, especially automotive and home goods retailers. The potential for adding new revenue through new programs seems to have leveled off.¹

Even the Olympics telecasts, which often produce additional ad revenues at least for the affiliates of the network rights holder — NBC in 2008 — failed to put earnings on an upward slope.

And as the year went on, signs of trouble grew and industry groups revised expectations downward. For the year, most expect revenue declines, despite the election. And the outlook for 2009 appears grimmer still. Reports of cutbacks began to emerge in the fourth quarter as stations braced for an expected drop in total advertising revenue far beyond normal non-election year declines.

Revenues

Over all, revenues at local television stations appeared by year’s end on a downward slope in 2008, despite the election.

As a rule, local television stations do well in election years, and less well in odd-numbered, non-election years.

For a while, 2008 appeared on track. Revenues looked as if they would grow, although less than in the two previous election cycles.

The media research firm Veronis Suhler Stevenson, in its annual communications industry forecast, projected in August 2008 that ad revenues over all for television stations in 2008 would be 5% higher than 2007.  (Even those projected earnings for 2008, $26.3 billion, were less than the $26.7 billion taken in during the previous election year, 2006).

By autumn, however, those projections seemed too high. In November, the Television Bureau of Advertising projected total local television ad revenues would decline 7% from a year earlier by the time 2008 was complete. A month later, another group, BIA Financial, a market research firm, also projected a 7% drop by year’s end, to $20.1 billion.²

Chris Rohrs, president of the Television Bureau of Advertising, whose projections are normally in line with those from Veronis Suhler Stevenson, said his group revised the forecast because of “unprecedented economic developments.”  From January though September, the group reported, actual ad revenues had already dropped 2% versus the first nine months of 2007. 

Two major factors contributed the weakening ad revenues for local television stations in 2008.

In the first quarter, a 100-day strike by the Writers Guild of America shut down production of prime-time scripted network television shows. (Scripted shows are theatrical programs such as Law & Order or Lost, while reality programs such as American Idol and Survivor are mostly unscripted.) As regular viewers of these programs stopped tuning in to the reruns, local affiliate stations also felt the hit, especially for their late local news programs that followed prime time. They rely on viewers of national programs to stay tuned to the local programming that follows.

With fewer viewers, some advertisers sought discounts from stations or shifted spending to cable television.³ Many local stations already began experiencing tougher times, including, at such CBS stations as KCAL in Los Angeles and WBZ-TV in Boston, a first round of layoffs in April.⁴ 

Then came the worsening economy, which accelerated into a full-blown crisis in the last quarter of 2008. The industry’s biggest categories of advertisers are automakers and car dealerships, both acutely sensitive to the credit crisis, and as the year went on they reduced ad spending, including on local television.⁵

In addition, some stations began feeling the added burden of the debt taken on by their corporate owners from the purchase of properties that were arguably overvalued in the stronger economy. 

Looking ahead, forecasts for 2009 project things to get even gloomier. Just how bad varies on the estimate. Some predicted that it would be the weakest non-election year since 2003, following the last recession.

Others think it could be much worse.

According to 2008 projections by Veronis Suhler Stevenson published in August, advertising revenue is expected to decline 8.3% in 2009. In November, the Television Bureau of Advertising estimated even smaller revenues for 2009, which it estimated would be 7% to 11% lower than its newly reduced expectations for 2008.

But now those may seem optimistic. In the first quarter, industry executives said local TV stations were seeing revenues down as much as 40%. And in an article foreshadowing many of the problems local television stations would face in planning their budgets for 2009, Deborah Potter, executive director of NewsLab, a journalism resource center, and a consultant to this project, suggests that profits margins have dwindled to new lows. “For publicly traded businesses accustomed to a 40 percent profit margin, 20 percent profit seems paltry — especially to Wall Street,” Potter wrote.⁶
 
Local and National Spot Advertising

The advertising slowdown was expected to cut across both categories that make up the bulk of a television station’s ad revenue: local and national spot advertising.

National spot advertising, which typically accounts for about 45% of station ad revenue, comes from companies that wish to advertise in wide portions of the country but for various reasons do not want to advertise on the national television networks broadcast everywhere. (Manufacturers of snow tires, for instance, do not want to reach viewers in Miami and San Diego because viewers there will never need their products, but do in places as far apart as Boise and Boston. By using national spot advertising, these advertisers can buy ads in multiple markets to reach only desired viewers and areas.)

Local spots, which generally make up about the 55% balance of ad revenue, are bought solely by advertisers in a station’s own market. For example, when a local Toyota dealer buys ad time in its local market, it is local spot advertising; when the Toyota company advertises its latest model in a number of local markets, it is a national spot advertisement.

Before the economic crisis, national spot was faring better than local. In August, Veronis Suhler Stevenson projected that revenue from local spot advertising would decrease by $400 million in 2008, or some 3%, compared with 2006, the previous election year.⁷ National spot revenue was projected to remain basically flat. Almost certainly those numbers are now expected to be lower.

And 2009 looks worse. In November, the Television Bureau of Advertising projected that local spot revenue would fall 4% to 8% in 2009. National spot advertising was projected to fall even further, between 11.5% and 15.5% compared with 2008.

Local Cable Advertising

In recent years, cable television has become an emerging competitor to local television spot advertising. Between 2001 and 2007, local advertising on cable grew 66% to $5.9 billion, an annual compound growth rate of 10%. By comparison, the compound annual growth rate for local spot ad revenue from 2002 to 2007 was 1.7%.⁸ 

One reason cable is gaining is cost. Local cable channels generally charge less than broadcast stations for advertising yet reach a similar geographic audience.

Growth of Local Spot vs. Local Cable Advertising

2002-2008 (Revenue in billions)

Year Broadcast Local Spot Cable Local Spot   Revenue Growth Revenue Growth 2009 (est) $13.7 -6.1% $6.9 6.9% 2008 (est) 14.6 2.3 6.5 9.8 2007 14.2 -4.8 5.9 11.4 2006 15.0 6.6 5.2 8.1 2005 14.0 -3.0 4.9 13.3 2004 14.5 7.3 4.3 15.2 2003 13.5 3.1 3.8 2.3 2002 13.1 -- 3.7 --

Source: Veronis Suhler Stevenson, 2008-2012 Communications Industry Forecast

Local cable channels still take in only about half what broadcast stations get in local spot revenue. But cable local ad revenue also seems less prone to fluctuation between odd and even years.

Analysts expect cable’s share of local advertising to continue to grow. For 2005 to 2010, Veronis Suhler Stevenson projected that cable local ad revenue would grow at a compound annual growth rate 8.8%, just under what it has done in the previous six years. Local broadcast ad revenue, by contrast, was projected to have an annual compound rate of growth of 0.2% until 2012.

Thus while local television is expected to remain dominant in local advertising, cable is yet another challenge to the older industry.

Political Advertising Levels Off

One sign of this more complicated landscape was political advertising in 2008. Even though the local television industry was disappointed with the amount of political advertising in 2008, it still got about $8 out of every $10 spent by campaigns.⁹

Campaigns normally buy advertising on local television because they can target their message to regions or audiences that a campaign’s polling shows are winnable or necessary to win the election.

The spending totaled an estimated $2 billion in 2008, representing 75% to 80% of total political ad spending for all media.¹⁰ Of that, about $1.2 billion, or 60%, came from candidates. The rest of the revenue came from political parties, ad-hoc political organizations and political action committees.¹¹      

The total dollars brought in matched that of 2006, as did the share of total local television revenues that came from political ads.

For all that, the figures fell short of expectations for a hotly contested presidential election.

And local television stations captured a smaller share of the political spending than in previous cycles. The two sectors that increased their share in 2008 were network and cable television.

With the weakening in the larger local television ad market 2008, political ads made up a slightly larger share of total revenues than in 2006. Political spending on local television increased more than threefold since 2000.

A number of factors contributed to the fewer dollars going to local television stations in 2008. A protracted Democratic primary season, though it generated its own ad spending, reduced the general election period to five months, from eight in 2004.

General election campaign advertising is more widespread and sustained than primary advertising. During primaries, stations only tend to get political advertising for a week for two before the actual voting. The shorter general election phase — though doubtless the campaign did not feel shortened to voters — meant that John McCain and Barack Obama only began to face off against each other nationally in June.

Evan Tracey, the chief operating officer of the media research firm Campaign Media Analysis Group, a part of the ad measurement company TNS Media Intelligence, told Broadcasting & Cable in December that, “Candidates had more money than there was broadcast time to buy.”

With local television saturated, political ad buys in 2008 grew in other local media instead. Hard figures for local cable, radio, newspaper and online are hard to come by, but the Campaign Media Analysis Group estimates that 2008 political spending on these media ranged between $200 million and $400 million. Analysts at the Television Bureau of Advertising and the Campaign Media Analysis Group said local radio and local cable television were the big winners among that group. Their share of campaign advertising in 2008 grew from 1% four years earlier to 5% last year.¹²

For now, local television remains the most popular medium for political spending. But it is unclear whether increased spending on other local media in 2008 might portend further changes for future political spending.

In any case, according to the Television Bureau of Advertising’s vice president for marketing, Jack Poor, local television’s importance in political advertisements will continue “as long as we have the electoral college.” He explained that buying ads on local television allows campaigns to target most of their spending on the most competitive states. “[Campaigns] have gotten so good at polling that they spend 85 to 90 percent of their money in 10 to 12 states where races are 52 to 48 [percent] or closer,” he said.¹³

Station Revenues

What does all this mean at the level of the individual local television station? For this, the data are a year behind, from 2007, so it does not reflect the current economic downturn or the shifting of campaign spending. But numbers for revenue by station, as opposed to overall spending across the industry, does reveal that while still a highly profitable business, local television has some underlying concerns.

Average station revenues are falling, when adjusted for inflation, and the impact is being felt most severely in smaller markets.

Earnings at news-producing stations in 2007 fell by an average of 10% from 2006 to $23 million, down from $26 million, according to PEJ’s analysis of BIA Financial data of 795 local television stations. At all stations, the decline averaged 1.3%.¹⁴

Some decline was to be expected. Revenues in odd-numbered, non-election years are historically lower than even years. But the 10% decline in 2007 is matched only by that seen in 2001, when the U.S. was slipping into a recession, and represents a sign that the economy was affecting local television well before it became a full blown crisis in the fall of 2008.

Even when compared with the previous non-election year of 2005, the average revenues in 2007 were down, by about 4%.

In fact, when examining revenues adjusted for inflation, average station earnings peaked in 2000 and have trended downward ever since. While stations are still profitable, a gradual lessening of revenues gives us some clear indication of the structural trend in local television news. It is an industry that is hardly immune to the pressures of the information revolution, even if it has not yet been hit as hard as some others.

When 1995 and 2007 are compared using constant dollars, revenue declined 21%. The erosion of a fifth of station revenues over a 12-year period raises questions about the long-term health of local television stations.

