Station Biz Sees New Hope, but Same Challenges

Business should be better in 2010, but stations still in hustle mode
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By all accounts, 2010 will be a rebound year for local television. The Winter Olympics and mid-term elections will ensure that, and so hostile is the Democrat-Republican turf war in Washington that spending on the elections and issues should make 2010 look like a presidential election year.

General managers say a surging fourth quarter in 2009, with the retail and automotive categories finally finding their wallets, gave stations momentum going into 2010. Cash from retransmission consent saved numerous station groups' bacon last year and continues to be a solid source of revenue; the question among subscription TV outlets is no longer if they'll pay broadcasters cash for carriage, but how much.

So everything's rosy, right? Not quite. Tossing away the 2009 calendar doesn't automatically make the 2010 revenue picture bright. Late in 2008, general managers repeatedly said they were all too happy to close the book on a dreadful year and get things moving in the right direction. Look at how that turned out—BIA/Kelsey reports a 22.4% decline in station revenue in that annus horribilis we call 2009.

Up against those numbers, the 2010 revenue figures will make station bosses look like studs. But the savvy ones will greet the new year the same way they went about their business in 2009: lean, digging for revenue under every last rock, treating each day like a ballplayer in the option year of his contract.

“[2010] has the potential to lull broadcasters into a false sense of security,” says Frank N. Magid TV President Steve Ridge. “An influx of political, retransmission and Olympics dollars, as well as an uptick in traditional advertising, will all serve to mask the 'new reality.' More challenging advertising fundamentals”—meaning a quantifiable return on advertisers' investments—“will be entrenched by the time the dust settles on 2010.”

BIA/Kelsey sees 2010 revenues for stations increasing modestly, from that putrid $15.6 billion in 2009 to $16.1 billion. It's hardly the $21.5 billion local TV saw as recently as 2007, but stations may never again see the market share they grabbed in the pre-digital world.

As the credit markets thaw, a few stations could even be sold. Post-Newsweek's deal for WTVJ Miami imploded on the cusp of Christmas 2008, and set the tone for a frigid M&A marketplace in which Nexstar's $18 million acquisition of a CW affiliate in Jacksonville was considered big news.

But there's never been more local news to report or more ways of sending real-time content straight to users, thanks to Twitter, stations' iPhone apps and, if they can catch a spectrum-related break in Washington, mobile DTV. “There's an awful lot of interest in [mobile DTV],” says SmithGeiger Senior VP Mark Toney. “It adds another layer of value to broadcasting that hadn't been there in the past.”

Stations can either set their flag in the digital frontier or continue to lose viewers to the widening array of digital diversions. “There's a lot more opportunity to get information to people,” says WISH Indianapolis President-General Manager Jeff White. “We have to make sure we lead in that.”

With Oprah winding down its broadcast run, hundreds of stations are contemplating how best to fill the considerable gap. Some will buck up for other syndicated options, but most will at least consider launching a local program. With the network-affiliate relationship growing increasingly dysfunctional, strong local programming may be the only way to ensure a station's long-term viability. Mission Broadcasting's WYOU Scranton/Wilkes-Barre made headlines by shuttering its newsroom in April, prompting skeptics to wonder how many stations would follow suit. Nine months later, scores of reporters are out of work, but the newsrooms remain open.

While those torrid political races make the sales departments buzz, they should spark the same degree of excitement among those stations' news staffs, too. Viewers' hunger for hyper-local news remains insatiable, and stations need to own the local angles. “There are a lot of exciting races,” says Post-Newsweek Stations President-CEO Alan Frank. “It's a spectacular time to be in the news business.”

E-mail comments tomichael.malone@reedbusiness.com, and follow him on Twitter:@StationBiz

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