Local TV

‘Disruption Is Coming’

Accelerating changes in technology, audience behavior and viewer demographics will cause major disruptions to the business model of local television news similar to those that have rocked newspapers, many news leaders interviewed for this report predicted. And several of these executives and thought leaders said they’re concerned that local television news is not moving quickly enough to prepare for what’s coming.

They don’t have the same urgency today from a cash perspective, but their businesses will get disrupted. Traditional core viewers will continue to age, new viewers will be harder to reach, more people will cut the cord, etc. And so what are broadcasters doing to strengthen and diversify and sort of reinvent their brands for the next 10 to 20 years and reinvent their business models around that, particularly in the digital world?

Jed Williams Chief Strategy Officer, Local Media Association

Television remains the most common place for Americans to get their news, but the audience declined in 2018 across all time slots studied by the Pew Research Center. And the old traditions of appointment TV are eroding as more consumers embrace streaming video over the internet, also known as OTT video, or “over the top.”

There’s growing fragmentation.

People are streaming and binge watching and they’ll turn on the news if there’s a big story or if it’s convenient in a lot of markets. Jennifer Lyons News Director, WGN-TV

Which requires local TV stations to be adaptive.

Back in the day, I said to my boss at the time ... ‘Hey, wouldn’t it be neat if we put the video on the phone and streaming on the phone?’ I mean, video was on the phone, you could watch a clip or something, but you didn’t watch a whole newscast, you didn’t stream on your phone, like people do today. They laughed at me and they said, ‘Who would want to watch television on their phone?’ But we did it anyway and I think we got our foot in the door early and you have to continue to innovate. That’s the biggest thing: We don’t know what the next big thing is going to be, but you have to be open to it. Jennifer Lyons News Director, WGN-TV

Meanwhile, young people are shunning local newscasts.

I think you can envision a time when television, local TV news begins to face in a big way the same secular challenges that local newspapers are already facing, and that’s an aging viewer and revenue pressures to match. Jim Friedlich Executive Director and CEO, Lenfest Institute for Journalism

Was the newspaper crisis a precursor to the TV crisis?

I would say the big difference is that local television, the graying of that audience on the primary distribution channel, is probably as aggressive or more aggressive than the aging on the newspaper model. I think a lot of the newspaper subscriptions declined so aggressively, so quickly over the last few years that now that trend is slowing in a lot of places. … I worry about television. I do think that there is this enormous age divide in terms of who has a television and whoever thinks about local news. And in the same way that fewer and fewer people grew up with a newspaper, now many of those people have never seen even their parents watch television news that way. Jeremy Gilbert Director of Strategic Initiatives, The Washington Post

The Money Spigot Is Still On

A major factor inhibiting change in local TV news is that stations are still making impressive money from advertising and retransmission fees.

‘When it rains, it pours’ for local TV.

Local television is driven by two or three principal revenue models. Most local TV stations are still highly ad-dependent and the categories tend to be retail, auto, various local categories. They have usually two-year or four-year spikes in revenue from political advertising that depend upon which state and which city one is considering. So WFLA in Florida does extremely well in the political cycle and a New York City station much less so. But political advertising is highly lucrative for the right stations because when it rains, it pours; and the rates that they receive are regulated and are kind of the best available rates and are quite lucrative for the local station. So there’s kind of regular advertising; political advertising; and there’s a third revenue source called retransmission. And retrans is also regulatory. It’s what cable needs to pay and is required to pay for the carriage of the local stations, and in some cases it’s quite lucrative and it falls right to the bottom line. It’s simply a payment that they receive. They have no sales costs against it, they have no programming costs against it, it’s just money, good. Jim Friedlich Executive Director and CEO, Lenfest Institute for Journalism

Retrans fees are not without complications, however. A dispute between CBS and AT&T over the fees led to a blackout for CBS stations in 14 cities on DirecTV, DirecTV Now, U-verse and AT&T in mid-2019. And Friedlich also noted that if political advertising migrates to digital, local news stations may be hurt.

There’s time to adjust.

On the broadcast side, they are dominated by advertising revenue and retransmission fees. And they’re doing quite well. They had record earnings in the last few years. And even though disruption is coming their way, they have a lot more runway. Nancy Lane President, Local Media Association

The latest Pew study found that local TV’s over-the-air advertising revenue in 2018 was up 12 percent over the previous year to $19.3 billion, but that gain must be weighed against the fact that 2018 was a year of heavy campaign advertising and 2017 wasn’t. In the previous election cycle in 2016, advertising was $19.8 billion, according to Pew.

