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Stations: Budgeting for the future

Oct 21, 2002  •  Post A Comment

Budget season is in full swing at TV stations across the country, which are deciding how best to allocate their resources for the coming year. Unknowns abound, such as whether the economy is truly in recovery mode and whether newscasts will have to devote resources to covering a potential U.S.-led war in the Middle East. Electronic Media National Editor Michele Greppi talked with a representative cross-section of station group owners across the country to get a peek into their plans for next year.
Is there a direct correlation between the ad market and your news spending plans for the next fiscal year?
Dennis Swanson: Absolutely. This is a business where the television stations, the distribution system, is expected to produce profit. The margins are in the distribution system, not in the network side. We just can’t go spend willy-nilly. We have to manage our costs in conjunction with what anticipated revenue is.
And quite honestly, it is hard to gauge what the revenue is next year. You have got to extract the politicals from this year. You have got to extract the Olympics from this year. And if you take those numbers out of most of the major markets, the growth isn’t quite as bullish as it appears. Then you have got a stock market that is all over the lot, but basically is under 8,000 right now. And then there’s all the talk about increased military activity in the Mideast, and that gets everybody nervous.
I think you have got to be careful in your planning strategy for next year and I don’t think it would be wise to push, to stretch targets on the revenue side. It would be more prudent to keep those numbers in line with some of the uncertainties that exist.
Fred Young: Through the economic adjustments of late 2000 and 2001 and especially post-Sept. 11, 2001, I think we have all matured and learned how to operate more efficiently at the station level. So we are approaching next year with the same eye to good management that we’ve tried to practice this year.
Phil Lombardo: Normally there would be a correlation between available ad dollars and operating expenses. In our case our news spending plans will continue into the next year.
About a year and a half ago, just before the economy went into its downturn and all of that, we created the position “vice president, news” on the corporate staff. His mandate was to go look at what we’re doing and take as much time as he needed, and come back and make a comprehensive report with what he saw was wrong with our newses, what he saw was right with our newses and what corrective action he saw was needed and necessary. We then reviewed that plan [with all the stations’ general managers]. After we did all of that, we put an action plan in place that extends over five years.
We said the first thing we are going to do is attack this and then once we get that achieved we’re going to do this and then once we get that achieved we’re going to do this.
It was very methodical and it had timetables. Like all things, in an ideal world you hit the timetable and in the real world you miss ’em. All of those timetables have sort of slipped a lot but we haven’t backed off on any of it. We added personnel. We changed anchors and increased what we were paying them because we wanted to get different types of anchors and better quality anchors. We put in all-new weather systems at all the stations. We upgraded our equipment. We added live trucks. That was all part of the initial let’s-attack-it-on-many-fronts-and-let’s-get-it-down.
We are in that program, even though that was a lot of expense in a down economy. The choice was either you go forward or you pull back. And since we’re a private company, I said, `Let’s go forward. I’m not going to pull back. I know it’s going to hit us badly,’ and it did. I said `I’m willing to do that.’ So whatever we had planned to implement this year, we put in place.
Paul Karpowicz: No, not really. The reason being that news is such an important part of what we do that we are not going to sacrifice our main franchise, even though next year may not be as strong as this year. Although we still think next year will be OK. Not great, but OK.
Jay Ireland: Not necessarily. We’ve got to make sure we are fulfilling our strategic objectives every year and then determine where else there may or may not be avenues of savings if needed.
Jack Sander: No, while you always look at expenses based on revenues, we try to be sure we are growing our news product. It is the foundation of what Belo stations stand for and therefore we look to constantly improving our news content and product.
Steve Minium: Not directly. Each of our television stations will receive approval of an operating budget based on the competing merits of their proposal. One of the many things the successful budget proposal will reflect will be our best estimate of next year’s ad market. The news budget will be a part of that approved budget.
How would you describe news budgets for the coming fiscal year compared with the current fiscal year?
Mr. Swanson: We want to be competitive but we think our competitors are going through the same process. They’re not selling in a different market than we are. And in fact, in a lot of markets they may have a competitive advantage over us, which would translate into more revenue. We understand that, but we want to be competitive. We don’t want to get into this battle with one hand tied behind our back. We have to set our priorities and then we have to make sure we’re using our money wisely.
Mr. Young: Carefully prepared. I don’t want to use adjectives or percentages. That would be unfair to all of our people.
