By Dave Morgan
Television has an audience problem, though not the same problem affecting most media platforms these days. Unlike newspapers, magazines and radio, the television viewing audience is actually growing.
According to just-released numbers from Nielsen, U.S. viewership of linear television (non-time-shifted viewing of broadcast, cable and satellite television) grew last year both in numbers of viewers and time spent per viewer. This growth occurred in spite of the fact that time-shifted television viewing, Internet video viewing and mobile video viewing all grew as well.
Wow! The world's most powerful media platform -- thought by many to be at a point of maturity or decline in the U.S. -- is still growing.
Television's audience problem is one of fragmentation. More people may be watching more TV, but unfortunately, they are watching many, many more channels and more programs than they used to. The pie may be bigger, but the slices of that pie are much smaller.
This is a major problem. Advertisers, who provide tens of billions of dollars of support for television programs, like their slices of pie big -- really big. While they have grudgingly put up with the constantly shrinking slice sizes over the past few years, most of them are getting close to their point of tolerance. Advertisers are starting to say that enough is enough.
This is very bad for television broadcasters, networks and programmers, since they are so dependent on advertising to support their businesses. Thus, the television industry has shifted from a world of scarce distribution to scarce attention, and most expect much of the economic value to follow. Value in the future will be less about securing distribution of programming and more about attracting and retaining audiences for programming, probably on a case-by-case basis.
Why are audiences fragmenting so much? Certainly, part of the problem is that with many more choices -- actually, an explosion of programming choices -- it is quite natural for viewers to spread themselves out among the many different types of channels and programs now available. Folks are no longer tied to only three broadcast networks for their television programming.
But that's not the only problem. I believe that viewer confusion and ignorance may be a very big driver of fragmentation as well. With so many choices on so many channels at so many different days and times of the day, it is practically impossible for viewers to know what's available to them at any one time.
It is a navigation issues. Viewers are confused. They lack information. Old tools like TV Guide magazine, TV listings in newspapers, and "lead in, lead out" programs, are largely obsolete and ineffective.
What about Electronic Programming Guides? Navigating those are like trying to use computers in the pre-graphical user interface days. They're not very user-friendly and only provide very "flat" information.
How will the viewer confusion problem be fixed? Shrinking the number of programming choices is certainly not an option -- the toothpaste is already out of that tube. Clearly, the television industry needs to find ways to better promote their programming to the right viewers at the right time. They need to find ways to distribute more relevant information closer to viewers about what programming is available that they might be interested in.
Almost 25% of all commercial time on television is used for program promotion. That represents at least $10 billion dollars of value, not to mention the several billions of dollars that broadcasters and cable nets and programmers spend "off-channel" to promote their shows.
To date, there is only a limited amount of science brought to bear on this process; not much was ever needed in the past since it always worked. That has changed. Now, I think, is the time to bring much more science to the television program promotion process. It could go a long way toward ameliorating audience fragmentation, or at least bring more predictability to managing audience flows. What do you think?
Post your response to the public Online SPIN blog. See what others are saying on the Online SPIN blog and leave a Comment on LeNoble's Media Business Insights.
Dave Morgan, founder of TACODA and Real Media, is Chairman of -- and a partner in -- The Tennis Company, which owns TENNIS.com, and TENNIS and SMASH Magazines.
Saturday, February 28, 2009
Tuesday, February 24, 2009
The Economy's Worst May be Past
By Irwin Kellner, MarketWatch
Last update: 12:01 a.m. EST Feb. 24, 2009
Comments: 486
PORT WASHINGTON, N.Y. (MarketWatch) -- Although you wouldn't know it from the behavior of the stock market, the economic outlook is turning just a bit less gloomy.
Prosperity may not be just around the corner, but statistical evidence is mounting to suggest that the worst of this recession may soon be past.
And before you inundate me with email alleging that I am out of touch with the real world, let me say right at the top that I am not for one moment saying that the economy has stopped sliding. I am only suggesting that it appears to be contracting at a slower pace.
Clearly, this has nothing whatsoever to do with the stimulus package that the president signed into law last week. As a matter of fact, if the recession does end within the next few months, it will probably be in spite of this package, rather than because of it.
If you want a policy to credit, it's monetary policy. The combination of liquidity that the Federal Reserve has pumped into the economy, along with its special lending programs and capital injections into the banks, is largely responsible.
But you want more than assertions; you want proof. And here it is:
The Conference Board's index of leading economic indicators has risen for two months in a row.
Producer prices have increased for two straight months.
Consumer prices rose in January -- the first monthly gain in six months.
The Baltic Dry Index, which measures the cost of shipping key raw materials like copper, steel and iron, has more than doubled from its recent lows.
Existing-home sales rose in December, and participants in our weekly survey think that another rise took place in January.
Pending home sales went up in December.
Builders' confidence inched up this month.
Thanks to lower interest rates, applications for both new mortgages and refinancings of existing mortgages are rising.
Real hourly earnings rose 4.5% in December following a 3.3% increase in November.
An index of consumer expectations rose in January.
Retail sales shot up by 1% in January -- the first monthly rise since June.
The decline in consumer credit moderated in the latest month.
New orders for consumer and nonmilitary capital goods went up in January.
The ISM index of manufacturing went up last month.
The ISM index of services rose last month for the second month in a row.
The money supply is soaring, a sign that there's plenty of liquidity in the economy.
The 3-month London interbank offered rate, a measure of banks' willingness to lend to each other, has dropped to 1.2% from close to 5% a number of weeks ago.
Other measures of the state of the financial markets, like the TED spread and the 2-year swap spread are down, as well.
Prices of credit default swaps for banks have fallen from their peaks.
The corporate-bond markets are thawing out, too; some $127 billion in dollar-denominated debt was issued in January, the most for any month since last May.
