Media General Gets Specific - Broadcasting & Cable

Media General Gets Specific

Newspaper division sold, group focuses on immediacy and urgency of broadcast and digital
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Media General looks a whole lot different today, to say the least, than when its Richmond Dispatch newspaper debuted in 1850. And after divesting its last newspaper earlier this month, the company is now focusing solely on its 18 TV stations and their respective digital properties. Marshall Morton, who took over as president and CEO in 2005, retires at the end of the year to make way for current VP/chief operating officer George Mahoney. Morton spoke with B&C deputy editor Michael Malone about the colossal cultural shift that occurred on his watch.

What specifically does it mean for the stations now that the company is a pure-play broadcaster?

The first thing it means is that the stations have all our attention. You might make the case that they don't want so much attention from corporate, but in this case it works in their advantage in many ways, and I think they would say the same thing. For years we looked at broadcast as a second way to address the market; we also had our newspapers, and as time went on, the past 10-15 years, the marketplace was becoming more and more in control of its media usage. It wasn't willing to wait for a prescheduled newscast or the delivery of newspapers. The whole mindset at the corporate level turned to serving a customer that's completely in charge. Today, really the only kind of customer we've got is broadcast, and we can devote our technology and capital spending to supporting that.

One thing I see at the market level is much greater interest in locally produced programming aimed at specific consumer tastes in that market. Birmingham's approach to news and entertainment is different than that in Providence or Columbus. We need to address that on the DMA's terms, not on our own cookie-cutter terms, and we're much better able to do that now.

Any regrets about having the newspapers depart on your watch? After all, they were part of company for 160 years.

Yes, of course-it's an emotional pull because many of the people in the business are friends. Newspapers gave us our start, and also gave us great values that we use today in the broadcast business. Beyond that, we decided in 1995 that we want to be the leading provider of news and information and entertainment in our marketplaces. The marketplaces are changing and if we are going to be true to our mission, then the packaging we use to get that news and information to the customer makes a big difference, too.

I don't see that we could have any better heritage than the one newspapers gave us. But when it comes to getting it to the marketplace on their terms, I think digital and broadcast do that [best]. They're also the most adept, from the standpoint of growth. We're not tied down by geography. The only thing that holds us back from growth is good ideas. So if we have good ideas about presenting [digital] products that are useful to someone in Oregon, they don't have to wait for us to build a branch in Oregon.

The broadcast side of the house did something I don't think newspapers ever could have done, and that's give us a sense of need for immediacy, need to react quickly to consumers' changing tastes. We've always had competition in the broadcast business-there's been at least three other networks to wrestle with for market position and ad share. That's something newspapers typically have not had to contend with. The whole DNA of a broadcaster is, be there first, be there accurately and focus on community needs. I think we've got the right product. I'll admit to some emotional ties that were broken, but not any unhappiness that we made this change to focus purely on broadcast and digital.

Tell me about this George Mahoney character...

(Laughs) George came to us from Dow Jones as our general counsel. He's very much a business-oriented attorney, a get-to-yes kind of guy, and he understood the ethics of the media business very well from his Dow Jones days, but also understands as a public company the obligation to be good stewards of the assets.

From 2000-2010, it became increasingly obvious that George was interested in the business experience too, not just the legal work. We bought a lot of TV stations, and sold businesses, and he showed himself to be adept at that. Around 2006 or 2007 he began working on the structured innovation process in the company. You and I have things that we need to get through the day in fine order, and what Media General wants to do is figure out what they are, how do we train assets to become the go-to spot in the marketplace with the answers you and I need?

George was very heavily involved in that. Most recently he ran our growth and performance area, looking for new revenue streams, new ideas and new packaging across all our product lines and in all our markets. He showed himself to be very good at that. It was also his first chance to manage P&L.

He has good experience, has the right mindset and loves problem solving. And he's a very collegial kind of person.

I can't guarantee he'll run everything just like I did; I hope he won't. But I think he will be focused on the future. He's said this many times-make sure we don't allow broadcast to get in the same position in the market that newspapers got into.

How do you describe a Media General station?

Locally-focused and with a growing understanding of how important it is to provide locally-produced news and information for the marketplace. Five or six years ago we started a morning show in Tampa, with two hosts, long-form advertising, community events and public service subjects. The idea was to syndicate it among our stations and perhaps others if they wanted it, leaving time blocks so our other stations could insert something local. It never worked out quite the way we wanted it to. It did very well in Tampa, but our other stations said, No, we have plenty of time to do this ourselves.