Average Station Revenue

1995-2007

Design Your Own Chart

Source: BIAfn MediaAccess Pro

Average station revenue is of limited use for making assessments of the economic picture at individual stations but is valuable in tracking industry and marketwide economic patterns.

For instance, another explanation for the long-term decline in average station revenue is that more stations have gotten into the business of producing news since the mid-1990s.

Mark Fratrik, the vice president of the BIA Financial Network, believes that the addition of newscasts at Fox affiliates in the 1990s and at CW and MyNetworkTV affiliates in recent years has been driving average revenues down since many of these stations have smaller audiences and bring in less money than affiliates of the three biggest networks.

For example, PEJ determined that 795 English-language, commercial local television stations produced news in 2007, compared with 714 stations in 2006.

And these smaller stations may be particularly vulnerable to the economic downturn. The 2007 data reveal that small-market stations have had the steepest revenue declines.

Stations in the smallest markets have historically had deeper revenue declines in down years. From 2006 to 2007, revenues at stations in the smallest markets (the 151st- largest and those even smaller) absorbed, on average, a 21% decline, compared with an average of a 6% decline at stations in the top 25 markets.

The average small-market station generated just $4 million in revenue in 2007, less than a fifth of the industry average.

Meanwhile, stations in the top 25 markets averaged revenues of $77 million in 2007, more than three times that of the industry average. Because they reach more viewers, they are able to continue to charge a higher rate to advertisers.

The next bracket, 26 to 50, made $24 million on average, a million dollars above the average for all stations.¹⁵

Average Station Revenue, Markets 1-50

1996-2007

Design Your Own Chart

Source: BIAfn MediaAccess Pro

Average Station Revenue, Markets 51+

1996-2007

Design Your Own Chart

Source: BIAfn MediaAccess Pro

Newsroom Economics

How important is news in the economics of local television?

In general, the answer is that it continues to be very important.

For most stations, certainly those affiliated with one of the major networks, newscasts generate the lion’s share of a station’s revenue. On average, each station made about 45% of its revenue from news broadcasts, according to a 2007 survey of news directors by the Radio-Television News Directors Association.¹⁶

This is higher than the 42% year before, but within the same range as responses in recent years.¹⁷

More than half (55%) of all news directors surveyed said their stations were making a profit. Although this figure decreased slightly from the previous year, it does not indicate a clear downward trend, as differences in levels of profitability measured have been small year-over-year since 2003.

Slightly fewer news directors reported in the 2007 survey that their stations are making a profit, and more reported losses than they did the previous year.

Local TV News Profitability

1996-2007

Design Your Own Chart

Source: RTNDA/Hofstra University Survey Based on survey responses of news directors

Stations affiliated with the four big networks — ABC, CBS, Fox and NBC — were more likely to report making a profit than non-affiliated ones. Fully 59% of news directors at affiliated stations reported profitability, compared with 37% of the independents.
 
CBS stations had the best year, just as the network did in entertainment programming. Just 7% of CBS station news directors said they showed a loss in 2007, and 62.2% said their stations turned a profit. Fox stations also tended to thrive with news. Six in 10 Fox station news directors said they made a profit in 2007, while 15% said they showed a loss. But the previous year, no Fox station news directors reported a loss, and 70% said they were making a profit. This represents a 10 percentage point drop from 2006 to 2007, and while it may reflect nothing more than a blip, it is worth watching.

NBC stations were similar to Fox affiliates. In all, 59.2% of NBC-affiliated stations reported profits.  ABC stations had the toughest year: 53.8% reported profits, a four percentage point decrease from the previous year.

Footnotes

1.Our assessment here is based on a revised projection by the Television Bureau of Advertising, the industry trade association, which indicates a more severe downturn for the industry in 2009.

2. BIA Advisory Service,  “Television Industry Projected to Post -7% Growth in 2008; Station Transactions Lowest Level Since 2004,” BIA Press Release, December 18, 2008

3. Johnny Diaz, “Strike took viewers from late local news,” Boston Globe, February 29, 2008.
Rich Kirchen, “Writers strike impacts Milwaukee TV news,” Business Journal of Milwaukee, April 4, 2008. David Hatfield, “Writers strike hurts Nielsen ratings for local TV news,” Inside Tucson Business, January 16, 2008.

4. Deborah Potter, “The Perfect Storm,” RTNDA Communicator Magazine, May-June 2008. Online at: http://www.newslab.org/articles/broadcasteconomy.htm.

5. Brian Steinberg, “Local TV Stations Anticipate Severe Downturn in ’09,” Advertising Age, November 11, 2008

6. Deborah Potter, “The Perfect Storm,” RTNDA Communicator Magazine, May-June 2008. Online at: http://www.newslab.org/articles/broadcasteconomy.htm

7. Deborah Potter, “The Perfect Storm,” RTNDA Communicator Magazine, May-June 2008. Online at: http://www.newslab.org/articles/broadcasteconomy.htm

8. Veronis Suhler Stevenson, “Communications Industry Forecast 2007-2011”

9. Clare Atkinson, “2008 Political Ads Worth $2.5 Billion to $2.7 Billion,” Broadcasting & Cable, December 2, 2008

10. Clare Atkinson, “2008 Political Ads Worth $2.5 Billion to $2.7 Billion,” Broadcasting & Cable, December 2, 2008

11. Jack Poor, vice president of the Television Bureau of Advertising, interview with PEJ, December 1, 2008

12. Jack Poor, vice president of Television Bureau of Advertising, interview with PEJ, December 1, 2008.

13. Jack Poor, vice president of Television Bureau of Advertising, interview with PEJ, December 1, 2008.

14. The Project uses BIA Financial Network’s database to calculate station revenue; the last full year for which data are available is 2007. Since there are hundreds of local television stations in the U.S., the report (like previous ones) short-lists those that have news directors (to see if they produce local news) and are commercial and viable. Spanish-language stations are not included. The exact tally of stations cannot be the same every year since stations constantly change ownership or shut down or both, and news divisions are not permanent features of local stations and may be added or removed.

15. According to Nielsen Media Research, there are 210 designated market areas in the United States. Each of these markets “identifies an exclusive geographic area of counties in which the home-market television stations hold a dominance of total hours viewed.” See Nielsen Media Research Web site, http://www.nielsenmedia.com.

16. The RTNDA Survey is annual survey of news directors. The latest survey was released in October 2008. It was conducted by Robert Papper of Hofstra University (formerly at Ball State University) in the last quarter of 2007. In all, 1,647 news local television station news directors took part. An additional 300 interviews were conducted in July and August 2008. A copy may be found in the October 2008 issue of the RTNDA Communicator.

17. Robert Papper, “News, Staffing and Profitability Survey,” RTNDA Communicator October 2008, p. 24

News Investment

By the Project for Excellence in Journalism

Introduction

Signs of belt-tightening abound in the newsrooms of the nation’s local television stations.

The number of news people is shrinking. Fewer stations are hiring and the median staff size heading into 2008 had slid from an all-time high the previous year. The move to expand or add news programs also appeared to be slowing.

And stations are increasingly looking at ways to shoot, edit and produce news video with fewer people.

Salaries for news professionals did grow on average in 2007. But the gains were almost exclusively made by on-air employees. The behind-the-cameras staff barely kept up with inflation. And throughout 2008, there were signs of stations now beginning to jettison some of their most senior people, including top anchors, to save money. Cutbacks accelerated in the last few months of 2008, with all types of newsroom positions being shed.

Moving ahead, 2009 is shaping up to be perhaps even more difficult. In the summer of 2008, a survey of news directors found that most expected staffing levels to be flat in the coming year, and a growing number feared that cuts were in the offing.

And that survey was completed before the economy soured in the fourth quarter. Analysts now warn that the situation in 2009 could be even worse.

One other potentially worrisome development for local news operations is that networks are increasingly demanding money from their affiliates for programming, while in previous years the payments moved in the other direction.

Still to be gauged is whether stations will take better advantage of the extra channels offered by the digital conversion to add such things as all-sports or all-weather channels, and whether cable providers will be compelled to carry them, and how audiences and advertisers will respond if they do. At the end of 2008, local all-weather channels were the most common at many stations, although few had yet to offer different types of content on their digital sub-channels.

TV News Budgets, Staffing Stay Flat

After investing in costly equipment to prepare for the mandatory digital transition planned for February 2009 but delayed until June, news budgets were flat for the most recent year for which there is data.

Fewer than half of all news directors (46%) had increased their budgets 2007, a drop from a year earlier (54%), according to the latest survey conducted by Papper for the Radio-Television News Directors Association.¹

Another third (34%) reported that their budgets would stay at the same level, and 13% reported cutting their news budget, up from 8% in 2006.

Larger stations seemed to fare worse in 2007. At stations in the top 25 markets, about a third of news directors (33%) reported that their news budgets had increased. For stations in markets ranked 101 to 150, 41% said their news budgets increased in 2007, while half of station news directors in markets 26 to 50 (51%) said their news budgets increased.

How did the other commercial stations — those not affiliated with one of the major four networks — do in 2007? Worse, in general, than network affiliates.

Slightly fewer of the independents reported a budget increase than their counterparts at affiliated stations, 44% to 46%. And more news directors at independent stations said they decreased their budgets in 2007; 22% saw budget decreases compared with 13% at affiliated stations.

Papper’s survey was fielded in the fourth quarter of 2007, a year before the worst of the upheaval in the economy.

An updated survey of a smaller group of station news directors was conducted in the second quarter of 2008. Responses revealed a drop in confidence among the directors that they would be able to maintain newsgathering resources or add new staffers as they looked ahead.

As he reviewed the data with PEJ, Papper cautioned that the situation likely had worsened throughout 2008, along with the economy, something that news professionals echoed.²

Employment Shrinks, Staff Sizes Begin to Fall

Newsroom jobs began slowly disappearing in 2008, and that trend may well accelerate as the economic turmoil takes its toll in 2009.

The survey of 300 news directors in the summer of 2008 found that there was a small net loss (1.5%) of newsgathering jobs in the first half of the year.³

Stations in the top 25 markets and those in more mid-sized markets (101 to 150), were hit the hardest, with as many as a third having cut staff.
 
The survey also found that 29% of stations had already reduced staff in the first half of 2008. About half of stations had held steady, 49%, and 22% had increased staff.
At the time of this survey, most of those news directors expected things not to get too much worse. Fully seven in ten said they anticipated their news staffs would remain the same over the following few months. And twice as many news directors (18%) expected to expand their staffs in the coming months of 2008 as thought they would have to cut positions (9%).

But all that optimism was certainly buffeted, if not erased, when the economic crisis gained momentum in the fall. 

How much effect did the economic crisis have across newsrooms late in the year? There were some major examples of cuts, including stations firing high-priced, long-time anchors. Papper, a consultant to this report, told PEJ that in the final months of 2008 stations made cuts across all departments, including news.