Clearly, traditional audience and revenue patterns cannot be taken for granted. Retransmission fees are up, but so are the number of people becoming cord cutters by turning to streaming services instead of cable and satellite. Traditional pay TV services lost 1.5 million subscribers in the second quarter of 2019 alone — the industry’s fourth straight quarter of record losses.

Disruption won’t shock anyone.

I think that Netflix, OTT, anything that pulls away from traditional TV is going to disrupt that industry further. And it’s amazing that it hasn’t thus far, with their revenues still being as strong as they are. But I will say the broadcasters see it coming. And they are preparing for that disruption. And they are taking active steps to make sure that they’re in that space, and that they’re disrupting themselves as well. Some better than others. But I really feel like the broadcasters get it, and aren’t going to sit back and be surprised by the disruption that happens. Nancy Lane President, Local Media Association

Getting Aligned Online

Some stations were slow to get serious about digital, and they’re trying to catch up now, including a greater commitment to producing online-only content.

Former CBS News chief Andrew Heyward sees a reckoning.

(Local TV) has come to a demographic reality and is going to have to figure out a way to make its digital products pay, and that will be the conundrum. Andrew Heyward Walter Cronkite School of Journalism at Arizona State University, Research Professor

When broadcast married digital ...

(The broadcast side) has been flat ... it rises just a bit each year, but not the growth that any industry wants. So digital is definitely the best partner for broadcast and it has brought the growth that we have been looking for. Kelly Landeen Vice President and General Manager, WAGM
We strive every day to do unique content for online. You need to get coverage of what is happening in your market on every station, in terms of like, ‘Oh, there was a fire here or a murder here, but what are we doing that’s a different angle? What kind of follow up are we doing?’ … The additional part of that is, we put a lot of effort into online promotion of that story. So we actually release the story first online, prior to putting it on air. Those are the things that we do to drive our digital product. Kathy Reynolds Assistant News Director and Multi-Platform Storytelling Lead, WUSA

It’s catch-up time.

I think that it’s definitely changing, but when it comes to local news ... people are still watching us live, right? So our big money maker is still ads during our newscast. We’ve dabbled in digital revenue, whether it’s ads for our website, and we recently launched apps in all of our markets, which is something that the industry has been doing for a long time. Christine Portela Director of News Operations, Local Media, Univision
Last year I organized the first-ever Digital Day, which was a day with all of the digital teams in the state. That had never been done before because there were no digital teams to meet. And this year, we’re expecting more than 25 people to show up for Digital Day. … There’s been a definite increase in attention and awareness that audiences are moving to digital platforms. Teresa Frontado Digital Director, WLRN News

Comparing TV with newspapers on digital potential

I think if newspapers can figure out a digital model that hinges on having a mix of content that’s monetized in a different way, their odds are as good as TV or radio because (newspapers) are story-centric and ... just not looking to put video online. (Newspapers are) creating video that complements a print story and that’s uniquely what people want to see on the web, not segments produced for a television screen. Carol Fowler Director of Content, KSDK-TV

Tuning into New Revenue

Local TV stations are looking for additional revenue streams, however modest. But the enormous technology costs keep their main focus on the big moneymakers.

Turning viewers into members.

(Local TV stations are) expanding into all kinds of areas. If you think about broadcasts and the big personalities they have in local markets, they could truly build some experiential VIP-type memberships that could give viewers access to all kinds of cool things beyond content. So I’m not really talking about a membership model to pay for the news on the TV website. I’m talking about a true membership model that includes really cool things. So that’s one thing that we see emerging. But a lot of investment is being made in OTT, and in new business models for broadcasters. And they’re investing heavily in digital, which maybe they were slower than newspapers. Nancy Lane President, Local Media Association

Selling video production as a sidelight.

We’re finding production is another revenue stream that we have that is growing because we will have different formats that we’ll do. Like, we’ll do recruitment videos instead of just commercial production. Kelly Landeen Vice President and General Manager, WAGM

Getting the most out of advertising opportunities.

In terms of how we cover news, we are selling a lot more sponsorships. I mean, that’s the reality of what we have to do. Our sports segments are sponsored. Our weather segments have logos on them. Everyone is trying to find different ways to monetize what we’re doing because you have to have a source of revenue. So, take from my Sinclair days in Maine, you do a sports segment, so we did the OA Centers for Orthopaedics Sports Report, so there was the sponsorship of every sportscast. The logo was on the front. We said the names. They paid X amount of dollars to get it, and then they get a number of web ads, in addition to that, a number of commercials, of promos. That’s how you build out sources of revenue streams that are beyond just people buying commercials, and it becomes a multiplatform purchase. There’s very rarely a deal done in broadcast news today that doesn’t include a digital component. Most deals are a multiplatform deal. Kathy Reynolds Assistant News Director and Multi-Platform Storytelling Lead, WUSA

How expenses limit options.