Some securities on banks' books are starting to recover in value.
All this said, the economy is still a long way from a pink-cheeked state of health. But remember, you've got to crawl before you can walk. And it looks like the economy is about to do just that.
Irwin Kellner is chief economist for MarketWatch, and is Distinguished Scholar of Economics at Dowling College in Oakdale, N.Y.
Last update: 12:01 a.m. EST Feb. 24, 2009
Comments: 486
PORT WASHINGTON, N.Y. (MarketWatch) -- Although you wouldn't know it from the behavior of the stock market, the economic outlook is turning just a bit less gloomy.
Prosperity may not be just around the corner, but statistical evidence is mounting to suggest that the worst of this recession may soon be past.
And before you inundate me with email alleging that I am out of touch with the real world, let me say right at the top that I am not for one moment saying that the economy has stopped sliding. I am only suggesting that it appears to be contracting at a slower pace.
Clearly, this has nothing whatsoever to do with the stimulus package that the president signed into law last week. As a matter of fact, if the recession does end within the next few months, it will probably be in spite of this package, rather than because of it.
If you want a policy to credit, it's monetary policy. The combination of liquidity that the Federal Reserve has pumped into the economy, along with its special lending programs and capital injections into the banks, is largely responsible.
But you want more than assertions; you want proof. And here it is:
The Conference Board's index of leading economic indicators has risen for two months in a row.
Producer prices have increased for two straight months.
Consumer prices rose in January -- the first monthly gain in six months.
The Baltic Dry Index, which measures the cost of shipping key raw materials like copper, steel and iron, has more than doubled from its recent lows.
Existing-home sales rose in December, and participants in our weekly survey think that another rise took place in January.
Pending home sales went up in December.
Builders' confidence inched up this month.
Thanks to lower interest rates, applications for both new mortgages and refinancings of existing mortgages are rising.
Real hourly earnings rose 4.5% in December following a 3.3% increase in November.
An index of consumer expectations rose in January.
Retail sales shot up by 1% in January -- the first monthly rise since June.
The decline in consumer credit moderated in the latest month.
New orders for consumer and nonmilitary capital goods went up in January.
The ISM index of manufacturing went up last month.
The ISM index of services rose last month for the second month in a row.
The money supply is soaring, a sign that there's plenty of liquidity in the economy.
The 3-month London interbank offered rate, a measure of banks' willingness to lend to each other, has dropped to 1.2% from close to 5% a number of weeks ago.
Other measures of the state of the financial markets, like the TED spread and the 2-year swap spread are down, as well.
Prices of credit default swaps for banks have fallen from their peaks.
The corporate-bond markets are thawing out, too; some $127 billion in dollar-denominated debt was issued in January, the most for any month since last May.
Some securities on banks' books are starting to recover in value.
All this said, the economy is still a long way from a pink-cheeked state of health. But remember, you've got to crawl before you can walk. And it looks like the economy is about to do just that.
Irwin Kellner is chief economist for MarketWatch, and is Distinguished Scholar of Economics at Dowling College in Oakdale, N.Y.
Monday, February 23, 2009
The Click Is Not The Right Metric For Many Advertisers
Advertising Age It's great that the Web is an interactive medium where everything can be measured, but it doesn't do an advertiser much good if you're measuring the wrong thing. And the click, Advertising Age's Abby Klaasen says, is exactly the wrong metric for many advertisers.In the Web world, credit goes to the last ad clicked on. As Klaasen explains, "brand-focused sites such as NYTimes.com and MarthaStewart.com and even social-media sites such as Facebook and MySpace lose credit because they are often not where a consumer will see that last ad." This leads to diminished revenue for these Web publishers.According to Steve Kerho, vice president of analytics, media and marketing optimization at Organic, "publishers have a lot to gain" from the study of how display ads affect conversions. For example, his firm recently found that a display ad can increase a search ad's click-through rate 25-30%. Had he only been watching search ads, he would have missed the display ad's influence. Even though the evolution toward better attribution models is steadily occurring, the report says that as many as half of all online advertisers are still measuring using "rudimentary models, such as the click." - Read the whole story...
How America Shops
Bling is dead, or at least immoral, retail guru Paco Underhill says. A wide swath of America is "shopping down" and renouncing the mall. If they do go to a store, they often ditch the items in their cart before checkout, says Underhill, CEO of consulting firm Envirosell. "If I were to act on a new retail concept today," he says, "I would ask, 'How do I marry the idea of a physical asset with an online world?'" TIME (2/22) Save local businesses by helping them maintain their marketing communictions consistency. It's less expensive than going out of business. Retailers survive at the demise of their competition.
Tuesday, February 10, 2009
Local Direct Revenues Can Save TV As Stations Face Fuzzy Future
FEBRUARY 10, 2009
Local TV Stations Face a Fuzzy Future
By SAM SCHECHNER and REBECCA DANA
LAS VEGAS -- Lisa Howfield, general manager of KVBC, the NBC affiliate here, watched last year as the broadcast-television business began to shrink. She started cutting. She combined departments. She made do with old equipment, and did away with luxuries like yearly sales getaways.
In December and January, she laid off 15 employees, or 6% of her staff. After the weatherman left last month, one of the morning news anchors took on both jobs. "It's like a bad roller-coaster ride," says Ms. Howfield. Her station's full-day viewership is down 7.7% this TV season from the same period last year, according to Nielsen Co., and Ms. Howfield expects her ad revenue in 2009 will be down 30% from 2008.
Television Stations' Power Wanes
Local television stations like Ms. Howfield's dominated the TV business for more than half a century. They inspired the term "network": a web of Channel 7s and 11s that delivered shows from ABC, CBS, NBC -- and later, Fox -- plus local news, syndicated reruns and talk shows. Because the stations owned the licenses to the airwaves that broadcast TV signals, big networks couldn't distribute content without them. In turn, local stations became the vehicles for the greatest mass-market advertising blitz in history.
