David Barrett has achieved just about everything in the broadcast business: running radio and television stations, serving as CEO of a major group, being inducted into the B&C Hall of Fame. Barrett, chairman and CEO of the Hearst Television group, adds another prestigious prize to his trove when he receives the Golden Mike award from the Broadcasters Foundation of America on Feb. 25.
Barrett spoke with Michael Malone, B&C deputy editor, about the state of the local broadcast business and why the Broadcasters Foundation, a charity that provides financial assistance to radio and television broadcasters who are in dire need, is well worth his time and energy. An edited transcript appears below.
You are involved with all sorts of industry associations and boards. Why the Broadcasters Foundation?
I admire their mission. There are plenty of people in this industry we hear about who have been very successful, who enjoy great careers. But there are also lots of other folks you don't hear much about whose lives have taken different turns, who have had catastrophic events. This is an organization that "takes care of their own," like the Springsteen song. I greatly admire the leadership chairman Phil Lombardo, and before him, Ed McLaughlin, have put in place to have the industry help those people who've worked in the industry who've fallen on hard times. As a company we've been very supportive; personally I've tried to be very supportive of the organization because its mission is wonderful. The more we get the word out that our mission is of importance and value, then we're able to raise money. That money helps people in desperate need. Good for all of us for helping people in need.
So you're a Springsteen fan?
I used to run rock radio stations! We were playing [Bruce] Springsteen in the beginning in some places, before people knew who he was. We were playing Springsteen on a rock station in Montreal that I ran in the '70s.
What do you make of the consolidation going on in the local broadcast industry? Is it a good thing?
I think it's the normal course of business. I've always talked about a Darwinian outcome; in most circumstances in local markets and overall, the strongest people are in a position to invest more in the business and provide the right kind of service. Scale is important in every industry; people that are consolidators are creating scale that makes for better business circumstances. We hear about US Airways and American Airlines talking about combining to form the largest airline in world. There will be people who observe that there may be adverse price implications for consumers in that environment. There are pros and cons with these kinds of consolidation plays, but it's the normal course of business.
There may be a lack of leadership for industry organizations when you have fewer station groups and fewer executives. Is there concern that, amid consolidation, one byproduct might be a lack of top-level people to do the hard work to make the industry work?
Over time, everybody has been concerned about who the next generation of executives are. Alan Frank has been succeeded [atop Post-Newsweek] by Emily Barr, who's an outstanding executive. Jordan [Wertlieb] was named president of Hearst Television. He's an outstanding next-generation executive. If companies are to be successful, they are going to have to develop next-generation management talent. The leading companies will be bringing those people to the industry table to provide leadership to the NAB, TVB and the like. While that is always a concern, I think it works itself out-people do emerge. I think there's some outstanding young talent in the industry.
You do think about, if there are fewer companies, sometimes it's harder for the Broadcasters Foundation to raise money because there are fewer people to tap. But that doesn't mean one should cut back on important initiatives to develop young people and spark interest in our industry and mentor them. The Emma Bowen Foundation is another organization that is a spectacular mentoring program. There are fewer companies, particularly on the radio side, that participate. But the companies that are committed long-term for our industry are stepping up. We certainly see that with the Broadcasters Foundation. It's a function of the kind of leadership Phil Lombardo and [president] Jim Thompson are providing.
All TV stations are trying to be 24/7 media outlets instead of just stations. What is the Hearst TV group doing to accomplish that?
We are focused on our digital platforms. Last year we did more than 4 billion page views, and 38% of those were on mobile platforms. The growth in our mobile activity and traffic is remarkable. We will hopefully generate in the 5 billion range of page views [in 2013], and I think mobile will be 50% of those page views. We are monetizing that. It is a challenge, but we are generating revenue and profitability on our digital platforms.
Multicasting has become a very significant business for us; it's now, in aggregate, the size of a small-to-middle-market television station. If you talk about value creation, we've been able to do that by having virtually all our stations involved in multicast programming. We are selling advertising and getting some ratings-we've created value in that space.
