The Sunbelt Communications president says that this recession is changing the face of local TV. How stations operate going forward will have to conform to a new reality of lower revenue and costs. And part of that may be cross-market news sharing arrangements, smaller news salaries and lower license fees for syndicated programming.
Every TV station in the nation, from New York to Glendive, Mont., is getting pounded by the seemingly bottomless and endless recession, but some are getting whacked harder than others.
Among those are the stations of Las Vegas, one of the epicenters of the real estate meltdown. Years of high growth have turned into months and months of painful contraction.
No station group knows this better than Sunbelt Communications. It owns or operates 11 mostly NBC affiliates in five southwestern and mountain states, but it flagship and chief revenue engine is KVBC, the NBC affiliate in Las Vegas.
In this interview with TVNewsday Editor Harry A. Jessell, President and COO Ralph Toddre says that the TV station business that comes out of the recession will not be the same as the one that went into it. How stations operate will have to conform to a new reality of lower revenue and costs, he says.
As for Sunbelt, Toddre is confident that it will survive and perhaps even grow by acquiring weaker stations, assuming the Obama administration allows it. In the meantime, he says, Sunbelt will eek out what additional revenue it can through the Web, mobile and digital channels.
An edited transcript:
So what’s the good news?
Boy, now that’s a tough one. The good news is that this may have been a wake up call because I don’t think things are going to go back to where we were.
Broadcasters really need to look at how they’ve been doing business. We have to look what we are doing from an operational standpoint, how we deal with the advertising side of it and how we deal with multiple platforms.
In some ways, it’s going to take us back 20 years. We’re going to have to look at how we used to do things and how we could potentially take some of the old ways and apply them to all the new technology and all the new platforms.
Unfortunately, because of the competitiveness of certain markets, syndication prices for programming and salaries — especially in news — really skyrocketed over the past 10 years.
When you’re in a situation where the money is good and things are good, you have a tendency to not pay that much attention to what’s going to happen in the future. In a lot of ways, the broadcasting industry is kind of like the government right now. There needs to be a lot of changes. We just need to do things in a different way.
Las Vegas is your big market and from all I hear it was hit hard by the real estate bust. How is the economy affecting you there?
Oh, it’s had a terrible effect. The housing market in Vegas is among the worst in the nation, along with Phoenix and Miami. Those three were battling it out as to which was going to get hurt the most by this. Unfortunately, I think Las Vegas won. We had a lot of businesses that went along with the housing market — you know, furniture stores, cars and so forth.
Our unemployment rate is going through the roof. I think that by the end of this quarter, we’ll be over the 9 percent range in unemployment in this state.
Can you quantify what’s happened in Las Vegas?
Our revenue was down in the 30 percent range in 2008 and, in some categories, 50 to 60 percent.
How do you manage costs in such an environment? Is it head count mostly?
I’m a firm believer that you can’t cut enough to make up for the loss of revenue. I mean you could completely destroy your operation. So you have to look at other ways of making up for that.
But there are going to be a certain amount of cuts that you have to make because you’re going to have to restructure the way you do things.
It’s going to definitely take a while for Vegas to rebound from this because it keeps getting hit so much.
The latest was the Wells Fargo thing. Wells Fargo was sending a whole bunch of people to Las Vegas on a reward, another one of those things that everybody’s going nuts over.
Well, that has an effect on us because companies are now reluctant send their people to Vegas for those kinds of things or for a convention because they are seen as perks. I’m sure you saw that at NATPE with the low attendance there.
What about your stations outside Nevada: Yuma, Pocatello, Twin Falls. Are they doing any better?
From a percentage standpoint, yes, they are. Our stations in Wyoming are doing OK. Our Yuma station is doing OK. Montana is doing OK. All the stations are down in all of our markets, but comparing them to Nevada and especially to our Las Vegas station, it’s not even close.
I noticed that you’re on the WorldNow Web platform. How is that going?
We’ve struggled with Web revenues just as I think everyone else has. It’s been one of those areas where we all know the importance, but translating that into the revenue has been difficult. Newspapers are a great example of that. You can’t transfer those newspaper dollars over to the Internet side.
So the Web is not going to save broadcasters?
No. It’s so minimal it’s just not a saver at this point at all, but you have to do it. It’s an expense that you have to deal with and it certainly is something that we have to grow.
Is local advertising ever going to be able to replace the lost national dollars?
I don’t think it will ever completely replace them, no. It’s going to be tough for medium markets and small markets to support all of the television stations that are out there because the national dollars are disappearing. If you have to rely completely on the local dollars, there’s not enough to support all of the television stations. So there are going to be some people that are going to survive and those are going to be the ones that have made the commitment to localism.