Now, with their viewership in decline and ad revenue on a downward spiral, many local TV stations face the prospect of being cut out of the picture. Executives at some major networks are beginning to talk about an option that once would have been unthinkable: eventually taking shows straight to cable, where networks can take in a steady stream of subscriber fees even in an advertising slump.
In December, CBS Corp.'s chief executive, Leslie Moonves, told an investor conference that moving the CBS network to cable would be "a very interesting proposition." Two days earlier, Jeff Zucker, chief executive of General Electric Co.'s NBC Universal, warned more broadly that the entire broadcast-TV model must change. "Otherwise it will be like the newspaper business or the car business," he told investors.
Many local stations -- once treated like royalty by broadcast networks -- are scaling back their original programming, cutting down on weekend news shows and trimming staff. Nationwide, 2009 TV-station ad revenue is projected to fall 20% to 30%, according to Bernstein Research.
Last week, Walt Disney Co. reported a 60% slide in operating income in its broadcast segment, including ABC and 10 ABC-owned stations, for the quarter ended Dec. 31, in part because of a 15% drop in revenue at its TV stations. Ad revenue at local stations is "significantly behind" last year's pace, Tom Staggs, Disney's chief financial officer, said in an earnings call. News Corp., which owns Dow Jones & Co., publisher of The Wall Street Journal, reported last week that its local TV stations, including 17 Fox stations, will undergo "major" cost-cutting in the coming 12 months. The stations are looking at a 30% decline in advertising revenue for the second half of the fiscal year ending June 30.
The weakness in the local-TV market could hammer the big broadcast networks, says Randy Falco, former president and chief operating officer of the NBC Universal Television Group and now CEO of Time Warner Inc.'s AOL. Cable operators, he says, may lure networks away from some ailing stations with the promise of steady subscriber fees: "Ultimately one of [the networks] will make a break. One of them will try to make a go as a cable network."
Local TV stations won't vanish overnight. Networks' parent companies still own some of the largest stations, giving them a possible incentive to preserve that slice of the business.
And while their profits are down, the vast majority of stations are making money: Local, regional and national businesses, like car dealers and retailers, spent more than $20 billion on local TV-station ads in 2008, according to some estimates. Lucrative licensing deals between the networks and sports leagues still require noncable broadcasts of big events such as the Super Bowl. These won't expire for another few years, and already, there's political pressure to keep NFL games on broadcast networks. In some markets, local stations have recently tapped a new revenue stream: charging cable operators to carry the stations' signals.
Any jump to cable would be five or 10 years away, according to CBS's Mr. Moonves. In an emailed statement, a spokeswoman for NBC Universal, where local media revenue declined 25% in the fourth quarter of 2008, said the company believes TV stations are still "the best way to reach the broadest possible audience."
Back in the 1960s and 1970s, local TV stations often had profit margins over 50%, and there was a lively business in selling them to new buyers at a premium. Networks competed to sign up local stations as "affiliates" and paid them huge fees to broadcast their shows. The networks also owned a handful of TV stations in the biggest markets, like New York and Los Angeles, from which they drew enough revenue to fund the expensive business of making prime-time shows, running farflung news divisions and buying rights to sports events.
Then came cable, and the balance of power between stations and broadcast networks began to shift. Some early battles were over programming. Stations were so crucial to the networks in the 1980s, and generated so much money for them, that studios would agree not to sell reruns of their shows to cable while the stations were still airing new episodes. But by 1993, cable had made headway. That year, NBC affiliates watched helplessly as their airport-sitcom hit "Wings" was sold by the studio in reruns to cable network USA. The once-orderly and profitable system in which TV stations held all the cards had started to crumble.
Networks' parent companies started buying or launching cable networks of their own beginning in the 1980s. ABC bought a controlling stake in ESPN. NBC launched CNBC and, later, a cable network that eventually became MSNBC. Fox started the FX network and Fox News.
"The stations were being abandoned by their erstwhile partners," says TV historian Tim Brooks. "Year by year, their clout eroded."
By the time the softening economy hurt local advertising in late 2007, local TV stations were already a much smaller part of the TV ecosystem. In 2007, stations attracted 26% of English-language TV-ad revenue in the U.S., down from 34% in 2000, according to TNS Media Intelligence. Fees from the big networks had dropped in many cases to nearly nothing -- and in some instances stations were paying networks for certain programs, like blue-chip sports broadcasts.
This year, stations also face the transition to digital over-the-air TV signals, which Congress last week voted to push back until June. More than 5% of TV households are still unprepared for digital signals, according to Nielsen, which could further squeeze viewership.
As station owners look to slash costs, many are cutting budgets for syndicated series, the shows that fill many of the hours outside prime time. These include mainstays like "The Oprah Winfrey Show" and "Wheel of Fortune," and reruns like "Seinfeld" and "Two and a Half Men." For years, these shows delivered big ratings and fed viewers into local newscasts. But as daytime ratings decline, stations are increasingly reluctant to spend as much on those slots, according to syndication executives.
Local newscasts are also feeling the pinch. Stations have pulled the plug entirely on some news shows in Lexington, Ky., and Yakima, Wash. In November, some stations owned by News Corp. and NBC Universal said they would begin pooling their newsgathering resources.
Station owners say even with these cuts, there are more local newscasts than the market can bear. "Over time, there will be fewer players," says Dunia Shive, chief executive of Belo Corp., which owns 20 local stations covering 14% of the U.S. market. On Thursday, Belo reported that its TV-ad revenue declined 11% in the fourth quarter from the year-earlier period, even with a windfall of spending on election-related ads.