Mr. Lombardo: News budgets will expand from a couple of points of view. No. 1, since most people in news departments are under contract, automatically, they’re going to expand by virtue of their contracts. There will be probably some personnel additions that are scheduled for next year, although I haven’t seen the final budgets. They’re right in the process of doing the budgets right now. But my recollection is that the schedule had some expansion of personnel next year. I do know there are going to be capital additions next year. They are probably going to want more cameras or editing equipment or studio cameras or something, but I know that’s coming because I’ve seen some of the preliminary requests. So that’s all part of the expansion we look at in 2002.
Mr. Karpowicz: I will say it’s pretty flat to up a little.
Mr. Ireland: Up slightly as a group. We’re adding in some markets and basically others we’re maintaining, depending on where they have been, what’s happened and a number of different factors.
Mr. Sander: In most places, we will be investing more. Additionally, we will be able to spend money in other ways since we won’t have significant election and campaign coverage costs.
Mr. Minium: News budgets will be part of each television station’s overall budgeting effort, and as such will be subject to our company’s profitability goals and the demands of the marketplace. Clearly, the 2003 budget cycle will be a challenge.
What are management’s goals for news for next year?
Mr. Swanson: We want to increase ratings, obviously. And where do we have the best chance to do that? We have the best chance to do that in our late news and that’s the good news because a lot of late news is lead-in driven and [CBS Television President] Les Moonves has given us great product to put in front of our late newses. We’re already seeing some indication of an advance in our late newses, and that is up to us to take advantage of.
The second place where we think we might be able to improve is because of the success thus far of “Dr. Phil,” we’re getting more sampling in the mid-afternoon and early fringe than we’ve gotten in previous years. And hopefully we can translate that into a little movement in our early newses. The late newses tend to turn earlier than the early-evening newses because that’s a younger, more mobile audience. Obviously the morning is very important. It’s a strong advertiser area, but it is a weakne
ss in our group, and we want to fix those as well, but we think we can make greater strides in the other newscasts I mentioned.
Mr. Young: Every one of our stations has its own goals, but those who are first in their market [aim] to build on that base; those who are not [aim] to get stronger; to continue to get stronger, to make our programs stronger and more interesting; and really to be prepared to deal with whatever you have to deal with in this news business.
Mr. Lombardo: See growth in our existing news products and find areas to expand the amount of news we present. Each of our news directors lays out their plan for the year, and they lay out their audience goals for the year. They are asked to be very realistic and not blue sky, to the point where if they feel they can have a growth of a half a point or a point, they should never say they can do two points or three points in share or rating or demos or whatever it is.
But each news director works with the VP, news, to lay out their goals for the coming year. So with the investments I’ve made in news, this is payback time is what I say to them. I’ll continue the investments, but you’ve got to pay me back in audience numbers. That’s the deal we have. That will all be part of the budgeting process. They have to submit their goals for each newscast that’s on the air.
If you can have a 1- to 2-rating point improvement in any of your newses, you begin to start paying back on the investment.
Mr. Karpowicz: We’ve just gone through a lot of expansion in terms of weekend newses and expanding in the mornings, so I think it’s just to continue to grow and build on the expansion that we have done over the past few years in those time periods that are relatively new: the Saturday and Sunday mornings and the 5 a.m.’s and so forth.
Mr. Ireland: Our goals are basically to continue the same great coverage of all of our local communities that we serve, making sure that we’ve got the right amount of reporters, photographers, crews, etc., to get the right stories. We have added some hours in some markets and in other markets we have discontinued some hours, but that has been basically driven by the specific market and the viewers, rather than any cost discussions.
On the Telemundo side we’re looking at adding more news hours. We want to become more of a local news source than there may have been previously.
Mr. Sander: We ask each operating company to develop their own plan and goals, but I know everywhere our commitment to news quality and performance is at the top of every station’s goals.
Mr. Minium: To improve product and profitability in all of our news operations, and in each of those operations, to win the lead on every newscast in every daypart.
How would you describe news programming plans for next year?
Mr. Swanson: This is a basic business. This is blocking and tackling. This is simply trying to outperform the other guy day in and day out in news coverage. We’re not going to re-invent the wheel. We just need to get down to basics. Are we covering the breaking news better than our competitors? Are we in touch with the public in our markets so we’re putting together newscasts they feel touch and involve them? Are we doing the things in terms of community effort that we need to do again to demonstrate to the viewing public that we are television stations that care about them and that they should be responsive to us because we’re responsive to them?
Mr. Young: I don’t predict any substantive increase or decrease in the amount of programs on our stations as a group, which doesn’t mean there might not be some adjustments, but there’s no group philosophy vis a vis quantity.