Do you see some stations dropping news as a result of the recession?
Yes. I can’t imagine us doing it, but some stations in smaller markets that are doing news or are trying to do news aren’t going to be able to afford to do it. News is incredibly expensive to do, especially to do well, and it’s going to be tough. There’s going to have to be a relaxation of the duopoly rules.
You haven’t been really aggressive on the duopoly front. You have a couple markets where you’re managing second stations. Would you like to get second stations in some of your other markets?
Yes, we would. I certainly would welcome that. In fact, I am looking at it in some cases that I really can’t speak of at this moment. A critical piece in television’s success in smaller markets is the duopolies — having a couple of operations in one and being able to offer all of the programming from the networks.
Could you see yourself buying a stand-alone station in another market? I ask because there seems to be stations out there that you could buy fairly cheaply right now.
There’s a lot out there. I’d love to be able to do it, no question. The problem is that you need to get loans to buy them and that is very difficult at the moment. However, one of the things I would love to look at is working with some of these lenders that may be having problems with companies that own stations. If there’s something that we can do to work something out, I’d certainly welcome that.
So you and [Sunbelt owner Jim] Rogers see yourselves as long-term players here. You’re not looking for the exit in any way.
Not at all, not at all. That is just not going to happen.
Did you make the trip to Vegas for NATPE?
I happened to be in Las Vegas and went over to NATPE because I was talking with a couple of syndicators. It looked like a ghost town.
There was talk there about broadcasters giving some push back on syndication license fees not only on the new shows, but on some of the renewals coming up.
There has to be. We just can’t afford it anymore, but, in the conversations I’ve had with the syndicators, they understand. They really do. They understand what’s going on and they have indicated — at least to me — that they’re very willing to sit down and talk about it.
How are you and NBC getting along these days?
Good actually. They’re in the same situation that we are in, that all broadcasters are in. There are going to be things that are going to irritate and cause problems, but if you just step back and look and see why they’re doing it, you understand. We need to be doing the same kind of stuff as they are and they seem to be working with us.
Is mobile a part of your digital broadcasting plan?
We have to look at that and we have been working on it. We’re just trying to figure out the best way of doing it. If we go into mobile, why would syndicators and the networks have a problem with that? That’s been one of the issues. I don’t see what that problem is because it’s just more eyes for their stuff. I mean it is our market and it’s just another type of platform. It’s just another television.
Perhaps the networks are concerned that allowing stations to use their programming in mobile will prevent them for doing deals with other mobile providers.
Yeah, but then they’re really infringing on our exclusivity. That’s always been an issue. Well, do we really have any exclusivity is the question and, in most cases, technically, I guess we don’t.
Another option for digital is second channels?
We are doing second channels in a couple of our operations now. It’s in this same place that the Internet is in. Actually getting dollars out of it is going to take a while, but it’s something that we definitely, definitely have to do. It’s an opportunity. Besides the great picture, it’s the best thing that we can get out of this digital transition.
Have you picked up any of the so-called diginets?
We have LATV in a couple of our markets. We’re working with NBC in trying to make deals for ShopNBC as a secondary channel.
We need people who embrace the multiplatform concept and see the benefits of that instead of giving it away as value added — a term that has made me sick over the years. There’s been that tendency to give away these other platforms to get people to buy [on the main channel]. The other platforms have value. There is tremendous value. You can target demographics so much better on the Internet and on the digital channels, but getting your people adjusted to that takes time and sometimes that’s what holds you up more than anything else.
I’m going back to Vegas for the NAB in a few months. What’s your capital expense budget look like?
I did something a couple of years ago. I went out on a limb a little bit, made the deals for equipment and converted all of our stations to digital. So, we’re done. I’m glad I did because now is certainly not the time to be buying transmitters.
So no big capEx this year?
Fox, NBC and other large station groups are talking about cutting costs through news sharing arrangements with other broadcasters in their markets. Have you talked to any of your rivals about doing that?
Yes. I’ve had some conversations about it and it’s intriguing. It really is. I think we will have more conversations about it. Absolutely. You have three stations in Las Vegas with helicopters and that’s an incredible expense.
Is the new administration going to be good or bad for broadcasting?
What I see in the new administration is incredible transparency and whether that’s good or bad I don’t know. There’s still the Republicans-vs.-Democrats thing and I’d love to see that disappear. Of course, that’s everybody’s wish, right?
Democrats seem to be hell bent against loosening the ownership rules just as a matter of principal.
I know and they really need to change. They really do because, like I said earlier, that’s going to be how some stations are going to be able to survive.
But broadcasting as a medium will survive?
Broadcasting will survive, I have no doubt. It’s going to change and it’s going to look a whole lot different, but it will survive.