While some stations cut back on news programming toward the end of 2008, most made more use of part-time staffers and maintained the amount news on their stations.

Papper suggested, however, that with newsrooms already stretched thin, many stations would have to reduce the amount of news programming if the industry experiences further significant cutbacks in 2009.

Even as early as late 2007, when the last full RTNDA survey was conducted, there were signs of cost cutting. Stations, for instance, had increased their reliance on part-time staff.⁴ The median number of part-time staff doubled in 2007 compared with 2006 (to six).

The staffing in local television newsrooms was not large to begin with. For 2007, in the biggest markets, those 1 to 25, the median newsroom size in the latest survey available was 58. The next biggest market (25 to 50) was 56. And markets 100 and below averaged 28 people.⁵

Cuts were evident in the median size of newsrooms. After hitting an all-time high of 30 in 2006, median employment dropped by 2 the next year. What growth there was tended to happen at stations in the biggest markets (1 to 50). Reductions were experienced in markets 51 to 150 and there was no change at stations in the smallest markets (151 and up).⁶ Stations affiliated with the four big networks mostly held steady. They averaged 39.3 full-time staffers vs. 38.3 in 2006. But the median showed a two-person decrease from 2006 figures to 32 employees.

Newsroom staffs at independent stations are generally smaller than those at affiliates. And in 2007, staff sizes at the nonaffiliated seemed to fall more than at affiliates.⁷ 

Local TV Newsroom Staff Levels

1988-2008

Design Your Own Chart

Source: RTNDA/Hofstra University Surveys Based on survey responses of news directors

Salaries Grow for On-Air Staff, Managers, Flatten for Others

If budgets were flat, one element on the balance sheet that was growing at least for some people in late 2007 was salaries.

According to the Papper survey, salaries for local television news professionals rose after barely budging in 2006. The increase averaged 5.1%in 2007.

The increases, however, were not spread around. The increase was mostly at stations in the top 25 markets. For all other markets, pay increases failed to rise above the 4.1% inflation rate for 2007.

Within the newsroom, the news director was best compensated. The median salary of a news director was $80,000, an increase of more than 7% increase over the previous year’s $74,000.

News directors have had similar increases in each the last 10 years. Salaries increased 51% between 1998 and 2007.

The next most highly paid employees were assistant news directors ($68,800) and managing editors ($56,000). Assistant news directors had a slight increase in median salary from the year before, when it was $63,000, but managing editors had a slight decrease from 2006, when the median salary was $58,000.

Salaries for these jobs have risen 29% on average since 1998.

Salaries over Time

Median Salaries, 2006-2007

Design Your Own Chart

Source: RTNDA/Hofstra University Surveys Based on survey responses of news directors

On-air positions (news anchors, sports anchors and weathercasters), taken together, have had similar increases between 1998 and 2007, up 52%.

But these salary increases for the anchors and other talent also grew much faster than those for behind-the-scenes employees such as graphics specialists, executive producers, managing editors and photographers. 

Shedding High-Priced, Experienced Anchors

As the economy worsened in 2008, however, a growing number of stations appeared to be addressing the issue of salary increases with a new trend — shedding some of the high-priced anchors once seen as the key to a local station’s brand and its place in the market.

Anchors in Boston, Houston, Denver and Fresno, Calif., lost their jobs in 2008.⁸ Staffing cuts for other positions were made at stations throughout the country.

Al Primo, a television news consultant, told the New York Times in November that anchors’ salaries, which reach seven figures at some stations in the biggest markets, seemed “out of sync with the reality” of budgets at stations.⁹ Papper, however, argued that letting go longtime anchors is not a broad trend and is mostly determined by ratings and the anchor’s value to a station. “Higher-priced talent at nonmarket leaders is certainly in danger,” he told PEJ. “But it’s always been about [an anchor’s] contribution, what you bring to the table.”

What impact this will have on stations remains to be seen and could bear some resemblance to a similar knowledge drain occurring in newspapers. (See Newspapers News Investment.)

Press reports in November and December of 2008 suggested that stations across the U.S. were making sizable cuts to their staffs, including traditionally more expensive on-air talent.

Some of the most high-profile job cuts were made at WNBC, New York, four on-air reporters were let go in December; and at KNSD, the San Diego NBC affiliate, where 24 newsroom staffers lost their jobs. Also in December, KSTP, the Twin Cities’ ABC affiliate, dismissed 18 in December. And KJZZ, an independent, Salt Lake City station, dropped 24 news employees.
 
John Beard, an anchor at KTTV, the Fox affiliate in Los Angeles, who was let go by the station in December 2007, argued that the loss of these veteran anchors will weaken the journalism these stations produce because these people were the institutional memory of the stations who knew the community best. “Basically, you replace someone who knows City Hall with someone who can’t find it,” he told the New York Times in November 2008.¹⁰

Whether that is true may depend on the anchors and the degree to which they functioned as editors at their stations or just readers of the teleprompter.
Less visible staff reductions — those of reporters or production staff — may have an even bigger impact on newsgathering. “The loss of higher-paid, experienced reporters is more likely to negatively affect coverage than the loss of an anchor who has probably spent little time reporting for a while,” Papper said.

Uncertain Future for Network-Affiliate Model

Staff reductions at local television stations come at a time when the networks most stations are affiliated with — ABC, CBS and NBC — are sending signals of a coming shake-up in the network-affiliate model.

These include changes in financial arrangements between networks and their affiliates and a reduction in the numbers of hours of national programming from networks. And at least one network (CBS) envisions distributing its programs directly through cable and satellite systems within the next decade — thus circumventing or cutting ties completely with affiliates.  

Reverse Compensation

Though the financial arrangement between networks and their local stations varies with each contract, most affiliates are paid to broadcast network shows.

The amount they pay is based on the station’s strength in its market and how important the market is to the network.¹¹

This has been an important source of income for local broadcasters. But that seems to be changing.

Fox was the first to turn that system upside-down. A decade ago it required affiliates to pay the network for programming.

In 2008, the first of the Big Three networks, NBC, followed suit. In July, the network began to demand compensation for programming from affiliates renewing contracts.
Specifically, CBS is seeking to get a portion of the money affiliates receive from cable operators, who are required to pay local television stations to transmit their station signal. The network believes it is entitled to a stake of these revenues — called retransmission fees — since it provides local stations with national programming like NFL games which can attract large audiences.¹²

Analysts predicted the other networks would emulate NBC and Fox in coming years. CBS had already been reducing the amount of money paid to local stations.¹³


The change hurts small-market stations disproportionately. Generally, stations in markets with more viewers are more important to the networks, and as a result have more leverage to negotiate whether or how much is paid to a network.

Should the reverse-compensation model become the norm, many small-market stations fear they will have to cut back on local programming, including news, to make up for the higher costs.  

Programming and Distribution

There were also signs during the year that the traditional relationship between networks and their affiliates could be nearing an end.

Leslie Moonves, the CBS CEO, told reporters at a December 2008 meeting of network executives and advertisers that within 10 years, CBS may no longer have traditional affiliated television stations, but might offer its programming directly to cable and satellite providers.¹⁴

Doing that would give the networks revenues from subscriber fees, which tend to be more consistent than local advertising.¹⁵

The NBC Universal CEO, Jeffrey Zucker, announced at the meeting that the NBC network would likely cut back the number of hours it programs for entertainment shows, like 30 Rock, The Office and Law and Order. Next fall, NBC will start Jay Leno’s new program at 10 p.m. on weekdays, effectively shortening the prime-time window for scripted programming to two hours a night on those days.

The Big Three networks — that is, ABC, NBC and CBS — program 22 hours a week over seven days, but they do not offer original programming on Saturday. Only CBS runs all-original scripted programming on Friday in prime time. Fox programs 15 hours a week over seven days. CW and MyNetworkTV do less and program only six nights a week.¹⁶

Changes — or an end — to the network-affiliate model would significantly impact the local television industry. While a reduction in the amount of programming from networks would give local stations more opportunities to sell ads, affiliates often rely on lead-ins from the networks’ entertainment programming to attract viewers to late news broadcasts.

An end to the network-affiliate model would have more dire consequences for affiliates. With less or no national programming from the networks, stations would likely be at a disadvantage in negotiating fees for retransmission of their programming on cable and satellite systems.

As 2009 began, the traditional network-affiliate model remained intact but unsteady. The changes foreshadowed in 2008 may prompt stations to expand beyond traditional local programming (mostly news) into more varied content as a protection against audience erosion.

Most network-affiliate contracts don’t expire until 2012 or 2013, which suggests any fundamental changes to the affiliate model won’t happen quickly.¹⁷   

But some stations are preparing for what could be the inevitable scenario. Lisa Howfield, the general manager of KVBC in Las Vegas told the Wall Street Journal in February 2009 that her station is going about business “like there's no tomorrow.” This includes cutting costs — through staff reductions, consolidation and putting off investments in equipment — drumming up new advertising business, and generally, learning to survive on much lower revenues.¹⁸   

Amount of News on Local TV Levels Off

In previous years, station owners have boosted revenues amid declining ratings for existing shows by adding new news programming to their schedule. As a consequence, the amount of news on local stations swelled as stations added morning shows and extended nightly news broadcasts into other hours.
There is evidence, at least in the latest data available, that this trend may be running out of steam.

At the end of 2007, news directors reported airing an average of 4.1 hours of news each weekday, identical to the year before. And a majority said they expected no increase in the amount of news in 2008.

Previously, stations facing declining audiences for nightly newscasts had added early morning and even midday news programming to recapture viewers who were not home when traditional newscasts aired around the dinner hour or late afternoon. That also provided a way to attract new revenue: If you cannot charge more for advertising when the ratings are down, or add more commercials into the programs you have, create new programs instead.

Stations affiliated with one of the four major networks — ABC, CBS, Fox and NBC — were the most likely to add news because they could add local newscasts before or after network ones when audiences are already tuned in. Unaffiliated stations produce an average of one hour less of news per week (3.1 hours) than affiliates.¹⁹

Stations continued to tinker with timeslots for news, adjusting the length and start times of newscasts to attract the most viewers in the morning, midday, evening and late night. But aside from simultaneously broadcasting newscasts on new digital channels in 2008, stations did not seem to add many more newscasts. 

If the trend toward adding more programs has leveled off, where does that leave stations? There are other revenue opportunities. One of those is that stations can look to add sponsorships of particular program segments such as weather or traffic reports to boost revenues. There are no data on whether this is increasing, but anecdotally industry professionals see it as a trend, especially as stations look to bolster declining revenues from spot advertising.²⁰

New Models for News Gathering

Pooling Coverage

As stations sought to trim their staffs in 2008, two big players in the local television industry were moving toward combining some newsgathering operations at local stations as they headed into an uncertain 2009.

Fox and NBC, the top two owners of local television stations, based on revenues — announced in November they would launch a video news service similar to the newsgathering model of the Associated Press. (The AP is a news agency cooperatively owned by its 1,500 U.S. daily newspaper members that provides news to the print media, radio and television stations. 

