The revenue side of the TV station business is not so hot these days. The ad market is soft, compensation payments from the big networks are dwindling and those co-branded Web sites are still not delivering many dollars.
So what's a TV-station executive to do? Focus on the cost side, of course. And for a growing number of cost-conscious station groups, that means centralcasting—controlling multiple stations in many cities from a single hub station. By consolidating one or more of the operations of geographically scattered stations, the groups expect to eliminate jobs, shave operating costs and, in the long run, reduce equipment costs.
"Centralized broadcasting cuts right to the very basis of the industry," says Sim Kolliner, a former NBC engineer now developing centralcasting products for Leitch. "It could totally change the face of broadcasting."
Master control—the place where a station's programming comes together and then is sent to the transmitter—is at the heart of most centralcasting schemes. But groups are also eyeing traffic, creative services, administration and syndicated programming. Even news, or parts of it, could be sucked out of the local stations into a central vortex.
"You have to look at it from a whole system viewpoint," says John Roe, vice president and chief technology officer at Belo Broadcasting. "Master-control consolidation has been used as a metaphor for this whole activity. But consolidating master control by itself doesn't buy you a lot. I don't think the cost savings are all that significant. But when you take all the other potential savings from centralizing various functions, taking them collectively or some set of them, it does have real possibilities."
"There is no one formula to follow," says Steve Jacobs, senior vice president of networked systems businesses at Sony. "There are different economics, labor equations, technology costs and linkages. There is no one right solution and no one right answer.
"Last year, it was all about the Internet and opportunities for new revenue streams," he continues. "This year, it's about profits and return on investment."
NO MORE LOCAL?
Centralization is not without its critics. The unions complain about the loss of jobs and warn of the loss of on-air quality. Others say centralcasting calls into question what localism in broadcasting is all about. Is it locally originated programming? News and sports? A physical building? Or is it the subtle influence of the shared destiny of a station and the community it serves?
After several years of talking about it, more groups are making the move. Media General and NBC are joining pioneers The Ackerley Group, The New York Times Broadcast Group and USA Broadcasting with rollout of systems. Others, including Belo, Clear Channel, Gannett, Hearst-Argyle, McGraw-Hill, Meredith, Raycom and Sinclair, have projects under serious consideration. Some, like Belo and Tribune, are running small-scale trials.
"I'm spending all my time on plans for centralized broadcast operations," says Al Kovalick, chief technology officer, Broadcast Solutions Division, Pinnacle Systems, a provider of gear for centralcasting systems. "It's very hot and is moving along much faster than anyone could have anticipated. Station groups are saying that they will centralize six, eight or nine stations this year, no matter what."
NBC is centralizing its backroom operations—master control, monitoring and traffic. "The strategy is to leave those things that are critical to local broadcasting alone, such as news and sales. In these areas, feet on the street are critical, so they remain autonomous at the station," says Jay Ireland, president of NBC television stations.
NBC's interest is an unintended consequence of its transition to digital, says Ireland. "Miami opened our eyes to what the possibilities are. Two years ago, we built a state-of-the-art facility there. We saw what could be done when you integrate everything and put all the automation systems together. There were savings and efficiencies. We had more efficient use of labor. Most important, we got a better-looking product on the air, quicker."
NBC plans three hubs for its 13 stations. The Miami hub, WTVJ(TV), will manage three other stations (WVTM-TV Birmingham is already online). The hub at WNBC-TV New York will control six other stations. And KNBC-TV Los Angeles will run KNSD(TV) San Diego, starting this August.
Media General is now unifying the traffic functions of 26 local stations and plans to centralize the master control of the stations next year. "By getting traffic in place first, we have a central database feeding 26 stations in 26 locations. So when we centralize master control, that center [in Tampa Bay, Fla.] will be adjacent to the traffic operating center—same building, same floor, same room, just sectioned off into a technical operation center," says Ardell Hill, senior vice president of Media General's broadcast division.
FEWER JOBS, BUT BIG COSTS
"Our initial calculation for centralizing traffic found that we have an average of 3.4 man positions per station, multiplied by 20," says Hill. "Centralizing traffic will let us do the same work with fewer than half that number.
"When it comes to master control, I'm dealing with five master-control operators running a station 24/7. If I pay $50,000 a year, multiplied by 20 stations, that is $5 million in annual salary costs, $25 million over five years. If I can replace the five operators at each station with two, one to cover morning and afternoon and another for weekends, I've eliminated three positions and saved $15 million."
But the savings are not as big as they seem, Hill warns. "In medium and smaller markets, salaries are nowhere near $50,000. … And the cost for fiber-optic lines from the centralized operations center quickly becomes significant. My boss is a taskmaster, and I'll be held accountable for those savings. My own informal conversations indicate that some people wish they had not been quite so optimistic about the numbers."
Other operational efficiencies flow from centralcasting. "To me the great opportunity will be the ability to manage our commercial inventory and adjust rates in a competitive inventory," says Jim Zimmerman, head of Media General's broadcast division. "Today, I look back and see how we did in the quarter, the month, the daypart, the average unit rate per daypart. But it's all in hindsight. By the time I get answers to those questions, I'm halfway through the next month. By the time we can raise red flags, I could be 45 days into the quarter."
Ackerley and The New York Times stations groups have led the way. Ackerley had its first cluster of interconnected stations in upstate New York in place in March 1998. From the hub at WIXT(TV) Syracuse, Ackerley runs traffic, programming, accounting and other technical operations for stations in Binghamton, Utica, Rochester, Watertown and Elmira. Each station continues to handles its own sales and news.
