Looking to the Net for bigger nets

Head of NBC Stations plans to make each a local 'portal'

Like the rest of the TV-station industry, the NBC Stations Group is grappling with the switch to digital, the impact of the Internet and the harsh reality that some of its traditional sources of advertising, such as the national spot segment, are shrinking.

But Jay Ireland, president of the NBC Stations Group, has a plan-or at least the outline of one-to ensure that his division keeps growing. The plan includes a complete overhaul and a more fully integrated stations-to-Internet connection, designed to make each of NBC's 13 stations a local "portal," he says.

The former GE Plastics executive also says the Web can make doing business with advertisers more efficient-and take the industry's effort to move to electronic invoicing several steps further. Conducting business with advertisers can be a truly paperless process, he says.

Redefining the stations' ad market is also part of the strategy. Ireland wants his stations to go after a bigger piece of the ad pie, not just dollars earmarked for TV.

In-house program development, particularly for the struggling daytime lineup, is also on the drawing board. Combining facilities with the Paxson stations is a top priority, and other station ventures are being explored as well.

The plan is a bit sketchier when it comes to utilizing the digital spectrum. Ireland acknowledges that there's not a definitive strategy there yet. But that's as much a network issue as a station issue. Once the network decides on a plan, the stations will serve as the launch pad to carry it out.

The TV industry, like most of American commerce, is obsessed with the Internet and utilizing its full potential. Ireland and the NBC stations are no exception. He has a staff of 70 Web-o-philes groupwide (Ireland calls them his "bunch of passionate maniacs") focused on integrating the stations with cyberspace. There is a director of Internet activities at each station and a handful of corporate Web gurus as well. Corporate Webbies include John Garcia, head of content development, and Dave Pugh, who oversees the technology infrastructure.

The source for local info

The stations' Internet strategy, Ireland says, "is to take our broadcast strength and the strong local ties and credibility we've developed and use that with the power of the Web to provide news and all kinds of additional information services all around the local community."

That includes everything from news, weather and traffic updates to movie and restaurant guides to browsing and buying retail online. "We will become the local portal, not just a television station on the Web," he says. "We'll become the local source of information, news and entertainment around the city or town you live in."

The station group has commissioned Open Market to revamp all the stations' Web sites-particularly the backroom operations-to enable the group to carry out the local portal strategy.

NBC has also made an investment in Digitalconvergence.com, an interactive service that connects viewers from programs and ads on TV to Web sites on their computers. But that's more of a future play, he says. "Eventually, not yet but eventually, we are going to have convergence of the Internet and television, and what we want to do is have a service that provides our viewers, at the click of a button, all this material that they can get from both."

What stations hope to do with Digitalconvergence, he says, is charge advertisers more for the qualified leads the technology generates by linking them directly with viewers.

Slowing core business

Part of the reason the NBC Stations Group is so Internet-focused is that the core business is not growing as fast as it once was, Ireland acknowledges. But he believes that, besides adding a new revenue stream, he can apply new-media technology to the core business and not only cut costs but possibly spur new sales as well.

"The agencies tell us that spot television is the most expensive ad buy they have because of all the tracking and paperwork that occurs over many different markets," he explains. His solution: Put the entire process on the Internet, from purchase to invoicing, confirming spot airings to payments, along with any changes that take place in between. "You could move to a vendor-driven auction. They're not doing that in television, but they're doing it with a lot of other commodities."

The whole process of buying and selling ads, including all the negotiations and approvals, could be moved to the paperless environment of the computer-just as it has at other GE businesses.

"I come out of a business where we've done something very similar," Ireland says. That business was GE Plastics, where he was chief financial officer. "We've done it around the world, and basically human hands don't touch it."

Daytime woes

Although the NBC Station Group is firing well on most cylinders, there are some problem areas-most notably daytime, where the group, like its network, is a distant third behind CBS and ABC.