That is part of the growth strategy going forward. We can look at investment in additional TV stations, but also look at lower-level investment in multicast and digital, which is responsive to how people are consuming media.
It's earnings season. Do you miss doing quarterly earnings calls since Hearst TV went private?
Part of me does. It had been an opportunity for us to articulate our view about the industry and use the pulpit, if you will, to advance some things our company felt were important. As I see people do earnings and talk business [now], part of me misses the opportunity to articulate where the business is going and assert the leadership of our company in a more public way. I don't miss the accountability that a lot of analysts expect. I kind of grimace when I see someone missed analysts' estimates by $7 million, less than 1%. I don't miss some of the short-term thinking that drives some of the analysts' questioning.
Hearst is the diametric opposite of that. We have assets we've owned for 50-100-125 years; if anyone takes the long view, it is us. We are as successful as a 125-year-old company as many of these new upstarts are. I would say the quality of earnings at Hearst Television and Hearst Corp. are higher than that of a lot of other [companies] in the industry. The depth of relationships we have with viewers, readers, advertisers and partners has remarkably strong and deep roots, and that makes for quality earnings.
How come we haven't heard Hearst TV's name in the M&A news?
We've got significant scale now at 18% of U.S. households. We've got a nice balance between NBC stations and ABC stations. Now that we are privately held again by Hearst Corporation, we're not in the public markets. The allocation of capital in Hearst Corporation is considered across a lot of different areas. The great success of Hearst has been driven by a diversified strategy: We are strong in magazines, strong in cable entertainment, strong in broadcasting and business media has been an area where we've invested. Hearst's board of directors and corporate management assess where the best opportunity for a return is as it allocates capital to different businesses. We want to keep a very balanced portfolio to the extent we can.
We are heavily invested in the TV business. We've spent as much money on the TV business as we have spent-I'm speaking for the corporation-in other areas. There is a balance in our portfolio that makes sense. Television is something Hearst is comfortable with and proud of; we've come off a very strong year in 2012 and we can be very measured as to what opportunities we look at, how strategic we are and what sort of return potential they have.
Might we see an acquisition this year?
I wouldn't signal one this year. But I would say we are certainly in the deal flow. We know everything that is out there. People would like us to be in the process, if only because we are a well-heeled company that people like to have at auctions. I'd say there's nothing imminent, but we've got our eye on the operating ball and our eye on strategically where the company needs to grow over the next 5-10 years and how we accomplish that. That's what we're focused on.
What did you see in Jordan Wertlieb that made you think he projected to a corporate role at Hearst?
He's smart, he has good judgment, good experience. He's been with us for 20 years so we've seen him in a variety of situations. We've challenged him as an executive in Boston and Baltimore in a number of different roles and he's got the right stuff. He's got the whole package-management skills, energy. He's a force of nature in terms of how he addresses the industry. Jordan loves television, he helps people be better at what they do. For me that's a key management attribute-help other people succeed. People like working with Jordan and he makes people better. That makes him an executive who's a great fit at Hearst.
With Jordan taking on the group presidency, are you transitioning toward retirement?
This is about preparing next-generation talent. This is a company that is ever mindful of that. [Former Hearst-Argyle President/CEO] John Conomikes brought me in as his right-hand guy and I understudied to him for a number of years; ultimately, he retired and I took over, and ultimately I will retire and Jordan will take over fully. We put a lot on his plate this year. It's the way Hearst approaches management transitions. I am not making any announcement as to specific plans about what I will do. I am a director and trustee of Hearst Corp. and a trusteeship appointment is for life. So I'll be coming in and out of this building for years to come if I stay healthy. I'll have involvement in the company for years to come, but I don't intend to be working as hard in the years to come as I've worked the past 30-40 years.
You're spending less time on airplanes these days?
[Laughs] A little bit, yeah. Jordan and [senior VP] Frank Biancuzzo and others are out there.
How does that feel?
[Laughs] I don't miss taking my belt off.
The Hearst TV stations have a strong reputation in terms of journalism and community service. How do you build that?
