Media General Bets Big On TV, Mobile, Online

Media General isn’t what it was a year ago. The newspapers that dragged the publicly traded company to the edge of bankruptcy are gone — most sold to billionaire Warren Buffett. That left Media General as a pure-play TV broadcasting company with 18 stations, all but one a Big Three affiliate. NBC affiliate WFLA Tampa, Fla. (DMA 14), is the flagship.

And then there is the new CEO. George Mahoney, who joined the company 20 years ago as general counsel, was raised to the top post upon the retirement of Marshall Morton on the first of this year.

Two weeks ago, he presided at his first quarterly conference call with securities analysts and was able to report that station revenue rose 28% to $360 million in 2012 due mostly to an 11-fold increase in political advertising, but also to growth in core advertising of more than 6%.

In this interview with TVNewsCheck Editor Harry A. Jessell, Mahoney discusses some of what’s behind the numbers and what’s to come — a renewed emphasis on local programming, an increase in locally produced programming, a two-pronged mobile strategy, digital marketing services and a surge in retransmission consent revenue.

An edited transcript:

So how have things changed at Media General now that it’s a pure play broadcast company?

Well, the most important thing for us right now is that Media General is focused as a broadcast and digital company. We have a very clear path with a very clear mission. We have people that have lived through the newspaper experience, and, I think, drawn the best from it, which is that they understand the importance of focusing on the customer and local audiences.

And so it’s wonderful to see how hard they’re working to make sure that Media General does the very best it can with the tools that it has. And no better example of that than in the fourth-quarter results, which were terrific because they had great political numbers in them. But even more importantly to me, were the core numbers. We expected to have political displacement in the fourth quarter, and there was some of that. But our people vowed at the beginning of the quarter that they would put back as much of the core advertising as they possibly could, and they were very successful in that.

The numbers that are coming in now show us that we actually gained about a full point of share in local core growth in the fourth quarter. And so when you think about all the political displacement that we had in markets like Florida, North Carolina, Virginia and Ohio and you can say you’ve built your core business by a full share point, you’ve really accomplished something.

To the outsider, it seems there must be tremendous synergy between broadcasting and newspaper. I know that Media General tried to make that work, but it always seemed to prove somewhat elusive. How come?

I’ll tell you that the biggest obstacle was the federal government and the [newspaper-broadcast crossownership] rules that had been in place since 1975. I have talked to people at the FCC and on the Hill who were infants or, in some cases, hadn’t even been born when those rules were adopted. And so here we are dealing with rules that had been based on what may or may not have been a necessity at the time, but that had absolutely no place as we went into the ’80s and ’90s and into the 21st century.

So it was very discouraging to see the entrenchment around those rules that’s still there in Washington. It’s a shame. It would have helped the newspaper industry a lot. It would help the broadcasting industry because people would have been able to align their properties in a more logical way and shave off some back-office expense so they could have focused on content growth. And that would have served communities much better.

So you’re saying that you think you’d still own your newspapers if those rules had been loosened up ten or 20 years ago?

I don’t know the answer on that. But I can tell you that it would have been a whole lot better for the newspapers. In the markets where we had converged operations, and there were a number of them, we could see the difference in the results because what we were able to do was take out back-office expense and take the savings and put more people on the street to gather more local content, to focus on customers, to focus on audience.

What would you like to see come out of the FCC’s current ownership rulemaking? You have a couple of duopolies in Greenville-Spartanburg [Miss.] and Augusta [Ga.] based on joint sales and shared services agreements. Would you like to see the duopoly rules relaxed so you could do more of those?

We think it’s essential that the commission recognize that, in a consolidating industry, you need to be able to find efficiencies. What happens is that the players on both sides of the JSA or the SSA have strengthened financial positions, but also the community is much better served because it has two voices, both of whom are strengthened as a result of the partnership.

Our experience in Augusta with [duopoly partner] Schurz Communications was one where we were able to add a number of new news shows, and also a local variety show. Schurz has benefited from it, Media General has benefited from it, and there is much more local information in that marketplace than there was before. And that’s something the commission needs to recognize as good for communities of all sizes in America.

The FCC is charging ahead with its incentive auction plan for taking back TV spectrum. I take it you’re not ready to sell your spectrum.

That’s correct. I don’t see Media General participating in the auction. Most owners that have network affiliates will not participate in that auction process. What we learned when we started looking at the amount of spectrum that we have is that we’d actually like to have more. We think it is important for innovation. It’s important for things like mobile DTV. It’s important for the growth and the future of the industry itself. And so that auction may make sense for a couple of different kinds of broadcasters, but it does not make sense for companies like Media General.

You can get more spectrum by buying others stations. Is that part of your strategy?

The first order of business for us in 2013 is organic growth. But to the extent that we could find things that would be a fit for Media General, we wouldn’t rule it out.

You said you had a pretty good fourth quarter there, but so did a lot of broadcasters because the political and resurgent auto spending. Doesn’t all that paper over the fact that a lot of the ad categories are pretty weak, and the national core is barely growing at all?

No, I don’t think so. I’m very pleased, actually, with our national numbers. But the most important thing for me is that we’re developing audiences, and we’re connecting our advertisers to those new audiences. And so when I see Media General with consistent share growth through 2012, not just in the first three quarters, but in the fourth quarter with the heavy political spending, it tells me that things are working very well, and that people appreciate our local content and are tuning into it. It’s also telling me that we’re doing a really effective job of selling.

Are you doing anything differently on the content side or is this just good old-fashioned selling that’s giving you that extra share?