Under the new Fox-NBC partnership, which was begun in January 2009 in Philadelphia, the owned and operated stations of NBC (WCAU) and Fox (WXTF) dedicated staffers to a joint video service who are dispatched to the scenes of breaking news to shoot video and avoid duplication between the stations.

The stations share the raw video but edit and package their own stories. The individual stations also have the option of sending additional reporters out on stories. The joint service also makes the content available to other local media outlets, including print, radio, Web sites or rival stations, for a fee.²¹

The service is meant to allow the individual stations to focus their resources on signature enterprise reporting. Enterprise stories are normally topical, aimed at contextualizing trends, lifestyle and lessons for audiences, and are less focused on events themselves. 

The local media partners intend to bring this news pool model to other markets where NBC and Fox both own and operate stations in 2009.²²

It is too early to assess the impact of Fox and NBC’s pool coverage experiment, but it is a model that other local television ownership groups could consider emulating if news budgets continue to dwindle.

Multimedia Journalists

Another cost-conscious newsgathering model grew in prominence in 2008 as technology made it easier for reporters at local television stations to produce their own stories.

The availability and ease of use of inexpensive video cameras, laptop editing applications and the Internet have made broadcast journalists better able to shoot and edit news segments. And for at least one station in Washington, it means the end of the television news crews as industry professionals have known them.
WUSA, owned by the Gannett Company, announced in December 2008 that it would replace its news crews with single all-in-one reporter/editor/producers known as a multimedia journalists in 2009.²³

The streamlined approach to television coverage combines a range of news producing functions normally done by at least four separate staffers – camera operator, correspondent, news producer and editor.

Previously, labor agreements between unions and television stations divided responsibilities among the newsroom’s reporters and camera and production staffers.²⁴ Two unions, the American Federation of Television and Radio Artists, which represents on-air reporters, and the International Brotherhood of Electrical Workers, which represents production employees, reached agreement with WUSA on new contracts that paved the way for the staffing changes in December 2008.²⁵ The station was the first major-market affiliate to completely replace its news crews with single-person crews.

But the one-person newsgathering model has been used more often by stations in small markets with less financial resources. Mike Devlin, the president and general manager at WFAA in Dallas-Fort Worth, told PEJ in January that reporters at some small-market stations have long reported, shot and edited their own stories.²⁶

The single-person operations also have been used by some network and cable news operations but have not entirely replaced reporting teams as it has at WUSA.
Earlier in 2008, CNN deployed one-person “all-platform journalists” in ten cities, (See Cable TV News Investment) while the newspaper industry has begun deploying multimedia  “mobile journalists” to report and write stories, and capture accompanying photographs and video, all of which are uploaded to the Web. (See Newspapers News Investment.)

Even more than pooling video coverage among television stations, the multimedia journalist newsgathering model has caused concerns about quality among veteran television news reporters.

Bill Lord, the news director at WJLA, the Washington ABC affiliate and a WUSA competitor, said television reporters were not equipped to do all elements of news production equally well. He told the Washington Post in December, “If you’re forcing everyone to do things against their skill levels and desire, your product suffers.”²⁷

Still, with fewer dollars to pay newsroom employees at local stations, many are looking for ways to simply produce more video with fewer people.
 
Sharing Newscasts

Another trend that appears to be slowing is the practice of a station sharing stories or even whole newscasts with other television news operations.

In recent years it had become common for stations to sell video or even packaged stories as a way to make money. Sometimes the sharing is done with stations in other markets or with competitors that air in the same market at different times.

For stations with limited newsgathering resources, getting content from a competitor could be the most cost-effective way to produce stories it could not otherwise report. Often they customize the story by having their own staff provide the lead-in or voice-over to the video.

The data from Robert Papper of Hofstra University offers evidence that this may be declining, perhaps as a cost-saving measure by stations unwilling to make the purchases. In late 2007, 24% of stations got programming segments from other stations that originated news. That compared with more than a third, or 37%, in 2006.

News for Other Platforms

Providing news to other local broadcasters is just one way that television stations share their content.

Local television stations routinely provide content to other platforms, notably for their own or others’ Web sites, local radio stations and cable news channels.  

In 2007, fewer stations reported sharing content with local radio stations (39%), a 10- percentage point decrease from 2006.

About the same number of stations reported sharing content with cable channels in 2007 (16%) as they did in 2006 (15%). Non-affiliated stations are beginning to share content with cable channels at a higher rate. In 2007, 15% of news directors at these stations reported sharing content with cable channels. In 2006, none reported sharing content with cable channels. 

Other Outlets Local TV News Stations Serve, 2007

Design Your Own Chart

Source: RTNDA/Hofstra University Surveys Based on survey responses of news directors

Fully 81% of stations in 2007, the most recent year for which survey data are available, reported posting their television content online, on their own or other Web sites, the same number as the year before.

Footnotes

1. The survey was conducted among 1,647 operating nonsatellite television stations in the last quarter of 2007. A shorter supplementary survey was conducted in July and August of 2008 among 300 stations. Robert Papper, “News, Staffing & Profitability,” RTNDA Communicator, October 2008, p.22. A total of 774 stations originated local news as of October 2008.

2. Robert Papper, interview with PEJ, October 16, 2008

3. Extrapolating his survey data to the entire population of those employees in newsgathering positions at local television stations, Robert Papper said the number of jobs lost in the first half of 2008 totaled about 360.

4. Robert Papper, interview with PEJ, October 16, 2008

5. The average, which Papper considers a statistically less accurate measure of newsroom health than the median, grew slightly, to 37.3 from 35.8 from the year before. That is highest level since RTNDA began surveying news directors. The inclusion of stations in big markets, with much disproportionately larger newsroom staffs than stations in smaller markets, generally skews the average upward. 

6. Robert Papper, “The Real Story of TV News Staffing,” unpublished, August 2008

7. The Papper survey found that the average staffing at independent stations decreased 20% in late 2007 to 25.5 full-time staffers, down from 30.5 in 2006. The median measure shows 6.5 fewer staffers at independent stations, down from 28 in 2006. But due to limited sample size, Papper notes that it is wise to be cautious about interpreting too much from sharp one-year changes in the survey data.

8. Brian Stelter, “A Generation of Local TV Anchors Is Signing Off,” New York Times, November 30, 2008

9. Brian Stelter, “A Generation of Local TV Anchors Is Signing Off,” New York Times, November 30, 2008

10. Brian Stelter, “A Generation of Local TV Anchors Is Signing Off,” New York Times, November 30, 2008

11. Michelle Greppi, “NBC Affiliates Prepare to Swallow Bitter Reverse-Compensation Pill,” Broadcasting and Cable, July 13, 2008

12. Sam Schechner and Rebecca Dana, “Local TV Stations Face a Fuzzy Future,” Wall Street Journal, February 12, 2009.

13. Greppi, Michelle, “NBC Affiliates Prepare to Swallow Bitter Reverse-Compensation Pill,” Broadcasting and Cable, July 13, 2008.

14. David B. Wilkerson, “CBS CEO: Ad rates flat with upfront, down from a year ago,” MarketWatch, December 10, 2008. Online at: http://www.marketwatch.com/News/Story/Story.aspx?guid={BCF393AD-080B-419F-9245-C6A014BE7653}&siteid=yhoof2.

15. Sam Schechner and Rebecca Dana, “Local TV Stations Face a Fuzzy Future,” Wall Street Journal, February 12, 2009.

16. Paul J. Gough,  “NBC might scale back hours, Zucker says,” Hollywood Reporter, December 8, 2008

17. Sam Schechner and Rebecca Dana, “Local TV Stations Face a Fuzzy Future,” Wall Street Journal, February 12, 2009.

18. Sam Schechner and Rebecca Dana, “Local TV Stations Face a Fuzzy Future,” Wall Street Journal, February 12, 2009.

19. RTNDA/Hofstra University News Staffing and Profitability Survey, 2008

20. Robert Papper, interview with PEJ, December 5, 2008

21. Michael Malone, “Fox, NBC Try ‘AP’ Approach to Local TV,” Broadcasting & Cable, November 13, 2008

22. Malone, Michael, “Fox, NBC Try ‘AP’ Approach to Local TV,” Broadcasting & Cable, November 13, 2008.

23. Paul Farhi, “WUSA Moves to One-Person News Crews,” Washington Post, December 1 2, 2008.

24. The station’s agreements with the American Federation of Television and Radio Artists, which represents on-air reporters, and the International Brotherhood of Electrical Workers, was ratified in December 2008. Paul Farhi, “WUSA Moves to One-Person News Crews,” Washington Post, December 12, 2008.

25. Malone, “Inauguration First Big Test For WUSA One-Man Bands,” Broadcasting & Cable, January 21, 2009. Online at: http://www.broadcastingcable.com/blog/Station_to_Station/10779-Inauguration_First_Big_Test_For_WUSA_One_Man_Bands.php?rssid=20112&q=WUSA

26. Mike Devlin, interview with PEJ, January 13, 2009.

27. Paul Farhi, “WUSA Moves to One-Person News Crews,” Washington Post, December 12, 2008

28. Congress passed legislation to move the digital television transition “hard date” from February 17 to June 12, 2009. About a quarter of all local television stations discontinued analog transmission on February 17, and more are expected to shut off analog signals on March 14 and April 18. These “soft dates” approved by FCC, on which a limited number of stations may be allowed to transition to solely digital transmission.

29. Brian Stelter, “Switch to Digital TV Wins a Delay to June 12,” New York Times, February 4, 2009.

30. John Eggerton, “NTIA: Wait List For DTV Coupons Keeps Growing,” Broadcasting & Cable, January 29, 2009.

31. John Eggerton, “DTV Oversight Hearing On House Docket,” Broadcasting & Cable, February 24, 2009.

32. “Airtime: The DTV Transition Brings Tidal Wave of Change,” Broadcasting & Cable, February 21, 2009.

33. Deborah Potter, interview with PEJ, October 31, 2008

34. Ted Hearn, “Martin Forced to Pull LPTV Must-Carry Plan,” Multi-Channel News, October 20, 2008

Ownership

Introduction

By the Project for Excellence in Journalism

The ownership landscape for local television in 2008 changed less than many expected.

The sale of television stations, as with station revenues, tends to spike in years with elections and Olympics. But 2008 defied the pattern.

The number of transactions was a fraction of previous years. And industry analysts reported a backlog of stations for sale.¹

The average sale price of stations, however, was up. Private equity investors were again major players in the deals that were concluded.² Meanwhile, the stock values of publicly traded firms that own stations plunged (along with the rest of the stock market) as local ad revenues and tight credit markets took their toll.

Over all, the lineup of companies that owned the media continued to be dominated by the four big networks’ parent companies—News Corporation (Fox), General Electric (NBC), CBS and Disney (ABC) — as well as some companies that also own newspapers, such as Tribune, Gannett and Hearst-Argyle.