It's a cultural thing. We continue to focus on what our priorities are. The most important thing we do is local news and local engagement and serving these local communities. It's a conversation that is ongoing. We also take the approach of the old saw that if something is worth doing it's worth doing well. We're very competitive-there's a competitive culture here of high performance. We want to win in our markets. Winning means strong local ratings, strong local sales and high profitably, and that allows us to attract and retain talented people. There's a whole cultural commitment to excellence that runs through the parent company and certainly runs through the television company. The stations are successful because of really talented people at every level of the station. It isn't about the people in New York on the 39th floor of the Hearst Tower making all the decisions, being the puppet master. We've got a great station in Boston that's led by Bill Fine. We've got a great station in Orlando, led by Jim Carter, in Pittsburgh, led by Mike Hayes-
Now you have to name everybody.
[Laughs] Caroline Taplett in West Palm Beach is terrific, Sarah Smith in Kansas City... You've got to have the best general managers, sales managers, news directors, people in engineering, marketing-the best people at each television station for them to be successful. It's been a challenge but we've been good at attracting and retaining talented people because they like the culture of the company, they respect the company and we empower them to do their thing.
Is there a corporate leadership training program where you identify a future leader and put them into the program?
I'm very focused, as is Jordan, on who the shining stars are out there. We have employee recognition programs in sales and marketing and we talk about who are next-generation people in every area of the company. Hearst has an executive development program called Hearst Management Institute, which we've done for a decade, probably longer. It's in association with Northwestern University. We've run a lot of our talented TV people through that program, as have the magazines and newspapers and business media. It's one opportunity for us to help develop next-generation people and we're very focused on that. Many of our best performers have been participants in that. They learn a lot; they learn things outside their wheelhouse of expertise-non-financial executives get good financial executive and marketing training, and leadership training is probably one of the most important things we cover.
What did you think of the Super Bowl?
We like the fact that Baltimore won. WBAL Radio is the rights holder for the Ravens.
You've got some roots in Baltimore.
I got there 60 days after the Colts left in Mayflower moving vans in the spring of 1985. The Ravens hadn't come to Baltimore and established that franchise when I left. Our TV and radio stations there have a great relationship with the team. We carry the preseason games on TV and fancy ourselves as the Ravens station. WBAL and 98Rock carry the games. [WBAL sports director] Gerry Sandusky is the play-by-play guy and Stan White, an All Pro player who played with the Colts, is our color guy. We're proud of our association there and it was fun to follow them all the way to the Super Bowl. They lost four of their last five regular season games, so I didn't have any expectations that they'd go deep, and there they were.
What did you make of the broadcast?
I thought it was OK. I thought they were ill prepared for the power outage. I was surprised there wasn't a plan-a disaster plan, if you will-for coverage. I viewed that as a news-like event in the game and they were ill prepared to cover it. They were scrambling. It's a broadcaster's nightmare when the power goes out, but you need to have redundancy plans in place and there wasn't enough redundancy in place to keep them going. It's one thing for the lights to go out in the stadium but to lose the booth-it's surprising that occurred. The guys were scrambling. I guess that was never done better than Jim McKay in Munich-how he shifted from sports guy to news guy to talk about the horrible circumstances that occurred [11 members of the Israeli Olympics team were killed in the '72 Games]. I don't compare them in any way, other than it was a shift to a different story. They had to scramble to get into a different storytelling mode, and there wasn't lot of information to come out.
There are so many options for your multicast channels. What works? Local? Entertainment?
It's a combination of both and it's very market sensitive-some formats work in some markets but don't work in other markets. Some classic TV things-Me-TV is an interesting product that resonates. In Monterey we've got the ABC affiliate as a multicast product that generates ratings. In Fort Smith [Ark.], we've got The CW, and we were recognized as the best CW Plus station in the country. That has become a profitable enterprise. It's taking some content and leveraging the audience and the relationships we have with advertisers in the local marketplace and launching new products. Every company is interested in innovation initiatives and launching new products, and we're certainly doing that with what we put on websites, mobile devices, multicast platforms. We are very much involved in new product development and innovation activities.
