Reps Brace For More Station Consolidation
National spot TV sellers fear expected loosening of the FCC ownership rules will shake up client lists
By Jean Bergantini Grillo -- Broadcasting & Cable, 3/30/2003 7:00:00 PM
Petry Media Corp.
Thirty years ago, 27 different companies repped 650 television stations across the country, selling their local time to national and regional advertisers. Today, just three companies, with a total of eight TV rep divisions, serve 892 stations nationwide. The three: Katz Television, Petry Media and the Cox Television rep group.
|The NY Connection|
|Most commercial TV sell spots to national advertisers through one of three Manhattan-based rep firms.|
|The Cox Group||$2.6B*|
|*2002 TV billings
|Continental TV Sales|
|Eagle Television Sales|
What led to so few serving so many? Deregulation, consolidation of station ownership and raw competition. And those forces, along with the general economic unease, are likely to cause even more turmoil within the rep community in the months and years ahead.
"The three station rep groups are really not all that different in that each has a broad cross-section of companies," explained an executive who spent more than 20 years with one of the three groups. "But, today, all their energies are in keeping the stations they have and luring others."
The rep business was affected by two big rounds of station consolidation, which followed the relaxation of FCC ownership rules. The first came in the mid-1980's and the second after the passage of the Telecommunications Act of 1996. That law allowed station groups to own more than 12 stations and raised the cap on the number of homes a single station group could reach from 25% to 35%.
"In the beginning of the 1980s, reps were making 12% to 15% commissions," the former rep said. "By the end of the 1980s, those numbers were down to 10% to 12%. Today, they are 6% to 8%, or smaller."
A major East Coast broadcast buyer put it more bluntly: "The rep business has been almost wrecked by cost-cutting. Too many rep firms undercut each other to get specific station groups. Now, they need to invest in their businesses and they don't have the money."
Rep firms are in trouble "if they don't offer TV or radio stations something special," said a West Coast buyer. "All of them had to lower their fees to lure stations. But it's not about billing. It's about revenue. A lower bottom line means less money for technological enhancements."
This spring, the FCC may trigger another big round of station consolidation by further loosening it station-ownership rules. The reps are paying close attention.
"Ownership consolidation is the biggest challenge facing the rep business," said Jim Beloyianis, president and CEO of the Katz Television Group. "If the 35% cap is removed, networks could diminish the number of stations now repped by independents." (The networks rep most of their stations in house.)
Tim McAuliff, president and CEO of Petry Media, said the rep business would also change if the FCC decides to permit duopolies—the ownership of two stations—in smaller markets. "When you have one station in a market agreeing to take over the back office for another station in the market, our rep firm ends up selling time for both stations."
Cox Television is the leader in total billings, with its three divisions—TeleRep, HRP and MMT—reporting a total of $2.6 billion last year. MMT, started in the late 60s, was originally created to handle the Meredith stations. HRP now fronts for smaller Cox, Tribune, Belo, Meredith and Emmis stations. TeleRep is the cash cow, annually billing $1.4 billion. It handles sales for Cox and other major-market broadcasters.
With 396 in its stable, Katz reps the most stations. Originally created to rep newspapers, it expanded into radio and TV as those media came along. In August 2000, San Antonio-based TV and radio station group Clear Channel Communications bought Katz and its parent AMFM.
Katz operates three rep divisions. Continental Television Sales works with stations in smaller markets. Millennium Sales & Marketing focuses on the Clear Channel and Sinclair station groups. Eagle Television Sales' principal client is Hearst-Argyle Television.
The privately held Petry Media reps 225 stations through two operating divisions, Petry Television and Blair Television, and reported a combined $1.2 billion in 2002 billings. Blair's clients include Gannett and LIN, while Petry counts Hubbard, Bonneville and Jefferson-Pilot as customers.
Because deregulation and station consolidation are out of their control, the rep firms hope they can grow their businesses by grabbing a bigger slice of the total advertising pie and improving service to ad buyers.
"We need to effectively present the value of our medium," Beloyianis said. "We believe spot TV is being underutilized. Broadcast, cable and syndication all reach the same national footprint. We can emphasize a geo-targeting, market by market approach."
"At Petry, we have stations in the top 10, 20, 30 markets," McAuliff added, "But there has also been a large swing towards agency regionalization. Money is moving out of New York and closer to stations in Detroit, Chicago, Atlanta. It helps to have regional offices and it helps to have strong management."
Ad buyers say the reps could help themselves and the spot business by persuading more of their station-clients to adopt electronic data interchange (EDI)—that is, fully electronic procedures for buying and selling air time.
"Broadcast reps don't offer me the same service I get with radio," said one key West Coast buyer. "I can get electronic invoices from my radio rep, while 400 TV stations don't have them."
"We need to make our medium more user-friendly on the agency level," Beloyianis admitted. "We have too much spot buying done with too much paper. The more we can streamline the back office, the more that will enable us to sell our unique marketing attributes to those stations."
The Television Bureau of Advertising, which pitches spot TV to national and regional advertisers, has been working hard to grease the spot TV transaction.
Another problem is DARE, the transactional software that most spot TV buyers and sellers now use. Some agencies find DARE lacking, said David Prager, chief information officer for the Katz Media Group. "DARE was 16 years in the making and is based on older technology that is limited and rigid. It needs to be made more open and simple to implement."
"In fact, both radio and TV need new standards, so we are setting up a single mechanism that every traffic and agency system provider can use," Prager said.
"Realistically," said Beloyianis, "if I'm going to ask an agency to listen to a two-hour pitch about why a Boston or Philadelphia station is crucial, I need to give something back in terms of ease of execution."
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