The daytime problem starts at the top of the daypart, when viewers defect from NBC in droves at the conclusion of the Today show. Later Today follows, and viewers have not been receptive to the show, which debuted last fall. In May, Later Today lost roughly two-thirds of its lead-in audience in New York and Los Angeles. In Chicago, it lost about half.

This year, the group bet on new syndication talk show Ainsley Harriott, which also didn't pan out and won't return next year. NBC recently canceled Later Today as a network show (under pressure from affiliates), although the owned stations will continue to carry it. NBC owns the show and hopes it will turn around.

"Daytime is an issue," Ireland acknowledges. "It's our least profitable and least sellable" daypart. In a sense, he says, NBC has exacerbated the over-the-air daytime problem with successful ventures in other areas-CNBC, for example-which have contributed to the fragmentation of the daytime audience.

The solution to NBC's daytime woes is elusive. "It's a real challenge," he says, "and the revenue potential there is relatively limited because of the size of the audience."

But the network and the stations are working feverishly in-house to develop game, talk and other shows. Ireland says he has also had lots of discussions with outside producers. Whatever new shows result, he says, have to fit with the NBC brand. The only genre he rules out is court shows, of which there is a glut on the market.

For next season, NBC's big syndication bet is on the new talk show Men Are From Mars, Women Are From Venus, based on the popular book of the same name. According to Ireland, NBC, as the launch group, is working closely with the show's producer, Columbia TriStar Television Distribution, on the show's format and content.

Ideally, the goal would be to duplicate the success NBC has had in prime time access, where it owns Extra and Access Hollywood, distributed by Warner Bros. NBC has long considered getting into the syndication business itself, although company executives say no decision has been made. "Nothing is imminent," Ireland notes, adding that, if NBC does go forward in syndication, it would likely be with a partner.

In the group's top six markets-New York, Los Angeles, Chicago, Philadelphia, Dallas and Washington-the NBC stations are a strong second overall and finish first or second in most of the key news time periods. The biggest problem market is Raleigh-Durham, N.C., where WNCN-TV remains a distant third. In Hartford, Conn., too, WVIT(TV) is in third place overall.

In Hartford, during the May sweeps, wvit remained in third place in households overall, although the station, a UHF outlet, has a better demographic profile than the household numbers suggest. In the key demos, the station is frequently No. 1 or 2.

Despite the problems, the NBC group gets fairly good reviews from those who follow the business. "Their daytime is where programs go to die," quips Bill Carroll, vice president, programming, Katz Television. But overall, he adds, the station group seems on track. "[Ireland] has a good grasp of the direction he wants to go. He's a businessman, and, in this day and age, that is what TV is."

Keeping up with 2000

But, with its major-market stations on firm footing, Wall Street sees continued growth for the NBC stations, even into next year, when it will have to make up $100 million or more in Olympics and political dollars.

Merrill Lynch, for example, estimates the NBC stations will generate a 10% revenue gain in 2001 to almost $1.4 billion, up from $1.27 billion this year. Operating profit for the station group, Merrill estimates, will climb roughly 13% in 2001, to $745 million, from $660 million in 2000.

Some of those profits will come from reduced costs and operating efficiencies. For example, as the stations have laid in digital facilities, the group will operate some stations out of centralized hubs and transmission centers.

All the NBC stations will have their joint sales ventures in place with co-located Paxson stations by the end of next month, Ireland says. Further consolidation will follow after that, with one master-control studio for both stations in many cases. By the end of the year, he adds, most of the stations will be repurposing news for the Paxson stations and possibly for other stations. In Miami, for example, wtvj(tv) is also producing a news show for the WB affiliate.

Ireland also told analysts and investors at a conference in March that he wants his TV station managers to "redefine" their markets. In other words, instead of going after just the available over-the-air TV time in those 13 markets-representing about $6 billion in advertising-he wants them to pursue print, radio and cable dollars as well. That's about $18 billion in potential ad revenue.

At the same time, he acknowledges, beating 2000's revenue and profit figures in 2001 "will be a challenge. But that gets back to the issue that, if you don't look at other revenue streams and potentials out there, beyond the base broadcasting business, you're never going to do it."