What's on your DVR?
Scandal. Person of Interest on CBS. I still like scripted television better than reality shows. I'm looking forward to Red Widow on ABC. The Voice is a very appealing show. Hearst has a joint venture with Mark Burnett's company so we are an owner of The Voice and a lot of projects Mark Burnett has in place. So this building is rooting for the success of The Voice, and given that we've got 10 NBC stations, it's a double good feeling when we watch The Voice's ratings perform as they did.
What was key to NBC's rebound in prime?
Having hit shows. The Voice is a hit show, Sunday Night Football performed well. They're challenged in the first quarter without football or The Voice but The Voice is back on later in the spring. They're making good decisions about show concepts, they're producing and marketing and scheduling them well. Interestingly, they hired Jeff Bader [NBC president, program planning, strategy and research] away from ABC. He's a name you don't hear a lot about but he's a very smart guy who's got a talent for scheduling. He's kind of an unsung hero. He's made some good decisions about how to schedule things. [NBCUniversal CEO] Steve Burke has hired talented people and he's getting a benefit from them.
NBC's news leadership is, at the moment, in flux. Is that a concern for NBC affiliates?
We certainly watch that with interest. They've had a great run for many years, but nothing lasts forever. They determined, [former NBC News president] Steve Capus determined it was time for a change. We are keenly interested in who succeeds Steve, what the vision is and how capable he or she is as an executive in running a very important division. The legacy of success at NBC News is long running and our 10 NBC stations are very focused on what happens next in terms of executive leadership. I'm a big fan of Pat Fili [-Krushel, chairman of NBCU News Group]. I'm confident she'll make a good call with Steve Burke about who takes that over. Those are important jobs in the industry and important jobs for the country. We need smart people on top of our network news organizations-that's good for our society.
Network affiliation agreements were very divisive in the recent past, but that seems to be quiet of late. Do you feel like stations have determined that paying the networks is just part of life now?
We're coming to commercial agreements that ultimately people accept on the network side and on the station side. The old expression I use goes back 15 years: We're in a deadly embrace of sorts with the networks. They need us in a big way and we need them in a big way. When that exists and that is acknowledged, you come to a business conclusion. The old saw that neither side is happy with the deal suggests that a reasonable deal may be the outcome. There is a new paradigm-we're providing money, paying fees, if you will, to the network for programming. It's a function of the high cost of programming and the fractionalization of audiences, but we need good programming; that one has to pay more to get it is a reality of the business. Not everyone has reached final affiliation agreements, but they're works in progress and they work themselves out as commercial agreements do.
How's your anxiety level regarding Washington and broadcast spectrum?
My anxiety level is moderating right now because of my confidence, and the industry's confidence, in [NAB president and CEO] Gordon Smith and how the NAB represents us in Washington, on the Hill and at the FCC. We have a leader in Gordon who is respected and well regarded and trusted-I think the Congress trusts him, I think the FCC has come to trust him. And our organization, I believe, is in a better place than it's been in a number of years in that regard. He is advancing solutions-oriented arguments as opposed to being an organization that says, no, we can't do that. He proactively tries to find solutions and compromises and addresses the concerns the government has.
That said, we've got to see how the auction rules play out. The Longley-Rice data models were released by the FCC [Feb. 5] with an invitation, I'm told, to look at it and tell us what we're uncomfortable with. That's the right kind of step. The engineering community in our industry will assess those models and hopefully be able to tweak them where necessary. You've got to really look at the rules of the auction in fine detail and look at the timing. It's Gordon Smith's and [NAB executive VP of strategic planning] Rick Kaplan's notion that this is so important that we shouldn't rush into it-in my words, not take a Ready, Fire, Aim approach, as opposed to a Ready, Aim, Fire one-is the right way to go.
Gordon is doing a remarkably good job for our industry. The NAB TV board is loaded with talented people who get the issues, are engaged in the issues and work hard.
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