Stations could ultimately be forced to consolidate, says Rick Feldman, a former TV-station executive and now CEO of the National Association of Television Program Executives. "At a certain point in time, there just may be too many players and the economics don't support it," he says.
Stations are scrambling to find new revenue streams. Some are testing out technology that will send their signals to cellphones and mobile devices, and beefing up their Web sites to boost online advertising. Others say rather than shrinking local news coverage, they're expanding it, since it's the only original content they still have.
TV Listings
Find television listings at LocateTV.
Chicago-based Weigel Broadcasting Co., which owns stations in Illinois, Wisconsin and Indiana, has collaborated with Metro-Goldwyn-Mayer Inc. to create a content provider called "This TV" offering mostly old movies from the MGM library. Nexstar Broadcasting Group Inc., a Texas-based company that owns or manages 51 stations around the country, launched highly local "community" Web sites. Stations owned by NBC Universal are piping content and ads to TV screens in supermarkets, taxi cabs and their own Web sites.
"These tough times really force you to look at everything," says John Wallace, president of NBC Local Media, the cadre of stations owned by NBC. "It remains to be seen how this is going to evolve, but I do believe there will be a market for local television well into the future."
A potentially more lucrative move stations are trying is charging cable operators to pay to carry them. Federal law requires cable and satellite operators to get the consent of TV stations to transmit their station signals -- and gives stations the right to withhold their consent. That means owners of bigger groups of stations, whose network affiliates air popular programs like "CSI" and "American Idol," have significant leverage.
In 2007, Sinclair Broadcast Group Inc. temporarily blacked out 23 of its stations from cable operator Mediacom Communications Corp., in a bid to get Mediacom to pay them for their signals. That instantly stripped 700,000 of Mediacom's households of a major broadcast network. Mediacom agreed to pay Sinclair. Sinclair has since signed deals with other operators, and estimated it took in $72 million in so-called retransmission revenue in 2008.
The national networks are examining this revenue stream, and some are asking their local affiliates to hand over some of the money they're getting from cable operators. CBS's Mr. Moonves recently told an investor conference he expects his affiliates to pay CBS a percentage of their retransmissions fees. "We feel we deserve a piece of it since we provide them with the NFL" and other pricey programs, he said.
At another conference, Mr. Moonves said cable operators have offered to pay the network these fees directly, cutting out the local stations altogether. Mr. Moonves didn't name specific operators and a spokesman for CBS declined to elaborate. "Down the road that's something that very well could happen, but I think it's five or 10 years away," Mr. Moonves said, citing long-term agreements with CBS affiliates, and calling CBS's relationship with those stations "a good one." In the third quarter of 2008, CBS' TV segment, including its CBS network and local stations, saw advertising revenue fall 14%.
The endgame could come sooner for stations where affiliation agreements with networks are due for renewal in the next three or four years. Over-the-air broadcast deals between NBC, CBS and Fox and the NFL, for example, expire after the 2011 season. Some sports events -- like college football's Bowl Championship Series -- have already signed more lucrative deals with cable networks. And as local earnings plunge and media companies take massive write-downs on the value of their broadcast licenses, the networks have fewer incentives to hang on to the stations they own and operate.
In Las Vegas, Ms. Howfield is optimistic her station will survive. She says KVBC is looking for ways to develop new categories of advertisers and to survive on less: "We better operate like there's no tomorrow."
Write to Sam Schechner at sam.schechner@wsj.com and Rebecca Dana at rebecca.dana@wsj.com
Local TV Stations Face a Fuzzy Future
By SAM SCHECHNER and REBECCA DANA
LAS VEGAS -- Lisa Howfield, general manager of KVBC, the NBC affiliate here, watched last year as the broadcast-television business began to shrink. She started cutting. She combined departments. She made do with old equipment, and did away with luxuries like yearly sales getaways.
In December and January, she laid off 15 employees, or 6% of her staff. After the weatherman left last month, one of the morning news anchors took on both jobs. "It's like a bad roller-coaster ride," says Ms. Howfield. Her station's full-day viewership is down 7.7% this TV season from the same period last year, according to Nielsen Co., and Ms. Howfield expects her ad revenue in 2009 will be down 30% from 2008.
Television Stations' Power Wanes
Local television stations like Ms. Howfield's dominated the TV business for more than half a century. They inspired the term "network": a web of Channel 7s and 11s that delivered shows from ABC, CBS, NBC -- and later, Fox -- plus local news, syndicated reruns and talk shows. Because the stations owned the licenses to the airwaves that broadcast TV signals, big networks couldn't distribute content without them. In turn, local stations became the vehicles for the greatest mass-market advertising blitz in history.
Now, with their viewership in decline and ad revenue on a downward spiral, many local TV stations face the prospect of being cut out of the picture. Executives at some major networks are beginning to talk about an option that once would have been unthinkable: eventually taking shows straight to cable, where networks can take in a steady stream of subscriber fees even in an advertising slump.
In December, CBS Corp.'s chief executive, Leslie Moonves, told an investor conference that moving the CBS network to cable would be "a very interesting proposition." Two days earlier, Jeff Zucker, chief executive of General Electric Co.'s NBC Universal, warned more broadly that the entire broadcast-TV model must change. "Otherwise it will be like the newspaper business or the car business," he told investors.
Many local stations -- once treated like royalty by broadcast networks -- are scaling back their original programming, cutting down on weekend news shows and trimming staff. Nationwide, 2009 TV-station ad revenue is projected to fall 20% to 30%, according to Bernstein Research.