Ackerley is now working on two additional hubs, one at KGET(TV) Bakersfield, Calif., for its stations in central California and one at KCBA(TV) Salinas, Calif., for stations in Oregon and Northern California. When all is said and done, only KVOS-TV Bellingham, Wash., and KTVF(TV) Fairbanks, Alaska, will be on their own and only because connectivity costs are too high.
THE SERVICE HUB
"It's a slippery thing to come up with exact savings because we have redeployed some of the money—we save payroll expense in master control and put another reporter in the field. But in New York, the savings are significant, in the vicinity of 25% of the total cost of operations, if you take out programming costs," says Ackerley President Dave Reid.
The New York Times Broadcast Group consolidates its eight stations out of the digital operating center at WTKR-TV Norfolk, Va. The center handles master control, quality control and monitoring, transmitter monitoring, satellite control and FCC and program logging.
The hub went online at the end of 1998 with the stations gradually coming aboard during 1999. As few as two people operate the eight stations, although more may be needed for live programming, says Frank Chebalo, who was promoted to general manager of WTKR-TV after bringing the hub online. The local stations can take over control when the need arises, such as loss of connectivity or complex programming events, he says.
In June, the group is looking forward to bringing on three Pax TV affiliates, part of a joint sales agreement. "The model is the same as we are accustomed to operating," says Chebalo. "We already have ABC, CBS and NBC stations, and now we will be operating stations from another network that has slightly different policies and procedures."
The New York Times sees itself as a service provider to other stations. Its digital operating center can handle more than 100 TV stations anywhere in the country. Similarly, NBC is could provide such services affiliates. "We want to get this thing working for our 13 stations," says Ireland. "But after this year, there is no reason why we couldn't share and open it up to others."
Connectivity—two-way, high-speed fiber links—seems to be the biggest obstacle to centralcasting. For many stations, the price of connectivity is still prohibitively high. But the price is coming down steadily, says Pinnacle's Al Kovalick. "It's dropping 50% per year, so obscenely, they are afraid if they are going to be in business. There is a glut of bandwidth."
Most of Ackerley's problems have involved connectivity. In New York, the company was lucky to find a single low-cost, long-term supplier, Telergy, which has aggressively fibered the upstate New York region. Not so in California. "We must deal with multiple providers, and individual fiber connections don't always mesh perfectly," says Kelly Alford, Ackerley's vice president of engineering. "Incumbent carriers may be the only providers in an area, and they are sometimes unwilling to lease high-capacity bandwidth over a long period of time. Anybody going out to do this needs to have the connectivity nailed down.
UNIONS AREN'T HAPPY
Unions are starting to weigh in on centralized broadcasting. The big issue is jobs. "I don't understand when I stopped becoming a valuable asset and became a necessary evil to keep things running," says one union member who asked not to be identified. "Management thinks it's magic; a file server can do it without hesitation. We're all hoping the hub system will fail. But I think they'll stick with it and work through all the bugs. They're determined."
Ray Taylor, president of NABET Local 41 in Chicago, thinks centralcasting could lead to disaster. "If there is a power outage in New York, we've had it in Chicago. And that's a big potential downside. They would lose commercials in every hubbed station."
Groups embracing centralcasting will also have to contend with critics who say the groups are pulling back from their FCC obligation to serve the local communities. "It is a very disturbing trend because it might spell the end to diversity of sources of local news, says Don Heider, assistant professor of journalism, University of Texas. "We first saw newspapers and then radio stations regionalize their operations and then homogenize their product. Now it seems that TV may be headed in the same direction.
"When 25 stations are owned by one corporate owner in New York, the only sense of local community are people in sales, news, traffic and master control. If we now lose those, they are the last link between human beings and local broadcasting."
Philadelphia IBEW Local 98 representative Frank Goldstein agrees. "I'm confused as to who puts in all the information about the snow storm, when schools are closing in the Columbus area or in Chicago? Who will really be on the ground in the smaller neighborhoods. There are things you only know when you live there."
Programming and news are clearly not beyond the reach of centralcasters. Peter Storer, CEO of Peter Storer Associates, which specializes in software for programming departments, says one person could manage programming for a regional cluster of stations. That executive could "control what they buy, how much they pay, how they split payment among their stations, amortization and payment to distributors."
JUST A FAD?
Although groups vow to keep news local, it is becoming technologically feasible to centralcast the news. As a consultant to a national cable network, Mark Bunzel produced local news from a distant location using a computer-generated virtual studio. "It passed the sniff test," Bunzel says. "It looked locally originated."
Centralcasting is no panacea for groups hard-pressed to maintain their financial margins, and it has its limits. "The idea of having one massive central site is a very compelling academic argument but rarely makes realistic sense," says Joe French, executive vice president of digital media management for Encoda. "Broadcast groups have stations strung all over the place. Does it make sense to back-haul a local ad into a local server only to rebroadcast it out again? And when you get to the local scene, where signature—local news, local sports—is everything to you, you want some local effect and control."
Larry Brody, president and CEO of CEI, thinks centralization will be most successful for small stations. "Stations with complex commercial and PSA schedules, plus a heavy news load with fast-breaking news, and third-party programming will be difficult to handle remotely."
Some broadcasters simply remain unconvinced. "The conclusion of our initial study was that there wasn't synergy with our existing business plans," says Mike Doback, vice president, engineering, E.W. Scripps.
"Our stations are spread out over a wide geographic area, and there is disparate programming. The stations are tightly managed, and there aren't enough labor savings to overcome the cost of equipment and transport circuits."
Tribune is also wary. "We didn't find anything frightening enough to say, 'Don't do it,' says Pat Mullen, the newly appointed president of Tribune Broadcasting. "But we also didn't discover anything compelling that said we had to jump into it."