We are doing things differently. We’ve recognized that local is our franchise. We’ve recognized the importance of local content. And so in 2012, we added 13 new newscasts across Media General. We added eight new local variety shows focused on the individual local markets that they’re in. It’s not unusual now to see a Media General television station with 35 or 40 hours of local news each week.

We’re doing the same kinds of things on the digital side. We have a different set of initiatives there, but we also are growing our digital business very nicely, and focusing now on audience extension products and audience development. We can marry those initiatives to the broadcast side so that both sides of the house are pulling together.

What do you mean by “variety shows”?

A great example is the daytime programs that we have at a number of our stations. We have a local host who calls people in and they talk about the kinds of things that are going on in the community. There are some paid ad segments in the middle of these programs, but mostly it about what people are doing. People are tuning in to find out what’s happening in their towns.

What that allows us to do is take out the kinds of programs that we might have put on during the day — game shows, things like that. So we don’t have the programming expense. Instead, we have Media General-developed programming that is focused on local communities and that allows us to keep all of the advertising revenue. So it’s a big win for us.

From your year-end report, I noticed that the website revenue is up 18.4% to $10 million. Are you going to be able to maintain that pace of growth?

Yeah. I think we’ll actually be able to increase the pace of growth there, and there are a couple reasons for it. We’re in the middle now of transferring over to a new WorldNow CMS. That’s the heart and soul of a lot of our websites, and it gives us new opportunities. We had before a home-built system that was terrific when we had newspapers in the house. But now we’re able to focus our efforts with a broadcast-centric CMS system, that gives us a lot of new opportunities for content and for sales. It lets us focus on the things that we do really well like video.

In the three converged markets where we sold our newspapers we also sold the websites with those newspapers. So we’re now building, from the ground up, new websites in Tampa, Myrtle Beach [S.C.] and Johnson City in Tennessee. We launched Tampa in the last month and what we’re seeing already is that 30% of the users are mobile users. That’s a really big number for the industry. And so what we’re seeing is the efforts that we’ve put into capturing the growth in mobile are really paying off.

It’s unusual to be starting up websites at this point in time.

It is. The other thing that we’re doing that will help us grow our digital numbers in 2013 is that we’re increasing the number of digital-only sellers that we have in the market. We started an experiment with that in the middle of 2012, and we’re now up to about a half dozen or so markets across Media General where we have people whose job every morning is to go out and sell digital. We’re seeing good payoff from that.

A number of newspaper groups have come up with a digital marketing service strategy where they go to small businesses and offer to provide a full range of digital media services. Do you think that would work for broadcasters?

I think it does work for broadcasters. We’re experimenting with that now in Spartanburg [S.C.]. We’ve done some of it in the past, and I think it’s something that we need to look at. Advertisers come to us and they ask us for those kinds of things. We help them with digital and then try to move them up into becoming broadcast advertisers.

What about your mobile strategy? What’s your plan to get into every smartphone and tablet in America?

What we’ve seen over the last 18 months in particular is the page view growth is principally on the mobile side. So that tells you a lot about the importance of smartphones and tablets to our customers. So what we’ve been very pleased to do is participate in OMVC and now Dyle. We have our stations mobilized in Tampa, in Raleigh [N.C.], in Columbus, Ohio, and in Birmingham [Ala.]. And we’re seeing how that goes.

Of necessity, it’s a somewhat slow process, but we think that there’s huge opportunity there for mobile DTV. It takes more programming, and it takes more receivers, and more devices, but we’re not unhappy with the progress that there’s been.

We’re also now beginning to experiment with the Syncbak [streaming] in a couple of our markets. So if consumers are going to start watching television programming on their phones, receiving the signals through the phone companies’ spectrum, then we want to participate in that, too.

Where is that test happening?

In Augusta and Columbus, Georgia.

What kind of programming will you be streaming? The networks are not yet giving anybody the rights to stream their programming.

You’re right. So what we’re putting up are our local news broadcasts and our local variety shows I mentioned before. That gives us enough to see what the experience is going to be in the local communities.

I presume that eventually you hope to get the network programming and the syndicated programming so you could stream more or less your whole programming day. Is that the goal?

I think that’s the goal on both the mobile DTV side and it’s also true on the SyncBak side.

You reported that your retransmission consent fees are up 77% to $37.7 million last year. That’s quite a leap. I presume it can’t continue to grow like that. But the question is, can the growth in retransmission consent fees outpace the demands that the networks are making for reverse comp?

In 2013, based on the contracts that we have already renegotiated, we expect to see our retrans revenues grow another 50%. The question then is, how much of that does Media General get to keep?

As you probably saw that in early December, we renegotiated our network affiliate agreement with NBC. We don’t have a renegotiation of our ABC affiliation agreement until mid-2014, and then our CBS station agreements don’t come up until 2015. And so to the extent that we’re negotiating higher retrans rates all the way through that period, and we’re not paying reverse comp to the networks, we keep 100% of that money. Then the important thing going forward after that is that we keep at least 50% of what we’re able to negotiate on retrans. And we’re very pleased with the negotiations that we’ve had so far on that.

Do you think that broadcast TV bares any responsibility for the culture of gun violence in this country?

I don’t think that it has a special role or responsibility in that debate. I think that because there are many other things, like movies and video games that are in the same mix, [that] I think are more important to the national debate. I think that, for our purposes, the most important thing is that we listen to our customers. We listen to our communities. And we do hear from people.

And if the community’s standards are such that something should not be on the air in a particular market, then we listen to the customers. We think that the right thing is for the industry to pay attention to this and to self-regulate itself. We don’t think this is an area where the government needs to get involved.