Last week, Walt Disney Co. reported a 60% slide in operating income in its broadcast segment, including ABC and 10 ABC-owned stations, for the quarter ended Dec. 31, in part because of a 15% drop in revenue at its TV stations. Ad revenue at local stations is "significantly behind" last year's pace, Tom Staggs, Disney's chief financial officer, said in an earnings call. News Corp., which owns Dow Jones & Co., publisher of The Wall Street Journal, reported last week that its local TV stations, including 17 Fox stations, will undergo "major" cost-cutting in the coming 12 months. The stations are looking at a 30% decline in advertising revenue for the second half of the fiscal year ending June 30.
The weakness in the local-TV market could hammer the big broadcast networks, says Randy Falco, former president and chief operating officer of the NBC Universal Television Group and now CEO of Time Warner Inc.'s AOL. Cable operators, he says, may lure networks away from some ailing stations with the promise of steady subscriber fees: "Ultimately one of [the networks] will make a break. One of them will try to make a go as a cable network."
Local TV stations won't vanish overnight. Networks' parent companies still own some of the largest stations, giving them a possible incentive to preserve that slice of the business.
And while their profits are down, the vast majority of stations are making money: Local, regional and national businesses, like car dealers and retailers, spent more than $20 billion on local TV-station ads in 2008, according to some estimates. Lucrative licensing deals between the networks and sports leagues still require noncable broadcasts of big events such as the Super Bowl. These won't expire for another few years, and already, there's political pressure to keep NFL games on broadcast networks. In some markets, local stations have recently tapped a new revenue stream: charging cable operators to carry the stations' signals.
Any jump to cable would be five or 10 years away, according to CBS's Mr. Moonves. In an emailed statement, a spokeswoman for NBC Universal, where local media revenue declined 25% in the fourth quarter of 2008, said the company believes TV stations are still "the best way to reach the broadest possible audience."
Back in the 1960s and 1970s, local TV stations often had profit margins over 50%, and there was a lively business in selling them to new buyers at a premium. Networks competed to sign up local stations as "affiliates" and paid them huge fees to broadcast their shows. The networks also owned a handful of TV stations in the biggest markets, like New York and Los Angeles, from which they drew enough revenue to fund the expensive business of making prime-time shows, running farflung news divisions and buying rights to sports events.
Then came cable, and the balance of power between stations and broadcast networks began to shift. Some early battles were over programming. Stations were so crucial to the networks in the 1980s, and generated so much money for them, that studios would agree not to sell reruns of their shows to cable while the stations were still airing new episodes. But by 1993, cable had made headway. That year, NBC affiliates watched helplessly as their airport-sitcom hit "Wings" was sold by the studio in reruns to cable network USA. The once-orderly and profitable system in which TV stations held all the cards had started to crumble.
Networks' parent companies started buying or launching cable networks of their own beginning in the 1980s. ABC bought a controlling stake in ESPN. NBC launched CNBC and, later, a cable network that eventually became MSNBC. Fox started the FX network and Fox News.
"The stations were being abandoned by their erstwhile partners," says TV historian Tim Brooks. "Year by year, their clout eroded."
By the time the softening economy hurt local advertising in late 2007, local TV stations were already a much smaller part of the TV ecosystem. In 2007, stations attracted 26% of English-language TV-ad revenue in the U.S., down from 34% in 2000, according to TNS Media Intelligence. Fees from the big networks had dropped in many cases to nearly nothing -- and in some instances stations were paying networks for certain programs, like blue-chip sports broadcasts.
This year, stations also face the transition to digital over-the-air TV signals, which Congress last week voted to push back until June. More than 5% of TV households are still unprepared for digital signals, according to Nielsen, which could further squeeze viewership.
As station owners look to slash costs, many are cutting budgets for syndicated series, the shows that fill many of the hours outside prime time. These include mainstays like "The Oprah Winfrey Show" and "Wheel of Fortune," and reruns like "Seinfeld" and "Two and a Half Men." For years, these shows delivered big ratings and fed viewers into local newscasts. But as daytime ratings decline, stations are increasingly reluctant to spend as much on those slots, according to syndication executives.
Local newscasts are also feeling the pinch. Stations have pulled the plug entirely on some news shows in Lexington, Ky., and Yakima, Wash. In November, some stations owned by News Corp. and NBC Universal said they would begin pooling their newsgathering resources.
Station owners say even with these cuts, there are more local newscasts than the market can bear. "Over time, there will be fewer players," says Dunia Shive, chief executive of Belo Corp., which owns 20 local stations covering 14% of the U.S. market. On Thursday, Belo reported that its TV-ad revenue declined 11% in the fourth quarter from the year-earlier period, even with a windfall of spending on election-related ads.
Stations could ultimately be forced to consolidate, says Rick Feldman, a former TV-station executive and now CEO of the National Association of Television Program Executives. "At a certain point in time, there just may be too many players and the economics don't support it," he says.
Stations are scrambling to find new revenue streams. Some are testing out technology that will send their signals to cellphones and mobile devices, and beefing up their Web sites to boost online advertising. Others say rather than shrinking local news coverage, they're expanding it, since it's the only original content they still have.
TV Listings
Find television listings at LocateTV.
Chicago-based Weigel Broadcasting Co., which owns stations in Illinois, Wisconsin and Indiana, has collaborated with Metro-Goldwyn-Mayer Inc. to create a content provider called "This TV" offering mostly old movies from the MGM library. Nexstar Broadcasting Group Inc., a Texas-based company that owns or manages 51 stations around the country, launched highly local "community" Web sites. Stations owned by NBC Universal are piping content and ads to TV screens in supermarkets, taxi cabs and their own Web sites.
"These tough times really force you to look at everything," says John Wallace, president of NBC Local Media, the cadre of stations owned by NBC. "It remains to be seen how this is going to evolve, but I do believe there will be a market for local television well into the future."