The private investors that led many purchases of television stations in 2007, including Hoak Media, Bonten Media Group and Oak Hill Capital Partners, bought fewer stations in 2008, mostly because financing for deals was hard to come by.  

2008 Sales Few, Private Equity Dominates

The number of stations trading hands in 2008 was the lowest since 2004 and was less than half the figure reported in 2007. The total value of the transactions through October 2008 was less than a quarter of the value of transactions in 2007.

According to market research firm BIA Financial Network, 96 stations were sold from January to December 2008, with a total value of $866 million. This compared with 270 in 2007 for $4.6 billion. In total dollars, 2006 still stands out with $18.1 billion spent, largely due to the $13.7 billion of Spanish-language broadcaster Univision and a large number of sales involving stations with digital broadcasting capabilities and those in mid-sized markets, which financial analysts had predicted to grow following the digital conversion. (See State of the News Media 2007)    

In 2008, the sales that fell through and the inventory of stations left unsold were in some ways more notable than the deals that closed.

In general, station groups seemed less willing to take on additional debt by making new purchases in 2008 than they had in the previous two years.

Heavy debt loads from financing sales of stations that proved to be worth less than originally estimated have put a financial strain on some ownership groups, especially ones that own fewer stations relative to big players in the industry.

Young Broadcasting, which bought KRON-TV in San Francisco in 2000 from Chronicle Publishing Company for $823 million, sought to unload it in 2008. At the time of the sale, industry analysts thought Young, which outbid NBC for the station and as a result lost its NBC affiliation, paid too much for the station, and revenues have declined since. The station, which began operating as a MyNetworkTV affiliate in 2001, has seen its fortunes diminish since the change in affiliation.  KRON brought in $57.2 million in 2007, according to BIA Financial, down from $160 million in 2006.

In August, Young wrote down $139 million in debt, reducing the station’s value to $227 million, while analysts placed its sale value somewhere between $125 million and $150 million in September.³ Even at a reduced price, the station remained unsold as of December 2008.

And in February 2009, Young — the owner of 10 stations in all — filed for Chapter 11 bankruptcy protection.⁴

Like Young, other station groups like Media General, also sought unload stations in an attempt to reduce debt. 

Total Value of TV Station Acquisitions

1996-2008

Design Your Own Chart

Source: BIA Financial Network

Debt, and the inability to refinance it, was one of a range of financial strains that dampened the station sales market in 2008. Over the last several years, owners borrowed money to finance sales or the conversion to digital broadcasting at their stations.

Though stations have upgraded their equipment for digital television broadcasts, many — especially stations in smaller markets — are still paying off these investments. 
Adding to the debt pressures that limited sales of television stations in 2008, a severe downturn in credit markets prevented sales that were in progress.

The bankruptcy and sale of the Wall Street investment banking firm Lehman Brothers in September scuttled the biggest single station deal that was agreed to in 2008. In October, the sale of Landmark Communications’ WTVF in Nashville to the private equity firm Bonten Media Group fell through. The sale, worth $209 million, was to have been financed by Lehman Brothers, which went bankrupt and was sold in September 2008.
Bonten operates 17 stations in nine markets. The group is led by former Emmis Communications president Randy Bongarten. Emmis had previously sold all of its local television properties. Landmark, a privately held company, sought to sell off all its broadcast media properties in 2008 to focus on its publishing, database marketing and career education businesses.

Adding to the fiscal strains, a slump in revenues in the slowing economy also eroded station appeal as advertising from retailers, especially car manufacturers and dealers and home goods resellers — the bread and butter of station ad revenue — plunged in the second half of the year on weak consumer sales.
 
Even the promise of a new advertising revenue source from additional content streams in the coming digital era failed to drive station sales.

And the growth of emerging revenue streams that once proved enticing to buyers failed to keep pace with declines in traditional advertising. These emerging revenues, mostly from station websites and the fees local cable operators pay to stations to distribute their programming to subscribers, have been the fastest-growing source of revenue.  
In previous years, the rapid growth of this revenue had fueled interest in, and sales of, local television stations. 

Not so in 2008.

One reason is that station websites, despite continuing to add more users, showed signs of slowing revenue growth in 2008.

Another hopeful source of new revenue for broadcasters has been slow to develop. The switch to digital broadcasting, required by February 2009, gives stations the ability to broadcast additional channels on the digital spectrum. This provides new opportunities for programming and ad sales, but it requires additional investment that not all stations were able to afford.

Mike Devlin, the president and general manager of WFAA in Dallas-Fort Worth, told PEJ in January 2009: “In this economic situation, stations are reluctant to invest in programming, which mostly comes from third parties.” 

Devlin said marketers have been offering Spanish-language programming, movie networks and classic television to station managers to put on their digital sub-channels. But, he suggested, in the midst of a major advertising downturn, stations feared they may not be able to sell enough ads on the sub-channels to turn a profit. Compounding the problem, the ad rates are likely to be lower on the sub-channels. As of January 2009, BIA Financial Network estimated that about 350 stations in the U.S. were using a second digital sub-channel.⁵   

With slumping traditional revenue, and insufficient gains from emerging businesses, the stock prices of local television companies hit their lowest point in 2008 since the recession of 1991-92.⁶

This was an unwelcome turnabout for station owners, who saw stock values grow at double or triple the rate of the overall market in 2007.

Major Transactions Upended

The collapse of the sale of WTVF as a result of Lehman Brothers failure was one of two major cancellations during 2008.

In December, NBC Universal’s intended sale of WTVJ in Miami to the Washington Post Company was canceled. The deal, which was set to close by the end of 2008, was estimated to be worth $205 million.⁷  Industry analysts had previously pegged the station’s value at $350 million to $400 million.⁸

NBC and the Washington Post Company announced in December that the sale would not go through because of “the current economic environment and the delay in receiving the necessary regulatory approval.”⁹

If the sale had been completed, the Washington Post Company, which owns WPLG, the Miami ABC affiliate, would have owned two stations in the market, the 16th-largest in the U.S. The ownership of two major network affiliates by one company made the deal subject to the approval of the Federal Communications Commission.
Analysts suggested that the Post Company would have sought to cut costs at the stations by sharing some operations, thereby reducing overhead.¹⁰

NBC’s attempted sale was indicative of a trend among the network parent companies to sell stations they operate outside of the 10 largest markets in the U.S. NBC Universal put WTVJ up for sale along with its station in Hartford, Conn., WVIT, to concentrate on stations in the most profitable markets.¹¹ (WVIT remained unsold as of December 2008.)
 
In 2008, CBS completed its divestiture of 50 medium- and small-market stations, which it began in 2006. The company sold four stations to Four Points Media Group, a television station holding company founded by the private equity firm Cerberus Capital, for $185 million.¹² Four Points bought two CBS owned-and-operated affiliates (KEYE-TV in Austin, Texas, and KUTV in St. George, Utah) and two MyNetworkTV affiliates (WLWC-TV in Providence, R.I., and WTVX-TV in West Palm Beach, Fla.).

Other sales during the year involved companies in financial distress.

One such company was Pappas Telecasting, a privately held commercial television group that owned 27 stations at the start of 2008. It filed for bankruptcy in May and put 16 stations up for sale to pay down debt. Pappas sold eight stations in Nevada and California to Entravision, a Spanish-language media company for $4 million.¹³

Entravision is the largest affiliate group of both the Univision and TeleFutura networks. In December 2008, the New York Stock Exchange threatened to delist Entravision stock because it had fallen below $1 a share during the previous 30-day period. The company was given six months to raise its stock price to above $1 before being delisted.¹⁴

Another Pappas station was sold only after the FCC was convinced that the station was at risk of being shut down. The station, KWBA of Tucson, Ariz., was bought by the Journal Broadcast Group. Because Journal owned another station in the market, the deal required the FCC to waive its limit on multiple stations in the same market being owned by the same company. (Waivers can be granted if the station’s only other option is closing or operating at a competitive disadvantage.)

As a part of the deal, Journal agreed to broadcast a 30-minute daily newscast on KWBA, which had not had a newscast since 2005.

The remaining Pappas stations were put up for sale at bankruptcy auction in December 2008.

In January 2009, Pappas sold its remaining 10 stations to New World TV Group at bankruptcy auction for $260 million. The buyer group was made up primarily of the Pappas creditors. The stations include KMPH-TV (Fox) and KFRE-TV (CW), both Fresno-Visalia, Calif.; KTNC-TV (TuVisión), San Francisco-Oakland-San Jose, Calif.; KAZH-TV (TuVisión), Houston; KPTH-TV (Fox) and KMEG-TV (CBS), both Sioux City, Iowa; KPTM-TV (Fox) and KXVO-TV (CW), both Omaha, Neb.; KDBC-TV (CBS) El Paso, Texas; KCWK-TV (CW), Yakima-Pasco-Richland-Kennewick, Wash.¹⁵

Often, broadcasters sold stations to raise cash for debt payments.
 
Media General, a company with interests in newspapers, television stations and interactive media situated primarily in the Southeast, sought to sell five stations, hoping to raise $100 million that it said it wanted to use to pay lenders.
 
As of December 2008, the company had sold four of them, with the sale of WCWJ in Jacksonville, Fla., pending. Media General sold WTVQ in Lexington, Ky., in May to Morris Network; WNEG in Toccoa, Ga., to the University of Georgia Foundation in June; WMBB in Panama City, Fla., and KALB (a joint NBC/CBS station) in Alexandria, La., to the private equity group Hoak Media in July.¹⁶

Observers of the local television industry have described a confluence of factors as contributing to a drought of sales in 2008. These include problems in the wider economy, such as a tight credit market and less investment over all, and problems specific to the industry, such as declining revenue from advertising.
 

For the remainder of 2009, industry forecasts predict continued weak revenues from traditional advertising and a slowdown in new revenue streams.

Big Broadcaster Files for Bankruptcy Protection

Another major ownership development in local television was that Tribune Company, the owner of 23 local television stations, filed for bankruptcy protection in December 2008.

The company, which owns stations and newspapers in the top five media markets and many other big markets, will likely look to sell the 13 CW, 7 Fox, 2 MyNetworkTV and the single ABC station it owns in 2009. But if the sales market for stations continues its slump, as some observers have suggested, Tribune could have trouble selling even its most valuable stations.¹⁷

A number of analysts expect sections of Tribune to be auctioned off in pieces.¹⁸ In 2007, the Chicago billionaire real-estate investor Samuel Zell bought the Tribune Company and became its chairman and CEO. The Federal Communications Commission granted a waiver of rules limiting the cross-ownership of newspapers and television stations to allow Zell’s purchase of the company.

FCC Regulations Up In the Air

Beyond its actions on individual waivers, in 2007 the FCC relaxed rules that limit companies from owning properties across media in the same market.