That kind of programming has been very popular-it attracts audiences fast and becomes profitable fast. In a couple of markets we've got evening shows that are very popular. It moves us away from syndicated programming into something that's hyper-local. We're doing a lot of sports-high school sports in particular. This growing awareness that the local marketplace has monetizable interest, and that it's a way to anchor audience for us, is something that has become instantly obvious to us-instantly of course after five years of proving to ourselves. So we see it growing all the time.

In the past year or so we've added 35-40 hours a week of local programming in our markets, news hours as well as the programs I just mentioned. The local station is focused on excellent sales education, excellent information education by topical programming, and understanding that the technology changes so fast that you've got to stay very close to that. So there are at least three branches that are in heavy pursuit in every marketplace.

I'm making a point to visit all of our stations between now and the end of the calendar year to talk about the strength of Media General today, with its broadcast and digital focus, its ability to train all its capital, and all its free cash, on its needs in broadcast.

Our balance sheet is in very strong shape. We've got a very committed lender in Warren Buffett-Berkshire-Hathaway, more precisely. He understands our thrust. Altogether we're a firmer company; the support we can give our local stations is stronger than ever. They've been encouraged, and I think George Mahoney will continue to encourage this, to press on new ideas and new products and new ways to address the market.

Might Media General do station acquisitions in the near term?

That would not be the top of the list. I think managing stations and LMAs [Local Marketing Agreements[, something like that, as we do in Augusta [GA] with WAGT, is probably the better course. Our sales organizations are typically very strong; we have a lot of traction in the marketplace and can do a good job with whatever station we manage. In Augusta, it has allowed both stations to move into a facility that's better suited to their needs, and to upgrade the technology. Our partner there [Schurz] is very happy with the arrangement, and we're incentivized to do better to gain market share for their station.

I think you'll probably see more of that. The industry is certainly consolidating, and we'll be very alert to opportunities.

Is Media General a keeper of its broadcast spectrum?

Yes. We're fortunate enough to live where we do in Richmond, and we can talk to the FCC face to face, hear what they're thinking, talk to our [elected] representatives and hear that they're thinking. And they get a chance to hear what we're thinking too. We told them we are keepers. We use a major piece of our spectrum assignment for HD, and we also have dot-two channels, and productively use those for news, weather and in some cases the Me-TV concept, which is very popular.

Then there's mobile-we have four markets with mobile signals. We think the future of mobile is just undeniable. There's a chicken-and-egg aspect to that of course, in that there are not that many appliances in the marketplace, but it's easy to make your iPhone, iPad and Droid into a TV if you wanted to. The potential for mobile signals-particularly in crisis management, things like that where it won't drag down the cellphone system, a one-to-many kind of communications device-I think it's going to be unbeatable. If you want to watch TV in your backyard, your country cabin, whatever-America does not like be tied down anything, so the idea of sidestepping cable or a satellite dish, I think Americans like [that].

Are you concerned with what you're hearing in Washington?

Not really. Some of the earlier ticklish points were essentially resolved, such as compensation for any gross expenditure required on repacking. I think there's goodwill among participants [in Washington] in getting it done. Our concern with the FCC in the past had been cross-ownership; we felt the rules created in 1975 did not have heavy relevance today in terms of the technology. An awful lot of things we do today were not even on the horizon when that legislation was written.

But the commissioners coming in are a younger breed. They've seen the expansion of broadcast and understand digital and understand what kind of competition it is in the marketplace. I think they're not blind to the facts there.

Can you give an update on Media General's mobile DTV strategy?

There are four markets where we're in play; we expect to add a couple more this year. There's limited usage for the reasons I mentioned, but we think it's an undeniable opportunity and one that people want to take advantage of. With the iPhone, Droid and [other] smartphones, the caliber of pictures is actually pretty stunning. I talk to people who fly across the Atlantic and watch a movie on their iPhone and have a perfectly good time with it.

At the moment it's a case of gaining audience. We're going to push it and promote it. One thing we have with an audience, a digitized audience, is the ability to let them know what we're up to, and quickly they can let us know if they like it or not. So we're able to fine-tune what we're doing.

Are you surprised by the political that's coming in?