A potentially more lucrative move stations are trying is charging cable operators to pay to carry them. Federal law requires cable and satellite operators to get the consent of TV stations to transmit their station signals -- and gives stations the right to withhold their consent. That means owners of bigger groups of stations, whose network affiliates air popular programs like "CSI" and "American Idol," have significant leverage.
In 2007, Sinclair Broadcast Group Inc. temporarily blacked out 23 of its stations from cable operator Mediacom Communications Corp., in a bid to get Mediacom to pay them for their signals. That instantly stripped 700,000 of Mediacom's households of a major broadcast network. Mediacom agreed to pay Sinclair. Sinclair has since signed deals with other operators, and estimated it took in $72 million in so-called retransmission revenue in 2008.
The national networks are examining this revenue stream, and some are asking their local affiliates to hand over some of the money they're getting from cable operators. CBS's Mr. Moonves recently told an investor conference he expects his affiliates to pay CBS a percentage of their retransmissions fees. "We feel we deserve a piece of it since we provide them with the NFL" and other pricey programs, he said.
At another conference, Mr. Moonves said cable operators have offered to pay the network these fees directly, cutting out the local stations altogether. Mr. Moonves didn't name specific operators and a spokesman for CBS declined to elaborate. "Down the road that's something that very well could happen, but I think it's five or 10 years away," Mr. Moonves said, citing long-term agreements with CBS affiliates, and calling CBS's relationship with those stations "a good one." In the third quarter of 2008, CBS' TV segment, including its CBS network and local stations, saw advertising revenue fall 14%.
The endgame could come sooner for stations where affiliation agreements with networks are due for renewal in the next three or four years. Over-the-air broadcast deals between NBC, CBS and Fox and the NFL, for example, expire after the 2011 season. Some sports events -- like college football's Bowl Championship Series -- have already signed more lucrative deals with cable networks. And as local earnings plunge and media companies take massive write-downs on the value of their broadcast licenses, the networks have fewer incentives to hang on to the stations they own and operate.
In Las Vegas, Ms. Howfield is optimistic her station will survive. She says KVBC is looking for ways to develop new categories of advertisers and to survive on less: "We better operate like there's no tomorrow."
Write to Sam Schechner at sam.schechner@wsj.com and Rebecca Dana at rebecca.dana@wsj.com
Wednesday, February 4, 2009
Congress Changes DTV 'Hard' Date to June 12
After heated debate by legislators Wednesday and a year and a half of broadcasters, cable operators and the government drilling the Feb. 17 'hard' date into the hearts and minds of viewers, the House voted Wednesday to change the cut-off date for analog TV to June 12. For More...
What TV Is Learning From The Internet
By Cory Treffiletti
Many people say the 30-second spot is dead, which may very well be true -- but television is far from dead, and it may actually be starting to learn a thing or two from the Internet that will keep it alive and kicking for many years to come!
Twice in the last two weeks, I've found myself glued to a TV set with other people: once for the presidential inauguration, and once for the Super Bowl. In both instances I was witnessing appointment viewing, the kind of experience that you really can't watch off DVR. These occasions may be few and far between nowadays. Both events were social in nature and available online, but I still chose to be in front of the TV rather than the Web. What does that say for the balance between Internet and television?
What it means to me is that TV is still a crucial component of our society. The water cooler still buzzes more often as a result of what you see on TV than what you see online. If anything, the two media are becoming more and more intertwined, as shows as well as commercial content are shifting consumers to the Web for a payoff that was only alluded to prior on TV. Demonstrating the power of integration, "Lost" still runs an annual alternate reality game to support the show -- and a number of the Super Bowl spots directed users online.
What's piqued my interest is the next generation of Internet Video-Link Television sets from companies such as Sony and Panasonic that integrate online video directly into the set and take advantage of other sources of content. If these sets go one step further and enable some form of interaction beyond just click and view, then they edge directly back into competition with the unique proposition that the Internet offers, vs. the social experience of TV: to be set free from the single viewing room and include the virtual community.
TV watching can be social or it can be solitary, as can Web use. But in the case of TV, the social experience occurs with many people in one room to watch a program -- whereas the Web's social experience is still that of a solitary person interacting virtually with others. Rarely, if ever, do people surf the Web with others in the room in a social atmosphere.
TV has tried to go Internet in the past with products such as WebTV, but it was always hampered by two challenges: the need for a keyboard and the slow speed of connection. The connection speeds are no longer a problem, and Apple has proven that design trumps standards when it comes to such products as a digital music player, so it stands to reason that the "cover flow" or some other iteration will make the TV experience navigable beyond watching and clicking video (we could refer to it as Web-Channel Surfing). The need for a keyboard will probably go away altogether.
One thing TV is learning is how to expand the "social" nature of programming beyond that singular viewing room. It's also learning how to integrate product placement or other video-based ad units and get beyond the 30-second spot.
The 30-second spot may go the way of the woolly mammoth, but TV advertising is here to stay. There are formats like the Flash overlay pioneered by YouTube, and intriguing companies with more innovative ideas such as Keystream and Innovid. TV technology folk benefit because they get to watch the Internet fumble through the test phase of these models to determine which of them they'll integrate into their services. The TV peeps get to let us make the mistakes of targeting and addressability, trudging through some creative challenges until the right model and the most effective methodology emerge. In the meantime, they're still raking in the dollars due to a minor renaissance in programming over the last couple of years (scripted shows are becoming popular once again).
If you fast-forward (to steal a pun from my DVR), you might see that five to seven years from now, TV is adopting these ad formats and limiting the commercial interruptions to one to two per commercial block. When I watch "Fringe" on Fox, typically there are fewer commercials at the beginning of the program than toward the end, which makes for a much more enjoyable experience. That's something stolen directly from the Web and the single commercial breaks of ABC.com, NBC.com and the pre-roll experiences of many sites. It also supports the simple laws of supply and demand. Less supply creates more demand and that increases prices. This won't really take hold until TV prices start to go down, and this year's upfront may (finally) be the time when that happens.