Presenting what he called a compromise, Kevin Martin, the FCC chairman at the time, called for relaxing the ban on cross-ownership only in the top 20 markets. His plan gave companies, under certain conditions, the right to own both a newspaper and a television or radio station in those larger markets.

The FCC’s 2007 measure grew out of a more far-reaching deregulatory plan proposed by Michael Powell, another previous FCC chairman, in 2003 (see previous reports). After the Powell measure was overturned in federal court, the more limited one from Martin was intended to have a stronger legal basis and also to articulate the middle ground between opposing sides.

Instead, however, the latest cross-ownership decision has opened the floodgates to challenges of the policy from both sides. It has been opposed by pro-regulatory groups that say the FCC went too far in relaxing the rules as well as by industry groups that want the ban lifted for all markets.

Tribune challenged the FCC’s rule relaxation, hoping for the deregulation of ownership in all markets, not just the top 20. It is unclear how Tribune’s bankruptcy will impact the proceedings. Media General, which had four waivers for its properties in smaller markets, was given permanent waivers, much like Tribune.

Martin said in 2007 that the partial lifting of the ban was meant primarily to improve the flagging health of newspapers.

The two national groups representing the industries most directly affected by the proposed rule change, the Newspaper Association of America and the National Association of Broadcasters, support deregulation on cross-ownership and argue that FCC didn’t go far enough in 2007.

The only media industry group to join the pro-ban chorus in 2008 was the Computer and Communications Industry Association (whose members include Microsoft, Google, T-Mobile USA and Yahoo), which opposes further consolidation of communications channels.¹⁹   

With broadcasters and activists both trying to get cases challenging the FCC’s rules moved to other courts, a ruling on the commission’s cross-ownership is not likely to be issued soon.

The uncertain future of the rules on ownership did not, by itself, stunt station sales in 2008. The FCC normally grants temporary cross-ownership waivers to allow sales that would be affected by the 1975 ban. If the 2007 decision is upheld in court, however, the rules could fuel a spate of sales, at least in the short term.   

The composition of the FCC and the Justice Department in the Obama administration will no doubt affect the future of cross-ownership. Less clear is President Barack Obama’s position on the rule. There have been some indications that Obama will work to roll back the FCC's loosening of the newspaper-broadcast cross-ownership rule.²⁰

The Top Local TV Companies by Revenue

The top-earners in the local television industry continue to be familiar names, as least as of 2007, the last full year for which revenue figures are available.

If we look at the top parent companies that year, three media conglomerates led the local television industry. News Corp., which operates nationally through the Fox Television group, continues to earn the highest revenues in the television sector. General Electric follows with its NBC stations, and then comes CBS.

Big Four Networks Dominate

When it comes to content, most U.S. television stations get programming from one of the four large networks — ABC, CBS, Fox and NBC.

These four companies make money from supplying programming to their affiliates. They do not, however, necessarily own a large number of stations. Among them, NBC owns the most stations, 34. In 2008, CBS sold four stations, Fox sold nine stations and NBC sold four. ABC ownership has remained basically unchanged from 2007.

The CBS group has 31 stations and ABC is next with 10.²¹

The big station owners are groups like ION Media Networks (with 63 stations), Sinclair (55), LIN TV (50) and Raycom (41). Since 2007 Raycom acquired two stations and LIN acquired five, while Broadcasting Media Partners sold six and Sinclair sold eight.

Ownership

Introduction

By the Project for Excellence in Journalism

The ownership landscape for local television in 2008 changed less than many expected.

The sale of television stations, as with station revenues, tends to spike in years with elections and Olympics. But 2008 defied the pattern.

The number of transactions was a fraction of previous years. And industry analysts reported a backlog of stations for sale.¹

The average sale price of stations, however, was up. Private equity investors were again major players in the deals that were concluded.² Meanwhile, the stock values of publicly traded firms that own stations plunged (along with the rest of the stock market) as local ad revenues and tight credit markets took their toll.

Over all, the lineup of companies that owned the media continued to be dominated by the four big networks’ parent companies—News Corporation (Fox), General Electric (NBC), CBS and Disney (ABC) — as well as some companies that also own newspapers, such as Tribune, Gannett and Hearst-Argyle.

The private investors that led many purchases of television stations in 2007, including Hoak Media, Bonten Media Group and Oak Hill Capital Partners, bought fewer stations in 2008, mostly because financing for deals was hard to come by.  

2008 Sales Few, Private Equity Dominates

The number of stations trading hands in 2008 was the lowest since 2004 and was less than half the figure reported in 2007. The total value of the transactions through October 2008 was less than a quarter of the value of transactions in 2007.

According to market research firm BIA Financial Network, 96 stations were sold from January to December 2008, with a total value of $866 million. This compared with 270 in 2007 for $4.6 billion. In total dollars, 2006 still stands out with $18.1 billion spent, largely due to the $13.7 billion of Spanish-language broadcaster Univision and a large number of sales involving stations with digital broadcasting capabilities and those in mid-sized markets, which financial analysts had predicted to grow following the digital conversion. (See State of the News Media 2007)    

In 2008, the sales that fell through and the inventory of stations left unsold were in some ways more notable than the deals that closed.

In general, station groups seemed less willing to take on additional debt by making new purchases in 2008 than they had in the previous two years.

Heavy debt loads from financing sales of stations that proved to be worth less than originally estimated have put a financial strain on some ownership groups, especially ones that own fewer stations relative to big players in the industry.

Young Broadcasting, which bought KRON-TV in San Francisco in 2000 from Chronicle Publishing Company for $823 million, sought to unload it in 2008. At the time of the sale, industry analysts thought Young, which outbid NBC for the station and as a result lost its NBC affiliation, paid too much for the station, and revenues have declined since. The station, which began operating as a MyNetworkTV affiliate in 2001, has seen its fortunes diminish since the change in affiliation.  KRON brought in $57.2 million in 2007, according to BIA Financial, down from $160 million in 2006.

In August, Young wrote down $139 million in debt, reducing the station’s value to $227 million, while analysts placed its sale value somewhere between $125 million and $150 million in September.³ Even at a reduced price, the station remained unsold as of December 2008.

And in February 2009, Young — the owner of 10 stations in all — filed for Chapter 11 bankruptcy protection.⁴

Like Young, other station groups like Media General, also sought unload stations in an attempt to reduce debt. 

Total Value of TV Station Acquisitions

1996-2008

Design Your Own Chart

Source: BIA Financial Network

Debt, and the inability to refinance it, was one of a range of financial strains that dampened the station sales market in 2008. Over the last several years, owners borrowed money to finance sales or the conversion to digital broadcasting at their stations.

Though stations have upgraded their equipment for digital television broadcasts, many — especially stations in smaller markets — are still paying off these investments. 
Adding to the debt pressures that limited sales of television stations in 2008, a severe downturn in credit markets prevented sales that were in progress.

The bankruptcy and sale of the Wall Street investment banking firm Lehman Brothers in September scuttled the biggest single station deal that was agreed to in 2008. In October, the sale of Landmark Communications’ WTVF in Nashville to the private equity firm Bonten Media Group fell through. The sale, worth $209 million, was to have been financed by Lehman Brothers, which went bankrupt and was sold in September 2008.
Bonten operates 17 stations in nine markets. The group is led by former Emmis Communications president Randy Bongarten. Emmis had previously sold all of its local television properties. Landmark, a privately held company, sought to sell off all its broadcast media properties in 2008 to focus on its publishing, database marketing and career education businesses.

Adding to the fiscal strains, a slump in revenues in the slowing economy also eroded station appeal as advertising from retailers, especially car manufacturers and dealers and home goods resellers — the bread and butter of station ad revenue — plunged in the second half of the year on weak consumer sales.
 
Even the promise of a new advertising revenue source from additional content streams in the coming digital era failed to drive station sales.

And the growth of emerging revenue streams that once proved enticing to buyers failed to keep pace with declines in traditional advertising. These emerging revenues, mostly from station websites and the fees local cable operators pay to stations to distribute their programming to subscribers, have been the fastest-growing source of revenue.  
In previous years, the rapid growth of this revenue had fueled interest in, and sales of, local television stations. 

Not so in 2008.

One reason is that station websites, despite continuing to add more users, showed signs of slowing revenue growth in 2008.

Another hopeful source of new revenue for broadcasters has been slow to develop. The switch to digital broadcasting, required by February 2009, gives stations the ability to broadcast additional channels on the digital spectrum. This provides new opportunities for programming and ad sales, but it requires additional investment that not all stations were able to afford.

Mike Devlin, the president and general manager of WFAA in Dallas-Fort Worth, told PEJ in January 2009: “In this economic situation, stations are reluctant to invest in programming, which mostly comes from third parties.” 

Devlin said marketers have been offering Spanish-language programming, movie networks and classic television to station managers to put on their digital sub-channels. But, he suggested, in the midst of a major advertising downturn, stations feared they may not be able to sell enough ads on the sub-channels to turn a profit. Compounding the problem, the ad rates are likely to be lower on the sub-channels. As of January 2009, BIA Financial Network estimated that about 350 stations in the U.S. were using a second digital sub-channel.⁵   

With slumping traditional revenue, and insufficient gains from emerging businesses, the stock prices of local television companies hit their lowest point in 2008 since the recession of 1991-92.⁶

This was an unwelcome turnabout for station owners, who saw stock values grow at double or triple the rate of the overall market in 2007.

Major Transactions Upended

The collapse of the sale of WTVF as a result of Lehman Brothers failure was one of two major cancellations during 2008.

In December, NBC Universal’s intended sale of WTVJ in Miami to the Washington Post Company was canceled. The deal, which was set to close by the end of 2008, was estimated to be worth $205 million.⁷  Industry analysts had previously pegged the station’s value at $350 million to $400 million.⁸

NBC and the Washington Post Company announced in December that the sale would not go through because of “the current economic environment and the delay in receiving the necessary regulatory approval.”⁹

If the sale had been completed, the Washington Post Company, which owns WPLG, the Miami ABC affiliate, would have owned two stations in the market, the 16th-largest in the U.S. The ownership of two major network affiliates by one company made the deal subject to the approval of the Federal Communications Commission.
Analysts suggested that the Post Company would have sought to cut costs at the stations by sharing some operations, thereby reducing overhead.¹⁰

NBC’s attempted sale was indicative of a trend among the network parent companies to sell stations they operate outside of the 10 largest markets in the U.S. NBC Universal put WTVJ up for sale along with its station in Hartford, Conn., WVIT, to concentrate on stations in the most profitable markets.¹¹ (WVIT remained unsold as of December 2008.)
 
In 2008, CBS completed its divestiture of 50 medium- and small-market stations, which it began in 2006. The company sold four stations to Four Points Media Group, a television station holding company founded by the private equity firm Cerberus Capital, for $185 million.¹² Four Points bought two CBS owned-and-operated affiliates (KEYE-TV in Austin, Texas, and KUTV in St. George, Utah) and two MyNetworkTV affiliates (WLWC-TV in Providence, R.I., and WTVX-TV in West Palm Beach, Fla.).

