Jessell | For Local TV, Flat Would Be A Victory Now
Several major TV station groups last week dutifully made their pandemic damage reports as part of their second quarter earnings releases and conferences calls with Wall Street analysts.
As expected, business closures and stay-at-home orders had put a dent in 1Q and were making a wreck of 2Q. As our Jack Messmer reported yesterday, the consensus was that 2Q sales would be down 32%-40%. Fox was the outlier at 50%. These numbers reflect mostly core sales. Only Sinclair offered official guidance for 2Q. It said core would be off 32% to 39%.
None of the broadcast executives would venture any guesses at what the economic disruption would mean for the entire year.
But it’s clear from the magnitude of the 2Q hit and the knowledge that the country’s return to normalcy would take considerable time that 2020 would not be the year that broadcasters had envisioned last year when they were making their annual forecasts.
Bright predictions of double-digit ad growth driven by record political spending have gone up in a cloud of microbes. Flat would be a great victory.
That’s the bad news.
The good news is the TV broadcasting business has shown itself to be fundamentally sound, thanks to the ever-growing stream of retransmission consent payments and the immunity from economic ills affecting the highly lucrative political advertising that pours in every two years.
Unlike their badly distressed broadcast cousins in radio, the fortunes of TV stations no longer rely solely the vagaries of advertising. (The pandemic’s impact on radio will be measured not just in lost revenue, but in how many stations go silent.)
The other good news is that in this crisis TV stations have shown that they can adapt, that they can carry on in the face the extraordinary conditions imposed by the pandemic. They continue to produce a full slate of newscasts with anchors and reporters roaming the streets for stories as they always do.
“It’s important to recognize… that our television stations are alive, well and serving their communities,” Gray Co-CEO Pat LaPlatney told the Wall Streeters.
That stations are alive and well has been confirmed by the surge in viewership that all station groups are experiencing.
“Since the COVID-19 outbreak, we are seeing significant year-over-year increases in our already strong local news viewership, both on air and online,” said Nexstar CEO Perry Sook.
Sinclair CEO Chris Ripley calls the surge — not the advertising shortfall — the “biggest effect” of the pandemic so far.
Scripps CEO Adam Symson said ratings and impressions are up 10% to 50%. “We believe we have moved into a new era for the journalism industry, one in which news, especially local news, is again a must-have for most Americans,” he said.
The broadcasters talked of belt-tightening, including postponing capital projects, which is not good news for the media technology sector. Sinclair CFO Lucy Rutishauser said the company has identified $130 million in savings this year, including $30 million in “non-essential capex.”
But most made the point of crediting their employees for the jobs they are doing and reassuring them that that layoffs, salary cuts and furloughs would be the last resort.
Even Tegna, which took some heat (here and elsewhere) for previously announced cuts and furloughs, made no hint of layoffs to follow. (I see that NBCU is taking out the ax, finally giving Tegna some badly needed cover.)
Stations have been able to maintain service in part because they plan for disasters, for drastic disruptions in their normal ways of doing things.
I doubt that any had a specific plan for a pandemic that required news staffers to keep their distance from one another and from people on the street and other news sources. But they had certainly had parts of other plans that they could piece together to help meet the present crisis.
And what plans they didn’t have, they made up on the fly.
In an interview last week with TVNewsCheck Editor Michael Depp, Fox’s EVP of Engineering Richard Friedel talked about how the Fox stations were meeting the operational and technological challenges. “We had all kinds of disaster plans and redundancy planning, but not quite for this,” he said. “We never really planned for everybody to go home and we are going to do a broadcast together.”
Finding ways to allow news staffers to collaborate from home was a big challenge, Friedel said. It’s one thing to tell salespeople to work from home, he said. “They were not hugely impacted. But when you tell an editor he is going to have to work from home and use a remote desktop to edit content in the station, that is a radical change in how they work.”
Often, it meant scrambling for the right equipment, he said. “We had lots of systems that weren’t obviously adapted to that, like a teleprompter.”
Also hampering home production was that some staffers didn’t have adequate internet connections in their homes, he said. This is something that broadcasters need to think long and hard about. Yes, the internet is a powerful tool, but it’s so powerful that I fear that stations are becoming totally dependent on it. What if the next crisis is not a real virus, but a virtual one that brings down or hobbles the internet? What then?
