Converting to digital: It’s all about the bottom line

Dec 16, 2002  •  Post A Comment

The firm bottom line with investing in an all-digital newsroom is the bottom line: You’ve got to recoup the investment at some point. Other than that, the issue of when and how to convert a news operation to a tapeless, digital environment is a moving target, with each station having specific and individual needs.
While television broadcasters have been making the conversion to digital newsrooms for a few years now, only 15 percent of local stations have a video server, the technological heart of the digital newsroom. Despite the obvious benefits of enhancing work flow, stations still need to make a business case for the transition. The financial analysis is different for each station but shares some common elements.
Three essential factors in deciding when to upgrade a newsroom are the life cycle of the existing equipment, the efficiencies generated by new equipment and the effect of the new equipment on the product, said Don Perez, director of technology and operations with Gannett Broadcasting’s NBC affiliate KUSA-TV in Denver. The station has relied on servers and nonlinear editing systems for about a year now. The conversion has cost the station somewhere in the $1 million to $5 million range, he said. “It’s hard for me to think of a major-market station that won’t have made this transition three to five years from now,” he said.
When the cost to maintain old equipment approaches the cost to purchase new equipment, a station can reach the tipping point, said Susan Adams Loyd, VP and general manager of the Jacksonville, Fla., Clear Channel duopoly of Fox affiliate WAWS-TV and CBS affiliate WTEV-TV.
The duopoly has not converted its news operations to digital yet, though it has installed some Discreet nonlinear editing systems and ParkerVision’s newsroom automation system. The stations are in the process of developing a business case for converting, and Ms. Loyd expects a decision within the year.
Logistics and cost savings
Among the issues is the ongoing cost of tape. She estimates her two stations can spend as much as $2,000 to $3,000 each month on tape. Another consideration is the length of time a station will need to maintain two separate systems during the transition. “In trying to maintain two formats there is time and expense and quality,” she said.
The duopoly is straddling the fence between holding back on new purchases and holding back on repairs of old equipment. Even though the cost to maintain old equipment is rising, the new equipment must pay for itself over its life span to justify the investment.
If a station can reduce its operating costs over three to five years, the conversion should generate a return on investment, said Kevin Ivey, president of the Ivey Group and an independent consultant to TV stations. The cost savings largely come from three areas: a reduction in tape costs, a reduction in staff and a reduction in maintenance on electromagnetic devices like VTRs. An expected benefit is that a station can produce a better newscast, since it can spend more time programming and less time managing the technology, he said.
Some stations do not look at a digital transition as a one-time investment. Liberty Corp. does not have specific plans to convert its 15 stations to digital but has instead chosen to purchase digital or digitally capable equipment during the normal equipment replacement cycle, said Jim Keelor, president and chief operating officer of the Greenville, S.C.-based company. This approach allows the station group to spread the capital investment over time.
“You can’t drive a ’49 Ford in a Ferrari world,” Mr. Keelor said. “Digital is a Ferrari world and we need to get there in a way where you can predict capital expenditures on a regular basis. We will recoup through a better-looking product, more efficiency and flexibility.”