TV is not going to die; it's going to continue to evolve. When my son is born, he'll be familiar with a completely different set of standards than I was familiar with, and he won't even bat an eye. I'll have to tell him all about the days when there were four to six commercials in each break, and how not all TVs were interactive. I can't wait for that day!
Post your response to the public Online SPIN blog.See what others are saying on the Online SPIN blog.
Cory is president and managing partner for Catalyst SF.
Many people say the 30-second spot is dead, which may very well be true -- but television is far from dead, and it may actually be starting to learn a thing or two from the Internet that will keep it alive and kicking for many years to come!
Twice in the last two weeks, I've found myself glued to a TV set with other people: once for the presidential inauguration, and once for the Super Bowl. In both instances I was witnessing appointment viewing, the kind of experience that you really can't watch off DVR. These occasions may be few and far between nowadays. Both events were social in nature and available online, but I still chose to be in front of the TV rather than the Web. What does that say for the balance between Internet and television?
What it means to me is that TV is still a crucial component of our society. The water cooler still buzzes more often as a result of what you see on TV than what you see online. If anything, the two media are becoming more and more intertwined, as shows as well as commercial content are shifting consumers to the Web for a payoff that was only alluded to prior on TV. Demonstrating the power of integration, "Lost" still runs an annual alternate reality game to support the show -- and a number of the Super Bowl spots directed users online.
What's piqued my interest is the next generation of Internet Video-Link Television sets from companies such as Sony and Panasonic that integrate online video directly into the set and take advantage of other sources of content. If these sets go one step further and enable some form of interaction beyond just click and view, then they edge directly back into competition with the unique proposition that the Internet offers, vs. the social experience of TV: to be set free from the single viewing room and include the virtual community.
TV watching can be social or it can be solitary, as can Web use. But in the case of TV, the social experience occurs with many people in one room to watch a program -- whereas the Web's social experience is still that of a solitary person interacting virtually with others. Rarely, if ever, do people surf the Web with others in the room in a social atmosphere.
TV has tried to go Internet in the past with products such as WebTV, but it was always hampered by two challenges: the need for a keyboard and the slow speed of connection. The connection speeds are no longer a problem, and Apple has proven that design trumps standards when it comes to such products as a digital music player, so it stands to reason that the "cover flow" or some other iteration will make the TV experience navigable beyond watching and clicking video (we could refer to it as Web-Channel Surfing). The need for a keyboard will probably go away altogether.
One thing TV is learning is how to expand the "social" nature of programming beyond that singular viewing room. It's also learning how to integrate product placement or other video-based ad units and get beyond the 30-second spot.
The 30-second spot may go the way of the woolly mammoth, but TV advertising is here to stay. There are formats like the Flash overlay pioneered by YouTube, and intriguing companies with more innovative ideas such as Keystream and Innovid. TV technology folk benefit because they get to watch the Internet fumble through the test phase of these models to determine which of them they'll integrate into their services. The TV peeps get to let us make the mistakes of targeting and addressability, trudging through some creative challenges until the right model and the most effective methodology emerge. In the meantime, they're still raking in the dollars due to a minor renaissance in programming over the last couple of years (scripted shows are becoming popular once again).
If you fast-forward (to steal a pun from my DVR), you might see that five to seven years from now, TV is adopting these ad formats and limiting the commercial interruptions to one to two per commercial block. When I watch "Fringe" on Fox, typically there are fewer commercials at the beginning of the program than toward the end, which makes for a much more enjoyable experience. That's something stolen directly from the Web and the single commercial breaks of ABC.com, NBC.com and the pre-roll experiences of many sites. It also supports the simple laws of supply and demand. Less supply creates more demand and that increases prices. This won't really take hold until TV prices start to go down, and this year's upfront may (finally) be the time when that happens.
TV is not going to die; it's going to continue to evolve. When my son is born, he'll be familiar with a completely different set of standards than I was familiar with, and he won't even bat an eye. I'll have to tell him all about the days when there were four to six commercials in each break, and how not all TVs were interactive. I can't wait for that day!
Post your response to the public Online SPIN blog.See what others are saying on the Online SPIN blog.
Cory is president and managing partner for Catalyst SF.
Advertisers Claw Back Upfront Spending
If ever I see a need to train and develop new, long-term direct business it's now..
Dr. Philip J..