Other sales during the year involved companies in financial distress.

One such company was Pappas Telecasting, a privately held commercial television group that owned 27 stations at the start of 2008. It filed for bankruptcy in May and put 16 stations up for sale to pay down debt. Pappas sold eight stations in Nevada and California to Entravision, a Spanish-language media company for $4 million.¹³

Entravision is the largest affiliate group of both the Univision and TeleFutura networks. In December 2008, the New York Stock Exchange threatened to delist Entravision stock because it had fallen below $1 a share during the previous 30-day period. The company was given six months to raise its stock price to above $1 before being delisted.¹⁴

Another Pappas station was sold only after the FCC was convinced that the station was at risk of being shut down. The station, KWBA of Tucson, Ariz., was bought by the Journal Broadcast Group. Because Journal owned another station in the market, the deal required the FCC to waive its limit on multiple stations in the same market being owned by the same company. (Waivers can be granted if the station’s only other option is closing or operating at a competitive disadvantage.)

As a part of the deal, Journal agreed to broadcast a 30-minute daily newscast on KWBA, which had not had a newscast since 2005.

The remaining Pappas stations were put up for sale at bankruptcy auction in December 2008.

In January 2009, Pappas sold its remaining 10 stations to New World TV Group at bankruptcy auction for $260 million. The buyer group was made up primarily of the Pappas creditors. The stations include KMPH-TV (Fox) and KFRE-TV (CW), both Fresno-Visalia, Calif.; KTNC-TV (TuVisión), San Francisco-Oakland-San Jose, Calif.; KAZH-TV (TuVisión), Houston; KPTH-TV (Fox) and KMEG-TV (CBS), both Sioux City, Iowa; KPTM-TV (Fox) and KXVO-TV (CW), both Omaha, Neb.; KDBC-TV (CBS) El Paso, Texas; KCWK-TV (CW), Yakima-Pasco-Richland-Kennewick, Wash.¹⁵

Often, broadcasters sold stations to raise cash for debt payments.
 
Media General, a company with interests in newspapers, television stations and interactive media situated primarily in the Southeast, sought to sell five stations, hoping to raise $100 million that it said it wanted to use to pay lenders.
 
As of December 2008, the company had sold four of them, with the sale of WCWJ in Jacksonville, Fla., pending. Media General sold WTVQ in Lexington, Ky., in May to Morris Network; WNEG in Toccoa, Ga., to the University of Georgia Foundation in June; WMBB in Panama City, Fla., and KALB (a joint NBC/CBS station) in Alexandria, La., to the private equity group Hoak Media in July.¹⁶

Observers of the local television industry have described a confluence of factors as contributing to a drought of sales in 2008. These include problems in the wider economy, such as a tight credit market and less investment over all, and problems specific to the industry, such as declining revenue from advertising.
 

For the remainder of 2009, industry forecasts predict continued weak revenues from traditional advertising and a slowdown in new revenue streams.

Big Broadcaster Files for Bankruptcy Protection

Another major ownership development in local television was that Tribune Company, the owner of 23 local television stations, filed for bankruptcy protection in December 2008.

The company, which owns stations and newspapers in the top five media markets and many other big markets, will likely look to sell the 13 CW, 7 Fox, 2 MyNetworkTV and the single ABC station it owns in 2009. But if the sales market for stations continues its slump, as some observers have suggested, Tribune could have trouble selling even its most valuable stations.¹⁷

A number of analysts expect sections of Tribune to be auctioned off in pieces.¹⁸ In 2007, the Chicago billionaire real-estate investor Samuel Zell bought the Tribune Company and became its chairman and CEO. The Federal Communications Commission granted a waiver of rules limiting the cross-ownership of newspapers and television stations to allow Zell’s purchase of the company.

FCC Regulations Up In the Air

Beyond its actions on individual waivers, in 2007 the FCC relaxed rules that limit companies from owning properties across media in the same market.

Presenting what he called a compromise, Kevin Martin, the FCC chairman at the time, called for relaxing the ban on cross-ownership only in the top 20 markets. His plan gave companies, under certain conditions, the right to own both a newspaper and a television or radio station in those larger markets.

The FCC’s 2007 measure grew out of a more far-reaching deregulatory plan proposed by Michael Powell, another previous FCC chairman, in 2003 (see previous reports). After the Powell measure was overturned in federal court, the more limited one from Martin was intended to have a stronger legal basis and also to articulate the middle ground between opposing sides.

Instead, however, the latest cross-ownership decision has opened the floodgates to challenges of the policy from both sides. It has been opposed by pro-regulatory groups that say the FCC went too far in relaxing the rules as well as by industry groups that want the ban lifted for all markets.

Tribune challenged the FCC’s rule relaxation, hoping for the deregulation of ownership in all markets, not just the top 20. It is unclear how Tribune’s bankruptcy will impact the proceedings. Media General, which had four waivers for its properties in smaller markets, was given permanent waivers, much like Tribune.

Martin said in 2007 that the partial lifting of the ban was meant primarily to improve the flagging health of newspapers.

The two national groups representing the industries most directly affected by the proposed rule change, the Newspaper Association of America and the National Association of Broadcasters, support deregulation on cross-ownership and argue that FCC didn’t go far enough in 2007.

The only media industry group to join the pro-ban chorus in 2008 was the Computer and Communications Industry Association (whose members include Microsoft, Google, T-Mobile USA and Yahoo), which opposes further consolidation of communications channels.¹⁹   

With broadcasters and activists both trying to get cases challenging the FCC’s rules moved to other courts, a ruling on the commission’s cross-ownership is not likely to be issued soon.

The uncertain future of the rules on ownership did not, by itself, stunt station sales in 2008. The FCC normally grants temporary cross-ownership waivers to allow sales that would be affected by the 1975 ban. If the 2007 decision is upheld in court, however, the rules could fuel a spate of sales, at least in the short term.   

The composition of the FCC and the Justice Department in the Obama administration will no doubt affect the future of cross-ownership. Less clear is President Barack Obama’s position on the rule. There have been some indications that Obama will work to roll back the FCC's loosening of the newspaper-broadcast cross-ownership rule.²⁰

The Top Local TV Companies by Revenue

The top-earners in the local television industry continue to be familiar names, as least as of 2007, the last full year for which revenue figures are available.

If we look at the top parent companies that year, three media conglomerates led the local television industry. News Corp., which operates nationally through the Fox Television group, continues to earn the highest revenues in the television sector. General Electric follows with its NBC stations, and then comes CBS.

Big Four Networks Dominate

When it comes to content, most U.S. television stations get programming from one of the four large networks — ABC, CBS, Fox and NBC.

These four companies make money from supplying programming to their affiliates. They do not, however, necessarily own a large number of stations. Among them, NBC owns the most stations, 34. In 2008, CBS sold four stations, Fox sold nine stations and NBC sold four. ABC ownership has remained basically unchanged from 2007.

The CBS group has 31 stations and ABC is next with 10.²¹

The big station owners are groups like ION Media Networks (with 63 stations), Sinclair (55), LIN TV (50) and Raycom (41). Since 2007 Raycom acquired two stations and LIN acquired five, while Broadcasting Media Partners sold six and Sinclair sold eight.

Footnotes

1. Robert Marich, “Private Equity: Buying In To Cash Out,” Broadcasting & Cable, August 25, 2008

2. Robert Marich, “Private Equity: Buying In To Cash Out,” Broadcasting & Cable, August 25, 2008.

3. Michael Malone, “Life Goes On at KRON,” Broadcasting & Cable, September 15, 2008.

4. Michael Malone, “Young Broadcasting Files For Chapter 11,” Broadcasting & Cable, February 14, 2009.

5. Allison Romano, “Cutting Bait on Subchannels,” Broadcasting & Cable, January 18, 2009

6. Robert Marich, “Analyst Frets Worst Economy in Two Decades for Media,” Broadcasting & Cable, September 27, 2008

7. “NBCU Miami Station Fetches Just $205M,” Broadcasting & Cable, July 28, 2008

8. “NBCU Miami Station Fetches Just $205M,” Broadcasting & Cable, July 28, 2008

9. Katy Bachman, “WTVJ Sale Terminated,” MediaWeek, December 24, 2008

10. “NBCU Miami Station Fetches Just $205M,” Broadcasting & Cable, July 28, 2008

11. Michael Malone, “NBC Puts Two Stations on Block,” Broadcasting & Cable, March 19, 2008

12. John Eggerton, “CBS Sells Four Stations to Four Points Media Group,” Broadcasting & Cable, January 10, 2008.

13. John Eggerton, “13 Pappas Stations File Chapter 11,” Broadcasting & Cable, May 12, 2008

14. “Entravision gets notice from NYSE,” Los Angeles Business from bizjournals, December 17, 2008. Online at: http://www.bizjournals.com/losangeles/stories/2008/12/15/daily17.html

15. John Eggerton,  “Judge Approves Sale of Pappas Stations,” Broadcasting & Cable, January 16, 2009 

16. Michael Malone, “Hoak Closes Purchase of WMBB, KALB/NALB,” Broadcasting & Cable, July 16, 2008.

17. Michael Malone, P.J. Bednarski  and John Eggerton,  “Tribune Files For Chapter 11,” Broadcasting and Cable, December 8, 2008

18. Michael Malone, P.J. Bednarski  and John Eggerton,  “Tribune Files For Chapter 11,” Broadcasting and Cable, December 8, 2008

19. John Eggerton, “Computer Companies Praise FCC Smackdown,” Broadcasting & Cable, May 16, 2008

20. Editorial, “Open Hopes,” Broadcasting & Cable, December 1, 2008 

21. Station tally as of December 2008; See ABC, CBS, NBC and News Corp. Web sites for updated figures. Stations numbers reflect the company’s holdings on the day we cull data, and may have changed by the date of publication of this report.

Digital Trends

Introduction

By the Project for Excellence in Journalism

Online advertising has been a small but growing part of local television revenue. But in 2008, it proved as vulnerable to the economic downturn as traditional on-air advertising.
    
As online advertising growth began to slow down, broadcasters looked hopefully toward a potential technological innovation: local television on cellphones.

If all goes as planned, the first Americans could begin viewing live television on their specially equipped handheld devices in late 2009 as broadcasters convert to digital transmission and broadcasters and mobile device manufacturers come to agreement on standards.

The potential for revenue gain though wider exposure to advertising or subscriptions is obvious. And it couldn’t come soon enough for many station owners, who have seen the once-meteoric growth in their websites slow despite new investments in sophisticated news-you-can-use content, including traffic and weather reports.

Digital Revenue Growth Slows

For local television news websites, 2008 was a year that began with forecasts of exponential revenue growth but ended with reduced expectations that would put the sites just above their 2007 figures.

