One of the major shifts in Internet operations by broadcasters is toward outsourced operations, lessening capital investment for the difficult task of getting started.
"There's been a huge change of attitude from stations," says Mark Zagorski, executive vice president of WorldNow, a third-party outsource for Internet services. "The changes in the market have made us a viable solution, and so we're getting more interest from stations and station groups. Those interested in doing it on their own with the hope of spinning off a big IPO have had to re-evaluate."
Two of the major players helping broadcasters with Internet operations are WorldNow and Internet Broadcast Systems (IBS). The two companies have different approaches: IBS' service provides staff to the station in return for a piece of revenue. (IBS also creates ad buys across its stations.) WorldNow is more of a technology/consulting firm-coming in, getting the operation up and running, training existing station employees, and then letting the station handle part or all of the business aspects of the operation. It has more than 130 stations signed on.
Overcoming the narrow reach of stations and station groups is an incentive to work with outsource networks, according to Tolman Geffs, CEO of IBS. "The real power behind us is that broadcasters know that, individually or even in groups, they only have so much coverage. Putting this thing together in a network to capture national advertising dollars and to share the considerable structural expense is a big win," he says. At present, IBS client stations are in 53 markets, with 33 in the top 50 station markets.
The Internet can also enable local broadcasters to go after newspaper strongholds, growing revenues despite a tight ad market. "Looking at the ad dollars available, local TV is about $14 billion a year; radio, about the same. Newspaper revenues are upwards of $60 billion," says Geffs.
Zagorski is targeting ad dollars like classifieds and yellow pages, usually out of broadcasters' reach. "We're not just redistributing dollars," he says.
WorldNow and IBS are only one part of the local-media menagerie. For others, targeting newspapers may be an exercise in redistributing revenues. Belo Interactive serves both newspapers and television properties under the Belo banner. Senior Vice President Skip Cass remains bullish on the Web's ability to expand revenues overall, not just cannibalizing other media. "There's a distinct opportunity to target new dollars through interactive media, Cass notes. "Content is king, and the real upside is in the possibilities the Internet opens."