We had budgeted for far less than is coming in; we had not thought the race would be so polarized. Being in four battleground states was something we weren't completely prepared for, but it's actually better than the four battleground states. For example, our Providence station-the DMA includes three Massachusetts congressional districts, plus the Warren-Brown [senate] race-is generating a lot of cash, too. We've been saying $57-58 million [for the year], and that's far higher than we've ever shown before. It's fair to say it's been surprising.

On the other hand, we've done things to position ourselves to be a good repository for politicians, because we have a lot of news programming. Most of our stations are No. 1 or No. 2 in their market, so the audience mass they are looking for is available to them.

With eight NBC stations in the group, Media General's fortunes are tied to NBC. What do you make of NBC's prime?

We've been looking for that for a long time. The early part of the week, NBC has shown retainable kinds of gains. We're happy enough with that. But we've always known that these things go through cycles-you're always prone to weakness trends that turn into significant dollar loss, so you always work hard to make local programming the calling card that keeps us in the market position, not primetime. As a result I think we do OK on that front. Many of our No. 1 and No. 2 stations were NBC affiliates, even before The Voice and Revolution began to take hold.

Media General's Tampa operation was a model for the convergence concept a decade ago. With the Tampa Tribune sold, does that mean convergence didn't work?

The decision to sell the newspapers was completely separate from anything about convergence. It was a recognition that the coming cohorts, the young folks of today, are getting information from elsewhere. We held on for four years, in the expectation that we were looking at a cycle, but we admitted toward the end of last year that this is a trend, so we announced the sale of the newspapers. But it had nothing to do with the success or failure of convergence.

I would say convergence in Tampa worked about as well as it could anywhere. TBO.com was the strongest website in the west coast of Florida-they took great advantage of the video generated on the TV side, and the depth of reporting that came out of the newspaper. Our site down there, WFLA.com, never lost its luster. People go to it directly. For years we'd redirect them to Tampa Bay Online [TBO.com]; now, of course, that no longer happens. We're beefing up the website, the content management system, and we'll begin to promote [WFLA.com] as a go-to source.

I'm sure you've seen these studies, but the growth in Internet traffic is largely coming from mobile devices. Mobile devices typically go to local TV, not their local newspapers, for local information. Newspapers more and more are charging for access to the website. We don't do that with our TV stations.

It will take a while to get complete traction [for WFLA.com] like TBO.com did. But we're fortunate that WFLA has a strong brand and I think we can build up that website very fast.

How is 2013 looking?

Core business is good. We go into 2013 as we've gone into every [off political year] with new opportunities to sell, and incentive packages to make sure key advertisers keep volume up. Auto is very strong so we think that goes into next year. There's certainly some pullback over presidential politics and that will be resolved. Nobody hates uncertainty like the marketplace, so once we get the uncertainties behind us I think that helps. For years we did an excellent job replacing the prior year's lost political; we know how to do that in a non-recessionary environment, and the chances are very strong that we are looking at a non-recessionary environment next year and we'll be able to get back to our old pattern of replacing and supplanting the previous year's political with new advertising and new advertisers.

The Internet is a better-known commodity for advertisers than it was even five years ago. We do a lot of teaching our advertisers on how to use the Internet and develop advertising packages for them. I think we'll see continued hyper-growth in Internet revenues that are helpful to us also.

Every forecast is subject to unexpected stumbles, but in terms of general trends, I think we can count on the Internet to provide us new customers and new revenue streams.

What are your plans for retirement?

Having a calendar less structured than it is. (Laughs)

My wife and I enjoy traveling. I will enjoy playing more tennis. I enjoy woodworking, so I'll get back in that. But for the most part, and I'm sure every man or woman who retires says this, there are so many books I want to read. My wife said our bedside table looks like a combat zone. I'll get that pared down. And our children, and their children, are lots of fun. We'll be plenty busy, I think. My wife and I are both involved in a lot of civic things in Richmond, where you feel like you can make a difference. We'll have more time for that.

Will you have an official role with Media General?

I will still be on the board. I succeeded Stewart Bryan [as CEO], who set the standard as to how to deal with a situation like this. He was very available to me when I needed him, but very out of the flow of decision-making, and never with any interference. I'd like to use that model when dealing with George and others here.

E-mail comments to mmalone@nbmedia.com and follow him on Twitter: @BCMikeMalone

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