Borrell Associates, a media research, consulting and project firm specializing in local Internet advertising, projected in March 2008 that local television stations would see brisk revenue gains online in 2008 — a 47% increase to $1.1 billion, from $772  million in 2007. In November, Borrell adjusted its projections and while it still saw online revenues growing year to year, it reduced expectations to a mere 8% growth.¹

The slackening of digital revenues at local television stations suggests online advertising was susceptible to the downturn in the local ad market, although perhaps to a lesser magnitude than on-air advertising.

The collapse in the local automotive and home goods and improvement categories of consumer advertising in the last quarter of 2008 dampened expectations for what stations thought would be a good year for the Web.

Television stations have gained a greater share of local online ad revenue, however. Borrell Associates estimated that the stations’ share of the local online market grew from about 2% to about 10% between 2004 and 2007, the latest year for which data is available. Local television’s share still lags that of newspapers or online-only media outlets such as Citysearch and Yelp, but is thought to be gaining at the expense of local newspapers.²

But these revenues still make up a small part of station revenue. Most stations get less than 2% of revenues from online operations. Just 12% of stations, according to Borrell, made more than $1 million from online in 2007. On average, stations pulled in $480,000 from television station Web sites in 2007. (Small-market stations generally made less than $350,000, while large market stations averaged about $750,000.³)

While the money is small, stations are getting more serious with their online ventures, including hiring more people to sell online ads exclusively.⁴ The reason is simple. While small, the revenues from the Internet are growing and that makes them significant in the increasingly difficult world of local television.

But according to Gordon Borrell, the CEO of Borrell Associates, the sharp slowdown in digital ad revenues at local stations could have an outsized impact on budgets in 2009. He told Forbes.com in December that many stations that have come to expect rapid growth in online ad revenues in previous years have compiled their 2009 budgets based on the earlier, more generous, projections.⁵ In March, Borrell had projected a 26% growth rate for 2009. The company has not publicly released new projections, but doubtless they are expected to be lower.

Internet Staffing

The number of news people dedicated to local television station websites stayed flat for 2007, the latest year for which data are available.

Few stations are dedicating news employees exclusively to websites. Instead, station employees are adding the Web to their other duties. The average station in 2007 had four newsroom staffers dedicated to the Web, half of them working part time.

And many more newsroom staffers are dividing their time between the Web and responsibilities related to traditional newscasts than in previous years. More than half of news directors (55%) reported that staffers had at least some Web responsibilities, compared to 41% in 2006. Sharing responsibilities for the Web was more common at smaller stations than in the 50 biggest TV markets.

News directors are increasingly involved in their stations’ websites. All but 2% of them were in charge of news content or the entirety of Web operations. Eight in 10 news directors said they were in charge of Web news content, identical to the 2006 figure. However, fewer were in charge of all aspects of their stations’ sites. Just 18% of news directors were in charge of their Web sites, a 7 percentage point decrease from 2006.

Content

The Web is becoming more than the newscast online. While eight in 10 station news directors reported sharing on the Web, many also added text, still photographs, and even blogs. Fully 98% of station sites had text, nearly 90% had still photos and 59% had audio as of 2007.

Text, Pictures and Audio on Local TV Websites

2006 to 2007

Design Your Own Chart

Source: RTNDA/Hofstra University Survey Based on survey responses of news directors

Video, the news element most closely associated with local television news, had the biggest growth of all in 2007.

More websites included news video, with 92% of stations making individual story segments available on their websites, up from 79% in 2006. Half of all station websites included live traffic and weather camera feeds on their websites in 2007, a 7 percentage point increase from 2006.
 
In May 2008, the Fox station in Chicago launched LiveNewsCameras.com to aggregate these camera feeds from local, national and international news websites. The website collects, and organizes live video streams from news sites in the U.S. and abroad. The majority of video on the site comes from local television station websites.
 
More stations also included full newscasts, although they were unlikely to be live. Slightly more news directors said their station websites have live newscasts, up 3 percentage points to 21% in 2007. Newscasts previously recorded were more common on station websites. Nearly half (48%) of the sites had recorded newscasts, compared to 37% in 2006.

Video Elements on Local TV Websites

2006 to 2007

Design Your Own Chart

Source: RTNDA/Hofstra University Survey Based on survey responses of news directors

The adoption of interactive news elements on local television station websites is somewhat mixed. Blogs had a brisk 20 percentage point growth from 2006, to 53%, while podcasts were slightly less common than the previous year (17% in 2006 vs. 16% in 2007).

The creation of Web-only newscasts is a feature that has not caught on with most news directors. In 2007, 8% said their station website was assembling its own newscasts to offer the latest news developments online, compared with 10% in 2006.

Interactive Features on Local TV Websites

2006 to 2007

Design Your Own Chart

Source: RTNDA/Hofstra University Survey Based on survey responses of news directors

More station websites also turned a profit or broke even in 2007, according to the survey. Nearly a third (31%) reported being profitable in 2007, up 8 points from a year earlier. Another 10% said they broke even, and 17% reported a loss. But all of these numbers, according to industry estimates, could become much bleaker in 2008 and 2009.

Station Sites as “Local Portals”

Station owners are seeking to remake their websites into indispensable hubs for information about the cities and towns they serve.

In the battle for local ad revenue, NBC Local Media, comprising 10 of NBC’s owned-and-operated television stations that reach 27% of U.S. households, redesigned station websites, broadening the types of content to include local information from print, online and blog sources.

John Wallace, president of NBC Local Media, said in a statement that the unit’s goal was “to create a new type of user experience that’s less an extension of our TV stations and more of an online destination for the latest local news, information and entertainment.”⁶

To that end, the NBC Local websites dropped station call letters from the sites and re-titled them to reflect the focus on the areas served. New York’s WNBC site, for example, became nbcnewyork.com.

In 2008, stations moved beyond reformatting broadcast news content for their corresponding websites. They are increasingly looking to other local Internet business models for inspiration on how to augment their own sites as destinations for all types of information about the areas the serve.

Stations’ sites are no longer adjuncts for newscasts but instead are positioning themselves to serve a wider audience than that of their broadcasts and broadening the spectrum of information available to visitors.  

Mobile DTV

Perhaps the next great arena for competition for local television, as it is for digital generally, may be mobile.

In 2008, the television industry accelerated efforts to bring over-the-air broadcast programming to cellphones and other hand-held devices.

Support for the new technology is nearly universal among local television stations. The group leading the charge for mobile DTV, the Open Mobile Video Coalition, includes 850 local stations and nearly every major station group in the U.S., and has the support of the broadcasting trade body, the National Association of Broadcasters. A separate organization, the Advanced Television Systems Committee, has the last word on approvals of voluntary standards for digital television technologies.

The costs to design and implement an industry standard for the use of the digital television spectrum to transmit programming to mobile devices are minimal compared to the investments stations made in preparation for the mandatory switch to digital transmission. The cost to implement mobile DTV through hardware upgrades at a station is estimated to be about $250,000.⁷

Early tests of the technology were encouraging to its backers.

In November 2008, two Chicago local television stations (ION’s WCPX and Fox’s WPWR) led a successful mobile digital television test in which they streamed live television programs to handheld devices.⁸

A few hurdles remain. A technology standard must be given final approval by Advanced Television Systems Committee. The group gave preliminary approval for a technology standard backed by the Open Mobile Video Coalition and the National Association of Broadcasters in December 2008. Final approval could come in mid-2009, and Mobile DTV-capable devices and add-on chips could hit the market by late 2009.⁹

The new receiver chips, which were developed by the South Korean electronics producers LG and Samsung in 2008, could be added to an array of screens that deliver full-motion video, including seat-back video players in cars, laptop, portable game systems, cellphones, smartphones and global positioning system devices.¹⁰

The distribution of content over hand-held devices would provide local television stations with a new avenue for advertising and subscription revenues. One estimate, from the BIA Financial Network, indicates that mobile video ads could be worth $2 billion a year by 2012.¹¹

Local broadcasters will not be without competition for mobile video. A mobile-only television provider, MediaFLO, owned by the wireless telecommunications research and development company Qualcomm, has been broadcasting audio, video and other data on spectrum originally allocated to UHF television signals since 2006. MediaFLO operated in 58 markets as of December 2008. It charges users a monthly subscription for exclusive content and that from networks that include CBS, NBC, Fox, MTV and Comedy Central.¹²

But the Open Mobile Video Coalition of 850 U.S. stations has some major advantages. While companies like MediaFLO have had to build their own transmitters, and negotiate license agreements for programs, stations already have  national and local programming ready for transmission to handheld devices.¹³

Local broadcasters also do not have to invest in new equipment to transmit to the devices because both mobile and digital television technologies use the same transmitters and broadcast infrastructure. Generally, both types of signals will reach the same coverage areas.¹⁴

Perhaps most importantly, stations can provide what the national mobile television providers have so far been unable to offer: local programming.

Footnotes

1. “2009 Outlook: Big Slowdown Begins for Interactive Advertising,” Borrell Associates, November 2008

2. “Benchmarking: Local TV Web Sites Gaining Ad Share,” Borrell Associates, March 2008

3. “Benchmarking: Local TV Web Sites Gaining Ad Share,” Borrell Associates, March 2008

4. “Benchmarking: Local TV Web Sites Gaining Ad Share,” Borrell Associates, March 2008

5. James Erik Abels, “Strapped Local Stations Look to Web for Cash,” Forbes.com, December 4, 2008. Online at: http://www.forbes.com/business/2008/12/04/television-internet-advertising-biz-media-1204localtv.html.

6. Brian Steinberg, “NBC to Establish Local Portals,” Wall Street Journal, October 13, 2008.

7. Glen Dickson, “ATSC Eyes Digital TV’s Future,” Broadcasting & Cable, December 8, 2008.

8. David Goetzl, “Mobile TV Gains Momentum,” Mediapost Publications, November 11, 2008 Online at: http://www.mediapost.com/publications/?fa=Articles.showArticleHomePage&art_aid=94489.

9. Glen Dickson, “ATSC Eyes Digital TV’s Future,” Broadcasting & Cable, December 8, 2008.

10. Deborah Potter, “On the Go: The outlook for mobile TV news,” American Journalism Review, August-September 2008. Online at: http://www.newslab.org/articles/mobiletv.htm.

11. Deborah Potter, “On the Go: The outlook for mobile TV news,” American Journalism Review, August-September 2008. Online at: http://www.newslab.org/articles/mobiletv.htm

12. Glen Dickson, “MediaFlo Primes for Growth,” Broadcasting & Cable, December 1, 2008.

13. Sarah Reedy, “One step closer to mobile TV,” Telephony Online, November 11, 2008. Online at: http://telephonyonline.com/iptv/commentary/telcotv-mobile-tv-1111/?cid=hcom.

14. Sarah Reedy, “One step closer to mobile TV,” Telephony Online, November 11, 2008. Online at: http://telephonyonline.com/iptv/commentary/telcotv-mobile-tv-1111/?cid=hcom.