Local TV is not dead.
That’s the message from the heads of the largest independent station groups in the country.
At a time when audiences are fragmenting with more channel choices from cable and satellite and consolidation is allowing mega-corporations to swallow up more and more stations, these station group executives-all of whom have been elevated to their posts in the past few years-will be responsible for ushering in the digital era.
They have a lot in common: They’re all baby boomers who grew up watching TV. And they all are preaching the gospel of local TV.
“While fragmentation is occurring, we still bring a tremendous value to viewers and advertisers,” said Dennis FitzSimons, president of Tribune Broadcasting and executive vice president of Tribune Co. “We provide advertisers with a geographically targeted vehicle to reach consumers. We provide viewers with a local option. Through a combination of entertainment programming and news programming, we differentiate ourselves from the basic cable networks.”
David Barrett, president and CEO of Hearst-Argyle Television, said the fundamentals of local television remain strong. “We’re going to continue to aggregate a mass audience in these local markets,” he said. “I think we’re still going to be able to capture a mass-market premium for our advertising time, even as the world continues to fragment. These are the local media vehicles that are going to deliver the largest share of audience.”
A big reason local stations have a leg up on cable, station executives say, is they deliver local news and forge ties with the community.
“We see in many markets a growing dependence [upon] and interest in local news,” said Jack Sander, president of Belo’s Television Group. “For those companies and stations who make that a foundation of who they are and what they do, that’s going to continue to be a very strong endorsement in this world that we face.”
A prime example is Belo-owned KHOU-TV, Houston. Last year, KHOU broke the story about faulty Firestone/Bridgestone tires on Ford Explorers, which then gained national prominence. Six months later, the station’s 10 p.m. newscast jumped to No. 1 during November sweeps, and the station swept the noon, 5 p.m. and 6 p.m. newscasts as well.
“You sometimes wonder: Does doing quality news pay off?” Mr. Sander said. “If you look at the ratings in November, six months after they broke the Firestone story and you saw all the other things they are doing there, they had the best ratings maybe in the history of that television station. Since November, that’s continued, and it wasn’t done with gimmicks. That’s why I’m optimistic about the business. We can provide the unique personality and branding that networks and cable networks can’t. That’s why I think we have a solid future.”
Trouble in D.C.
Many in the independent station camp think the biggest threat to local news and stations could come from Washington. The Network Affiliated Stations Alliance filed a petition in March asking the Federal Communications Commission to investigate the networks, saying they’ve violated FCC rules by threatening to penalize a station if it pre-empts network programming and by interfering in the sale of stations.
In addition, the networks and their parent companies are urging lawmakers to raise or eliminate the 35 percent station ownership cap-a move affiliates feel would hurt local news.
Five of the six major station group executives interviewed were passionate about leaving the station cap at the current 35 percent. They say the cap ensures diversity at the local level. If the cap is either lifted or axed altogether, they worry the networks may go on an all-out buying spree for more major-market stations.
“We thought, frankly, it should have remained at 25 percent,” said Alan Frank, president of Post-Newsweek Stations and chairman of NASA.
“We are great believers in diversity and the importance of localism. Unfortunately, raising the cap only furthers consolidation, limits the number of voices, limits diversity-and it is not good public policy. It’s not good for our nation, and we don’t think it’s good for the communication system.”
Cox Television President Andy Fisher agreed. “It is important to have a lot of different individuals and companies in the business who can comment on how the networks conduct their business and what they put on,” he said. “If all the big stations are owned by the networks, a few people in a few offices will make decisions of what people see.”
Deb McDermott, executive vice president of operations for Young Broadcasting, said if networks are allowed to own a larger portion of the distribution chain, stations will have less leverage with the networks.
“Most groups who are not owned and operated by a network are against having the cap raised,” Ms. McDermott said. “It makes their relationships with the networks more difficult.”
Still others argue that the Viacoms, Disneys and News Corps. of the world have many other ways to grow their businesses without owning more stations.
Tribune is one of the few station group owners that is pro-deregulation, Mr. FitzSimons said. That’s because Tribune bought major metropolitan newspapers, such as the Los Angeles Times, Newsday and the Hartford Courant, last year when it acquired Times Mirror.
“We are for deregulation,” Mr. FitzSimons said. “We do understand why mid-sized station group owners would be very concerned about the caps, given the tenuous relations with the networks and the concern they have with the power of the networks. Our main issue is broadcast-newspaper cross-ownership. We are for deregulation, but we understand the concerns that exist about raising the cap.”
Dealing with the downturn
With major media companies such as Disney, NBC and CNN shuttering divisions and cutting staff due to the soft ad sales climate, local stations haven’t been immune.
However, most of the executives agreed that the downturn was predictable and don’t see it as a long-term trend.
“We’re coming off a long run of big-time growth,” said Mr. Sander, who hasn’t made any drastic staff cuts. “I don’t think consumer spending and those types of things are as negative as we seem to be lulling ourselves into. The value of TV as a mass medium is as important as it was one or two years ago, so there is no foundational reason why there would be advertiser dilution of value.
“I think we’ll see it come back sooner rather than what the experts are saying. There have been a lot of people out there saying you can’t write off 2001.”
Mr. Barrett said the business is cyclical, that when things turn down in the general economy, advertising is viewed as the easiest cost to reduce.
“I think there’ll be an upturn in ad spending because people can’t rely on reduced costs to stimulate their businesses totally,” Mr. Barrett said. “They’ve got to drive top-line sales, and advertising is an indispensable component for driving sales. As the overall economy improves, ad spending will return to more normal levels. It tends to be a little bit better than [gross domestic product] every year on a percentage growth basis, and I think it’ll continue to be the case.”
Mr. Barrett said Hearst-Argyle shouldn’t have any mass layoffs, since the company has already been in the process of managing its overall head count for the past several years.
“We had an early retirement program put in place last year for our employees. It was part of anticipating what we knew was a downturn this year,” Mr. Barrett said. “So we’ve been in front of the process. Our stations are operating very lean, and we’re operating with fewer people than we were this time last year.”
At Post-Newsweek Stations, Mr. Frank said the company is already in a hiring freeze, and he doesn’t want resort to layoffs. “We all went into the year knowing it was going to be a difficult year,” Mr. Frank said. “So our budgets took that into consideration. We feel an obligation to continue that level of service. We would like to not make cuts, that’s for sure.”
Mr.
FitzSimons said Tribune already runs “pretty lean” and that the economic climate might present new acquisition opportunities.
“We’re fortunate we’re in strong financial shape,” he said. “We’re not highly leveraged, so sometimes downturns create opportunities for us, such as acquisition opportunities. We made a lot of money for our shareholders by buying television stations during the last recession.”
Ms. McDermott said the big difference with the weak economy now is that there is general softness, whereas in the early 1990s, there were some regions in the country that were hit harder than others, such as the East and West coasts.
“What you’re seeing is general softness across the board, which lends me to believe it’s not going to be a long-term softness,” Ms. McDermott said. She said that when sectors of the country are hit individually, it can take many more years to recover. “When regions of the country get hit and they fall dramatically, [that’s worse]. It took California eight years to get out of it. In the Northeast it took a number of years for that to resurface.”