TV News Check
Headwinds Are Buffeting TV Stations. What Can They Do to Survive the Storm?
BIA Advisory Services’ Rick Ducey: “You have to look more than quarter by quarter” to navigate a difficult year ahead.
Local TV stations are certainly in a period of change and challenge, but with some strategic thinking and planning, they can stay competitive in the local video marketplace, said Rick Ducey, managing director, BIA Advisory Services, at TVNewsCheck’s Local Television Strategies at the NAB Show New York on Wednesday.
This year saw the dual boon of political advertising and the Olympics, but things will fall back to earth in 2025, when core advertising revenue is predicted to be basically flat. And as advertising moves more and more to digital platforms, broadcasters need to be moving in that direction as well.
TV stations face competition in the local video space from powerful digital companies, with Facebook and Google taking half of all of the local advertising dollars in any given market, according to Ducey. Retail marketing networks — think Walmart or Kroger — are coming on strong with powerful first-party data platforms. Walmart this year bought smart TV company Vizio for $2.3 billion in order to merge its data with Vizio’s viewership data to create highly targeted consumer profiles for itself and third-party brand advertisers.
“All local advertising is a $174 billion business. Retail media and commerce is a $130 billion industry. Why didn’t we get some of that growth?” Ducey asked.
Retransmission consent fees are expected to decline over the next several years as people cut the cord and move away from traditional pay TV services. Those viewers frequently move to virtual MVPDs (multichannel video programming distributors) such as YouTubeTV or Hulu+LiveTV, and thus far the broadcast companies have maintained the right to handle negotiations with those providers, something broadcast ownership groups want to change.
Meanwhile, the media conglomerates that own broadcast networks are demanding a larger percentage of reverse compensation from station groups, while prioritizing their direct-to-consumer streaming services.
Even broadcasters’ core offering — local news — is being challenged, with Americans preferring to get their news on digital devices (58%) versus TV (32%). One quarter of American adults turn to news websites for their news, Pew reported in September. Overall, broadcast viewing makes up only 20% of total viewing, Ducey said, with viewing on streaming, gaming, digital and social platforms making up the rest.
The regulatory environment has not been favorable toward broadcasters recently. The FCC, led by chair Jessica Rosenworcel, is not interested in revising outdated broadcast regulations and it effectively quashed Standard Media’s proposed $8.6 billion acquisition of Tegna in 2023. The Biden administration in general has taken an anti-consolidation stance, personified by controversial FTC Chair Lina Khan. That said, DirecTV and Dish just announced their intention to merge without seeming to encounter opposition.
Finally, the local measurement problem still has not been solved, with broadcasters unable to provide advanced audience metrics against linear broadcasts. That’s becoming a bigger problem as advertisers demand outcome-based buying. Nielsen is rolling out its local Big Data product in January and broadcasters are hopeful that will help, but warn it will take at least a year to fully comprehend the data.
It’s not all doom and gloom, but it does require broadcasters to spend time rethinking the business model that’s served them until this period of extreme disruption, Ducey said.
“There needs to be a strategic reframing of what it means to be in the local TV business,” he added. “As the multiplatform video market continues to morph and evolve, local TV must keep pace with competitors by tapping innovations in technology, data, business models, audience and ad trends.”
Broadcasters have six potential revenue streams: broadcast advertising; digital advertising; retransmission consent fees; connected TV and over-the-top TV (CTV/OTT) channels and apps; NextGen TV (also known as ATSC 3.0); and datacasting, Ducey said. While broadcast advertising and retransmission consent both are declining, there are growth opportunities in the other revenue streams, he noted.
But even those revenue streams face obstacles.
Some 10% of broadcasters’ total revenue currently comes from digital and streaming options, with advertising on linear services still making up the lions’ share of broadcast advertising revenue. The supply of digital and streaming advertising inventory is plentiful, which serves to keep pricing down. That situation was made worse when subscription-based streamers like Netflix and Prime Video opened their platforms to advertising, flooding the market with inventory.
“You know you are underperforming in digital,” Ducey said. “You should be making twice as much money in digital as you are now.”
NextGen TV is on track to be rolled out in 80% of the country, but it requires consumers to adopt it by using digital antennas and acquiring smart TVs with ATSC 3.0 tuners. Since most consumers don’t even know NextGen TV exists, it’s a heavy lift to get them to take the necessary steps to start using it. Moreover, broadcasters received no new bandwidth to help them roll out NextGen TV, and ATSC 1.0 remains in place.
Ducey had some suggestions for broadcasters to pursue, including partnering with retail media networks on cross-platform advertising buys, something broadcasters should be offering as broadly as possible. He also suggested offering self-serve programmatic advertising on CTV and OTV platforms to local buyers, such as small and medium-size businesses. With their own streaming products, broadcasters should be acquiring their own valuable first-party data on which they can build better advertising networks. And ATSC 3.0 means that datacasting could become a real offering for broadcasters
“It all comes back to those six revenue streams,” Ducey said. “We have to allocate resources in a meaningful way. If you are planning big businesses, you have to look more than quarter by quarter.
No comments:
Post a Comment