You’re constantly fighting an industry where your cost of doing business is astronomical. I mean, you’re talking about equipment that is extraordinarily technical equipment, that is high-end, is getting used 24 hours a day. … So, there’s an extraordinary cost to doing business, and so you use your broadcast revenue in so many ways to help carry that weight. Kathy Reynolds Assistant News Director and Multi-Platform Storytelling Lead, WUSA

Fragmentation and the Future

The fluidity in the TV market can be difficult to navigate, but smart TV executives will take their products where the audiences are — or will be.

Aggregation vs. fragmentation.

So every audience matters and we’re really coming to a world that we’re aggregating audiences because there’s more fragmentation of them. There’s more consumption, but more fragmentation. And more than ever we try to aggregate audiences to provide marketing solutions for clients. Larry Wert President of Broadcast Media, Tribune Media

Catering to younger, ‘more instant’ viewers.

The station is now on Roku and Amazon and stuff like that. So it gives them the opportunity because … we’re finding a lot of the younger people do not have cable or dish. So their viewing habits are different than older people and they are more instant. They don’t do — how do they call it — appointment TV. They don’t sit down at 8 o’clock to watch a particular show. Kelly Landeen Vice President and General Manager, WAGM
I think a lot of local newsrooms are actually doing an OK job at making sure that they get their content deployed on digital platforms, but I think the easiest step that they could take would be, make the consumption of the content fit the platform itself,” Sabatinelli said. “So if you’re developing content and you’re deploying it onto an OTT platform, people that are launching these apps generally aren’t expecting to hunt and peck for something. They’re looking to watch TV. Blake Sabatinelli CEO, Newsy

A shout-out to TV journalism.

There’s some communities, the TV station is knocking it out of the ballpark. You know, we used to dog on them, but there’s some that are really doing a nice job and they’re actually creating a nice news ecosystem on their digital platforms. Doug Phares Former CEO and President, Sandusky Newspaper Group

Video on ‘Print’ Websites

The “pivot to video” by legacy print news outlets didn’t go so well, but video has a legitimate role in many news products.

Keep it short and relevant.

I’m all about video right now and they have to be short. And we know everybody’s mobile, right? They have to be short and they have to, again, involve community. Catherine Nelson Publisher, Piedmont Media

Facebook executives beat the drum for video in 2016, saying consumer demand was soaring and Facebook’s news feed might become majority video within five years. An emergency “pivot to video” movement emerged in many newsrooms. Local news reporters were ordered to grab video from virtually every scene and to file the video before they filed their stories.

But it soon became evident that the numbers cited by Facebook were vastly overstated. Facebook said the miscalculation was accidental, but a group of advertisers alleged in a federal lawsuit that Facebook knew it was wrong for at least a year and fraudulently failed to disclose it. Facebook agreed to a settlement of the case in June 2019.

So where does that leave local news outlets that have been primarily text-driven but are looking to broaden their platforms? After all, it wasn’t just Facebook that fueled the video pivot. Ads at the front end of videos are money makers for revenue-hungry news organizations.

Many news outlets have cut back, while continuing to produce videos when they’re most appropriate — for police surveillance video, for example, or to give a lift to a major enterprise project. It remains a challenge for text-oriented news sites to produce videos with the polish that consumers have come to expect.

Making it automatic and high-impact.

We have our editors do a video the night before the paper comes out to do a recap. One of our videos that we did, it was at a meeting that was controversial, had over 15,000 views. And 15,000 in a market that is only 10,000 is considerable. Catherine Nelson Publisher, Piedmont Media

Video serving advertisers and other customers.

We have the PATH Foundation here and it’s a nonprofit that gives to local nonprofits and it’s very successful. We approached them to do a program where we would ... make 30 videos integrated into a specialized publication, doing 10-second videos with each one of them in the community to build awareness. Now that’s a new revenue stream and it’s very cost-effective, and they’ll have those videos. Our videos, they own. We did a marketing campaign with a local furniture place where we redesigned his website, we … did five videos for him and put them into a specialized publication. Catherine Nelson Publisher, Piedmont Media

Having a well-rounded staff certainly helps.

I think you can look at it as a hybrid situation. If you have a talented production staff that’s multifaceted, somebody in the production staff who understands social media, somebody who’s a photographer, videographer and graphic artist. … You’ll find one of those because I did. Catherine Nelson Publisher, Piedmont Media