Local TV – Summary Essay
Almost all the indicators for local TV are pointing down.
NBC stations suffered in particular as a result of the network’s short-lived experiment with putting comedian Jay Leno on in the final hour of prime time, which failed to attract a big following and reduced the audiences for the local news that followed. Even after he was bumped back to his old timeslot, news directors feared the viewers might not return to the newscasts.
Revenue, too, was in a free fall. Ad revenue is always lower in a year without federal elections or the Olympics, but the drop in 2009 was especially severe even with the unexpected bounty of political spending on health care legislation. Revenues were estimated to have fallen by 22% from the year before. The last two non-election years, by contrast, recorded much smaller declines: 5% in 2005 and 6% in 2007.
Looking ahead, most market analysts project revenues to grow only slightly, in the 3%-to-5% range in 2010, but that is hardly taken as good news given that it is a year that will include both the off-year elections and winter Olympic games. Some analysts even predict a slight decline in 2010. There is a wild card in play, however: the lifting of restrictions on corporate campaign spending by the Supreme Court could produce an avalanche of new political ads.
The industry, in other words, is facing a structural challenge. Stations, after years of declines in audience, may be nearing a point where they can no longer add new newscasts or new revenue opportunities, such as sponsored segments, to its old ones.
Stations are banking on new technology, and indeed this is the one area where the numbers are moving in the right direction. As more people use the Web and mobile devices to browse video, stations stand to gain. Stations are expected to see brisk revenue growth from their online properties — websites and mobile — for years to come. But online only amounted to 8% of station revenues in 2009, and there is little prospect of it significantly buoying them anytime soon.
And TV stations weren’t the only media outlets seeking local revenue from Web and mobile devices, and some of their competitors are ahead of stations in getting into the game. Stations only had a 10% share of local online ad spending in 2009.
Amid all this, the simmering conflicts between local affiliates and the networks are intensifying. Networks are demanding a share of the fees that cable systems pay to local stations to carry their broadcasts, revenue the stations say they can ill afford to part with. In exchange, station owners could seek more influence over programming or more opportunities to sell local ads during network broadcasts.
The affiliates come to the bargaining table with a vivid illustration of their clout. NBC’s decision to cancel the Jay Leno Show was largely driven by the complaints of station managers.
Comcast’s pending purchase of NBC creates a unique situation. As the owner of NBC stations, Comcast will have to negotiate retransmission fees with other cable companies. At the same time, Comcast is required to pay those fees to affiliates.
Meanwhile, local TV is facing more immediate changes. Newsgathering operations are getting smaller. For news this has meant new experiments with competing stations sharing content, staff or equipment, or even teaming up with the local newspaper. In addition, stations are pushing to create different types of local content — not just news — in the hopes of saving money on syndicated programming or filling in gaps left by reductions in network offerings.
But among the biggest lessons of the year is a reminder of the power of lead-in. Be it syndicated, local or network programming, when ratings fall for what airs just before the news, there is usually collateral damage to newscasts. And, despite their own drop in ratings, it is still news broadcasts that deliver the largest portion of station revenue.
Further evidence could be in the offing: Oprah Winfrey, who typically delivered strong audiences to early evening newscasts, ends her run in over-the-air broadcasting in 2011 as she turns to cable.
All of this helps explain why local television stations, once Wall Street darlings, are generally off investors’ most-favored lists. Some station owners, especially those with newspaper holdings, restructured under bankruptcy protection; others appeared to be on the verge of doing so.
Mergers and acquisitions of local TV properties slowed markedly over the last two years. In 2009, most stations that did change hands went to creditors or were sold at fire-sale prices, not to investors or companies looking to expand their broadcast portfolios.
It remains to be seen whether changes in the industry will lead to more stations being owned by fewer companies or if local ownership will take root. Much of that may be determined by federal media ownership policy. (Click here to read more about media ownership and federal policy.)
Despite prospects for new technologies and expanded local programming, the outlook for the industry appears difficult. In the near term, stations are likely to continue to bounce between boosts in election and Olympic years and lean years in between. But the boom years of late have not been as good and the lean years even leaner.
- In 2009, total industry revenues were expected to decrease 22% to $16.1 billion, from $20.6 billion the previous year.
- Revenues for 2010 were expected to increase between 3% and 5%.
- Political advertising neared $1 billion in 2009, doubling the total of 2007, the previous non-election year.
- Reports suggest that 450 jobs were lost at local TV stations in 2009, and that was on top of 1,200 jobs lost in 2008.
- Despite staff reductions, the average amount of news increased to 4.6 hours each day, from 4.1 hours the previous year.
The number of transfers of station ownership was up in 2009, mostly due to bankruptcies and distressed sales. As a result, the total value of sales increased to $715 million in 2009, from $537 million in 2008.
- Local TV station website revenue was expected to increase 26% to $1.3 billion in 2009, from $1.1 billion in 2008.
- Websites of local TV stations were expected to have 10% of the market share for all local online advertising in 2009, up slightly from 2008.