Because it is in the year leading to 2004, we will be putting a lot of sweat equity into political coverage, just because it is something we believe in. We’re working hard at it. Every one of our stations is doing more of it than we did several years ago. We’re involved in a lot of markets in the debate process, in Massachusetts and Florida and in some other states. Quite honestly, we’re enjoying it and we’re really looking forward to owning WMUR in Manchester, as next year becomes a critical time in the primary process, with stations in New Hampshire and Iowa. We’re kind of salivating over that.
Mr. Lombardo: We want to look at opportunities to expand news, but another place we want to look at is the morning, because we’re finding that stations now who do an hour in the morning are looking at doing an hour and a half and stations that are doing an hour and a half are looking at doing two hours in the morning, so we have got to be mindful of that and got to be sensitive to that and when the opportunity presents itself, we want to be prepared to do it.
Mr. Karpowicz: I would describe our plans as very aggressive. Maybe the one area we are going to look at very carefully is the ability to share relevant material between markets that we probably have not done as much of in the past. We’ve got basically three stations in Indiana; we’ve got a couple of stations in Michigan; we’ve got stations in Ohio; [and] we’ve got stations in Illinois. To the extent that there is a regional value to sharing news stories and resources, we’re going to try and exploit that.
Mr. Ireland: We are looking at continuing to do more and more local programming. It may take the shape of local coverage of specific events in more of a half-hour, hour kind of program. It may take the aspect of adding some news hours on weekends for the Telemundo stations, or mornings. And overall I think continually adjusting the programming to fit the nuances of what our viewers want to see.
Mr. Sander: Not really different than in any other years. We have expanded news somewhere every year, and I expect that to happen in a few places in 2003.
Mr. Minium: We will continue to look for expanded programming opportunities that extend our news brand in each of our markets and support our company’s goals in the areas of profitability and synergistic support.
Any significant changes in how resources are committed? For example, have you built money for coverage of events related to terrorism, the Middle East and the possibility of war on Iraq? Will there be more emphasis on equipment or systems upgrades as opposed to hiring?
Mr. Swanson: To really get into the detail of strategy in that sense probably wouldn’t be wise for us, because our competitors are going to read your articles. We are just working very carefully to use what expense dollars we have for our television stations in the wisest manner to produce the best results.
Mr. Young: That’s a proprietary question. I wouldn’t answer that.
Mr. Lombardo: There will be a slightly greater emphasis on equipment but there will still be expansion of human resources.
Mr. Karpowicz: We obviously have built money into the budget for breaking news, and whatever form that takes, we’ll be prepared to cover whatever breaking news exists. We still have a significant breaking news budget, which we can allocate wherever there is news. It’s probably consistent with what we’ve done in the past.
As there are systems and equipment that can grow efficiencies, we’ll be looking at those. We’ve also recognized the value of consumer reporters, investigative teams, things like that, that would require the investment in people. We’re happy to do that, and we’ve done that in many markets.
Mr. Ireland: No. We look at every event that occurs, determine what we need to do from the standpoint of all the resources we have available, whether it’s News Channel, the network, our local stations within a market. You can’t plan necessarily for what may or may not happen, so what we do is we put things together and as it happens we’re going to adjust and cover what we have to.
Mr. Sander: We build in dollars for unexpected news events, but don’t label them in any way. We also use the Belo Capitol Bureau [in Washington] to coordinate news coverage that is of interest to multiple stations and markets.
Mr. Minium: We build our news budgets with our best-guess projections of possible
future coverage issues. However, every news director has experienced unanticipated budget-breaking coverage scenarios. Very few, if any, stop covering news as a result. Despite these real-world challenges, the objective for Clear Channel Television news directors is clear-their goal is to win the lead in their respective markets every day.
Are there any news options or spending questions being held back for consideration in the third or fourth quarter?
Mr. Swanson: In most of our major markets, CBS stations … have been at a competitive disadvantage. And that just relates to day-in-and-day-out news coverage. We have to improve that starting yesterday and that’s every day. We have some strategies in mind for that but we look at the local news business as every day. We’ve got to go out there every day and compete regardless of what the dollar count is.
All we want to do when the business closes tonight is we want to be able to say to ourselves, `We’re better at the close of business tonight than we were at the close of business last Friday. And same thing next Friday.
It takes a tremendous amount of mental discipline to get one of these places turned around. It’s going to be long-term and we recognize that. We understand it and we’re in it for the long haul.
Mr. Young: No, I don’t think so. These are the kind of questions that if you asked 27 stations or 50 or 100, you might get 50 or a hundred different answers, but certainly not as a group, no.
Mr. Lombardo: No.
Mr. Karpowicz: No more than usual.
