Moving Beyond the Old TV Model

Apr 25, 2005  •  Post A Comment

The local broadcast business as it’s known today doesn’t have much room for growth, and that’s why stations are now peeling back the layers on an array of new revenue streams. In fact, the need to move beyond the core revenue stream of advertising punctuated last week’s National Association of Broadcasters convention in Las Vegas.

The annual event has traditionally been a hardware show, but for the first time it felt thematically more akin to the Consumer Electronics Show, which regularly embraces the idea of convergence. While oodles of equipment stuffed the NAB floor, the message behind the new tools, keynotes and sessions was that broadcasters must begin mining new opportunities.

That message permeated the show this year, sounded by outgoing NAB President and CEO Eddie Fritts, by Verizon Communications CEO Ivan Seidenberg, by the heads of major advertising trade associations and by the broadcasters who attended.

Partnering With Telcos

Mr. Seidenberg opened the show with a keynote speech asking local broadcasters to create partnerships with the phone company in delivering their services over cellphones and over Verizon’s planned Fios TV service. He asked for their support to avoid traditional cable franchise regulation. What Verizon offers broadcasters in return is nearly unlimited capacity to serve up not only their linear standard-definition and digital channels but also alternative platforms for content such as mobile television and video-on-demand.

“We have an abundance of capacity,” he said. “With the tremendous bandwidth in our system and with our business interest in providing as much content as possible, we believe we can do this in a way that expands the market for both of us.”

That message appeals to broadcasters, many of whom feel constrained by the limited growth potential of their current revenue stream. “When you talk about content for wireless devices and VOD, you add new uses and untapped revenue,” said Chris Rohrs, president of the Television Bureau of Advertising. “Stations will be providing content to the viewer in whatever way they want to receive.”

That’s where Verizon hopes to win their favor. “We need the content our customers want the most, and that means we need you,” Mr. Seidenberg told NAB attendees.

He outlined some of the forms that content on cellphones from local broadcasters could take: “traffic alerts and weather reports delivered to the dashboard of a consumer, program guides, video clips promoting your lineup delivered to cellphones,” he said.

The broadcast business is on the cusp of a transition from an old model to a new one, Mr. Rohrs said during a panel at the show. “The transition is led by stations,” he said.

Capitol Broadcasting-owned CBS station WRAL-TV in Raleigh-Durham, N.C., introduced earlier this year a subscription service feeding news, weather and traffic information to cellphones. Other stations are likely to follow.

Nearly all broadcasters have been approached by phone companies looking for content for their mobile video service, said Roger Ogden, a senior VP at Gannett Broadcasting who oversees five stations and is also the president and general manager of NBC affiliate KUSA-TV in Denver. “The time to begin to commit more resources has arrived,” Mr. Ogden said. “It’s now time to stop talking and push forward with action-small action and smart experimentation.”

Another opportunity stations want to look at is video-on-demand. “VOD is a big part of our future,” Mr. Ogden said. KUSA news content is available on demand on Comcast in Denver, along with news from the market’s Viacom-owned CBS station, KCNC-TV. But stations must proceed with caution so they don’t cannibalize their core products, he added.

Revisiting the Web

While broadcasters enjoy a smorgasbord of new opportunities, they also are still keenly invested in growing one they’ve already plowed money into: their Web sites. Station Web sites represent a $100 million or $120 million business and will likely double this year, Mr. Rohrs said, as advertisers continue to support local content.

But advertising isn’t the only revenue stream for Web sites. Some of the Gannett stations are experimenting with offering some proprietary content, such as weather, on a subscription basis on their sites.

As stations evaluate mobile options, what’s uncertain is the potential for advertising in mobile video, said Bob Liodice, president of the Association of National Advertisers. “As traditional media goes through this transition there will be degrees of experimentation. They will be leveraged as part of their broader media mix,” he said.

Mr. Seidenberg said he expects mobile content from broadcasters will include a mix of ads and subscription-based services. “We like subscription-based. They tend to be advertising-based. I think we can work together to find a balance,” he said.

During his final convention after 23 years as head of NAB, Mr. Fritts left the audience with these parting thoughts: “I am convinced … a new generation of broadcasters [will] emerge to seize the digital world, using the cellphone, Internet, countless wireless devices. Broadcasters can and must be part of the digital future.”