Fox also had to make the studios and control rooms as safe as possible for those who had to come in, Friedel said. “We were the first I know of that put plastic wrap over control panels,” he said. “You come in, clean the control room on your shift, put down the plastic wrap, at the end pick it up, clean the control panel again. The next guy comes in and repeats the whole deal. A simple concept.”
All the groups are developing work-arounds and I suspect that some may prove more efficient and stick around after the virus burns itself out. Gray’s LaPlatney wasn’t so sure. In a Q&A with us this week, he said efficiency is fine, but effectiveness is critical. “You might be able to save a little money doing something, but is that ultimately going to cost you?”
Let’s not forget about the networks and the syndicators. Even as they, too, have watched advertisers flee, they have adhered to the adage that the show must go on. I’ve been amazed at what the latenight talk shows, Saturday Night Live and others have able to pull off. If you haven’t already done so, check out our stories on how Rachael Ray and Deborah Norville are doing their shows from home.
I hope the CEOs and CFOs are right — that the worst is past, that stores, restaurants and other consumer-facing businesses will open up soon in large numbers over the summer and the advertising dollars will flow as before. But nobody really knows. We are in uncharted waters. But I do know that even if the belt gets tighter, broadcasters will find a way.
They always do.
Jamie, Can’t You Even Pretend You Care?
On the quarterly conference calls, the questions from the analysts are mostly predictable, but every once in a while you get one that makes you wonder if the stock-ownership corporations and broadcasting are a good fit.
I had to wait for the last question on the week’s last call (Scripps) for this doozy from Jamie Zimmerman of the Litespeed Partners hedge fund. Asserting that Scripps has the highest employees-to-station ratio, she suggested that the pandemic is an opportunity “to take that number down and actually let go a bunch of employees who perhaps were redundant and not necessary.”
CEO Adam Symson was such a gentleman in responding:
“Hi, Jamie. It’s Adam. Wow, I guess I would tell you I don’t see this in any way as an opportunity,” he said. “And right now, we’re very focused on the health and welfare of our employees.
“I don’t necessarily think it’s also an accurate statement that we have more employees across our stations than other groups. So, at this moment, we don’t feel the need to execute furloughs, pay cuts and layoffs.”
It’s not how I would have responded. Just another reason I’m not a CEO.
Wharton Hangs It Up
I got to know Dennis Wharton during the Al Sikes administration of the FCC in the early 1990s when I was reporting for Broadcasting magazine and he for Variety and I was beating him like a drum on the fin-syn story, possibly the most contentious and high-profile proceeding in FCC history. His recollection of who got the best of that story may differ, but I think he would agree that it was a friendly rivalry.
We became and stayed friends, even as he moved to the “dark side” (his term) in 1996, forsaking journalism and joining NAB as its chief spokesman. Last week, nearly a quarter of a century later, Dennis announced that he was retiring from the post, handing over the press handling to his capable seconds, Ann Marie Cumming and Zamir Ahmed.
Testament to Dennis’s value to NAB (and possibly his political acumen) is that he survived the upheaval that led to the ouster of his first boss, Eddie Fritts, in 2005 and the short, troubled reign of his second, David Rehr, and then went on to win the trust of current chief Gordon Smith.
Dennis was of the rope-a-dope school of PR. He wouldn’t lie, but you could punch yourself out questioning him on a story that might put the industry or the NAB in a bad light. In such cases, the best I could get out him was a little direction — that way is a dead end; this way may be more fruitful.
He was effective in his job because he accommodated reporters on the little things, building goodwill that would prove invaluable when dealing with them on the big things or in planting a story.
Dennis didn’t sit around waiting for reporters to call. He was an active participant in countless legislative and regulatory battles, making sure NAB’s arguments were always heard loudly and widely. Broadcasters do a lot of good deeds in their communities. Dennis made it his mission to make sure they did not go unnoticed in the press and in Washington.
I am going to stop now before this begins to sound like a eulogy.
I look forward to taking him to a long lunch at one of his favorite restaurants along Connecticut Avenue near the old NAB headquarters. I might finally get the real story.