Mr. Ireland: No.
Mr. Sander: Not that I can think of.
Mr. Minium: We will continue to cover the news of the day in all of our television markets regardless of the realities of the marketplace. We will look closer at discretionary projects should budget considerations dictate.
If you have a duopoly, how is that affecting news planning and budgets for the next year?
Mr. Swanson: There’s no cookie-cutter approach to this. Our duopolies are not all the same. The duopoly in Los Angeles involves an independent that has a lot of news along with the CBS-owned station, so when you put the two of them together you’re looking at a considerable amount of news.
The duopoly up in San Francisco is different. That’s one station that’s significantly in the news business with another station that isn’t built like the Los Angeles second station is.
You just have to use common sense, look at each market, evaluate each situation accordingly. I don’t think we’ll take the same approach for duopolies in each and every market.
You should get some efficiencies with duopolies, particularly in the general administration area. What we want to do is hire the best general managers we can and then give them the authority to assess their situations in each individual market and apply the philosophies there that they think best to win in that particular situation.
Mr. Young: We have the one in Sacramento, but we still are just refining the two different products at KCRA and KQCA. I don’t see that as a budget issue at all. That’s been there a long time-when it was an LMA [local marketing agreement] and now that it’s a duopoly. It is not KCBS and KCAL at this point.
Mr. Lombardo: [Citadel Communications does not have any duopolies.]
Mr. Karpowicz: We have a number of duopolies and in most of them we produce news for both stations. We’ve found it to be great in that you can use personnel across two stations, and as I indicated, one thing we’re going to be looking at very closely is the ability, not only across two stations in the same market but if I’ve got a station in the state capital in Texas or Indiana that can provide services for the other stations in the same state, we’re going to try and look at that as an opportunity as well. [We’ll do] the same thing with sports coverage.
Mr. Ireland: For us in five markets it has been a pretty significant change, because in Miami, Chicago, Los Angeles, Dallas and to be in San Francisco, we are going to be combining the Telemundo and the NBC stations into one newsroom in each one of those cities. It’s going to give us a lot more options for coverage of both markets, and it’s going to give us a capability to see the talent we have and all the people on both sides.
Mr. Sander: Since we have been operating duopolies for some time, I don’t think there is any new thinking. We are consolidating some backroom costs but have been working on that for some time.
Mr. Minium: Many of our duopoly markets have two distinctly branded newscast products served by one newsroom. When budgeting, we consider each station’s branding requirements, strategic plan for news and each station’s revenue potential.
What, or how much, would have to happen in the ad market to relieve some of the pressure on news budgets?
Mr. Swanson: The reality is that ad sales have been tough for television, period, not just over-the-air stations. The media, whether it’s print, whether it’s radio, whether it’s television, has been whacked since the dot-coms went under in the summer of 2000, because the dot-com influx of money had two impacts. One was they were late getting to the market and they were unsophisticated, so they were paying premium rates. Second, they were taking up a significant portion of inventory and that just made the rest of your inventory more valuable and so you got a twofold impact. When that went away, it sort of got masked in 2000 because that was a presidential election year and the political spending was high through November. By the year ’01, circumstances were most difficult.
We need to see our overall economy improve-it isn’t just us, it’s the economy in general. … It’s not the easiest for not just our business, any business, to predict revenue for the coming 12 months. We’ve got to look forward to 2004 because that’s a presidential election year, and so you know there will be an influx of money into that and you hope the economy is getting better by then.
Mr. Young: Oh, I can’t answer that.
Mr. Lombardo: I started spending money when advertising budgets were going in the toilet. I wouldn’t change our plans. The plans that are in place are the plans we’re going with.
Mr. Karpowicz: I don’t think we’ve put a lot of pressure on the news budgets. We’ve been very consistent throughout the years. We watch expenses all the time, whether it’s a good year or a bad year. We apply the same scrutiny to expenses and expansion and so forth whether we’re having a good year or a bad year.
We also believe that spending money in news should be an investment and that there should be growth. As you continue to invest and add franchises and add people and build your product, there is an expectation that you are going to grow your audience. We haven’t had any cutbacks I can think of in news because we view that as such an integral part of what we do.
Mr. Ireland: We budget within-the only [categories somewhat affected] would be advertising and promotion and we feel pretty comfortable with what we’ve got and the outlook for the market that we’ve got.
Mr. Sander: Our company tries to operate the same in all kinds of economic times. We try not to over- or underspend, depending on ad revenues. We try to keep a consistent balance and not go up and down like a yo-yo.
Mr. Minium: It is always easier to execute discretionary projects when business is strong.