Broadcast and cable hit as agencies take second-quarter options
By Claire Atkinson -- Broadcasting & Cable, 2/3/2009 1:53:37 PM MT
Second quarter option taking has begun in earnest and cuts are beginning to take place across the board. Agencies began handing down the news on Friday and have been working their way around the industry for the early part of this week. According to executives in the market on both the buy and sell side, certain clients are taking double digit options with some cable networks, and in some instances clients have asked to pull out as much as 50% of their ad commitments. That extreme scenario might not play out for the rest of the business since option taking has only just begun and will take a process of weeks to complete. One unnamed cable executive dramatically described it as “mass slaughter,” while another said it was “horrible,” while confirming revenue losses were 15%. But other cable executives disputed that characterization and said things were playing out as expected with some clients firming up and others cutting back. Top tier programming networks were thought to be less affected than lower tier players. Advertisers commit money to their TV partners in advance each year, and every quarter allow marketing partners take back up to 50% of that commitment. Since the economy is in such bad shape, clients have been expected to take back more money than in previous years. Typical cancellation rates are between 8% and 10%. Last week one major media buyer, Rino Scanzoni, chief investment officer at Group M, predicted rates would be between 10% and 12%. Still, one executive said the packaged goods category was particularly heavy with the cuts. Procter & Gamble is said to have been a strong contributor to the trend. P&G said last week it would not cut its overall marketing spend, but would move more money into other marketing disciplines such as coupon programs. It also said it was driving media partners for efficiencies. A spokeswoman for Procter & Gamble said: “We don’t comment on our talks with our media partners or our spending.” CBS could be among those exempt from any cut-backs since it has a long term pact with the packaged goods giant. Retailer Macy’s, which also announced it will lay off 7,000 staffers, has made some cuts, as predictably have the hard-hit auto and financial services sectors. The broadcast network market is still difficult to assess since not all clients have made up their minds. One agency side executive reported that money was coming out of the network prime market, and possibly late night and daytime. Some of that money was being re-spent in the traditionally cheaper cable market. “The broadcast side is actually holding up relatively well, and the softness on the cable side is to be expected,” said one major media executive. "There is no risk in pulling back from a lot of the cable networks, because if you want to buy back in later, there will be real estate available.” Another broadcast network said the cuts were in the range of what they were expecting, while another said second quarter was running at a similar pace to first quarter. Disney reported Tuesday that fiscal first quarter revenue for its Media Networks division dropped 5% to $3.9 billion for the quarter while operating income at cable networks decreased $69 million. Other media companies report this week. The fear is how the option taking will play into upfront market, which like Wall Street, is driven as much by emotion as reality. One agency executive predicted that CPM (cost per thousand) pricing could drop as much as 10 per cent. Another sales side executive dismissed that figure completely. “It’s a double whammy. The scatter market will be weak and you don’t want a weak scatter market as your lead-in to the upfront," said one cable executive.
Dr. Philip J..
Broadcast and cable hit as agencies take second-quarter options
By Claire Atkinson -- Broadcasting & Cable, 2/3/2009 1:53:37 PM MT
Second quarter option taking has begun in earnest and cuts are beginning to take place across the board. Agencies began handing down the news on Friday and have been working their way around the industry for the early part of this week. According to executives in the market on both the buy and sell side, certain clients are taking double digit options with some cable networks, and in some instances clients have asked to pull out as much as 50% of their ad commitments. That extreme scenario might not play out for the rest of the business since option taking has only just begun and will take a process of weeks to complete. One unnamed cable executive dramatically described it as “mass slaughter,” while another said it was “horrible,” while confirming revenue losses were 15%. But other cable executives disputed that characterization and said things were playing out as expected with some clients firming up and others cutting back. Top tier programming networks were thought to be less affected than lower tier players. Advertisers commit money to their TV partners in advance each year, and every quarter allow marketing partners take back up to 50% of that commitment. Since the economy is in such bad shape, clients have been expected to take back more money than in previous years. Typical cancellation rates are between 8% and 10%. Last week one major media buyer, Rino Scanzoni, chief investment officer at Group M, predicted rates would be between 10% and 12%. Still, one executive said the packaged goods category was particularly heavy with the cuts. Procter & Gamble is said to have been a strong contributor to the trend. P&G said last week it would not cut its overall marketing spend, but would move more money into other marketing disciplines such as coupon programs. It also said it was driving media partners for efficiencies. A spokeswoman for Procter & Gamble said: “We don’t comment on our talks with our media partners or our spending.” CBS could be among those exempt from any cut-backs since it has a long term pact with the packaged goods giant. Retailer Macy’s, which also announced it will lay off 7,000 staffers, has made some cuts, as predictably have the hard-hit auto and financial services sectors. The broadcast network market is still difficult to assess since not all clients have made up their minds. One agency side executive reported that money was coming out of the network prime market, and possibly late night and daytime. Some of that money was being re-spent in the traditionally cheaper cable market. “The broadcast side is actually holding up relatively well, and the softness on the cable side is to be expected,” said one major media executive. "There is no risk in pulling back from a lot of the cable networks, because if you want to buy back in later, there will be real estate available.” Another broadcast network said the cuts were in the range of what they were expecting, while another said second quarter was running at a similar pace to first quarter. Disney reported Tuesday that fiscal first quarter revenue for its Media Networks division dropped 5% to $3.9 billion for the quarter while operating income at cable networks decreased $69 million. Other media companies report this week. The fear is how the option taking will play into upfront market, which like Wall Street, is driven as much by emotion as reality. One agency executive predicted that CPM (cost per thousand) pricing could drop as much as 10 per cent. Another sales side executive dismissed that figure completely. “It’s a double whammy. The scatter market will be weak and you don’t want a weak scatter market as your lead-in to the upfront," said one cable executive.
Tuesday, February 3, 2009
Inventory Glut Points To Tough Times
TechCrunch "The signs are everywhere" that online advertising is in for some tough times, Tech Crunch's Erick Schonfeld says, especially the display market. Bellwether Yahoo this week reported a 2% decline in display ad revenues, while another major publisher, The New York Times, reported even worse declines.The problem, of course, is a glut of display inventory. As Schonfeld says, the problem is so bad that Web sites are now actually showing fewer ads per page to reduce ad clutter and to keep ad rates from falling further. Meanwhile, comScore, in its 2008 Digital Year in Review, says that even though the number of display ads actually fell compared to a year ago, some 4.5 trillion ads were served to U.S. consumers last year. That amounts to about 2,000 ads per person per month.Indeed, the display ad market is an over-saturated place. As Schonfeld says, "there is simply no need for the 300-plus ad networks out there." Accordingly, there's an ad network shakeout going on: stronger networks are picking up more funding and acquiring smaller competitors. For example, Glam Media bought AdaptiveAds just last night, while SocialMedia this morning raised $6 million and the mobile ad network AdMob raised $12.5 million. - Read the whole story...
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