Bonten Media’s Randy Bongarten has lots of worries, but the broadcast networks’ dropping their affiliates and going directly to cable and satellite is not among them. “It just doesn’t make sense,” he said. “That’s not shooting yourself in the foot; that’s shooting yourself in the head.”
Like other TV station group heads, Randy Bongarten has a lot of worries these days. But the broadcast networks’ bypassing their affiliates and distributing their programming directly through satellite and cable operators is not among them.
“That would be a decision of inestimable stupidity,” the chairman and CEO of Bonten Media said at the SNL Kagan Radio/TV Summit in New York City yesterday.
Bonten, who operates ABC, NBC and Fox affliates in eight markets, appeared on a panel with three other top station group executives: Vince Sadusky, president and CEO, LIN Television; Colleen Brown, president and CEO, Fisher Communications; and David Amy, executive vice president and CFO, Sinclair Broadcast Group.
The broadcast networks periodically bring up the bypass idea as CBS CEO Les Moonves did last December. What they lose in advertising revenue due to reduced ratings, the networks say, they will more than make up in licensee fees from the operators.
But the networks underestimate how much audience they would lose, Bongarten said. The networks’ financial models say 15 percent, but it would be at least 50 percent and as much as 70 percent.
The importance of affiliates in attracting audiences can be seen by comparing strong affiliates and weak affiliates, Bongarten said. The variance in ratings can be 50 percent, he says.
Bongarten questioned why the networks would give up the free distribution system they have now to deal with operators that they “never particularly got along with.”
He also said that if the networks went to cable they would leave behind TV stations with no intention of going away. The stations would find new programming and further fragment the neworks’ audiences.
“It just doesn’t make sense,” he said. “That’s not shooting yourself in the foot. That’s shooting yourself in the head.”
The broadcasters all tried to put the best spin on the declining fortunes of the station business.
Bongarten acknowledged that auto advertising, which accounts for 30 percent of broadcasting revenues, essentially disappeared last summer and is only now showing some early signs of returning.
But the loss of the auto business is “obscuring” success in finding new advertisers, particularly retailers, he said.
The new advertisers cannot replace the lost auto dollars, he said, but they point to a healthy recovery. “TV is going to come back stronger than people anticipate and sooner than they anticipate.”
Brown agreed that new business is key, but that television has been too expensive for many advertisers. “We’ve priced ourselves out of so much of the advertising,” she said.
A typical station may have 800 clients, but there are a “whole lot more than 800 advertisers in the market,” she said. “We have to get better at finding a way to bring our pricing down.”
Multicast channels and the Web may provide the opportunities for advertisers that cannot afford the main channel, she said. “With new price points, I am very optimistic we are going to have a lot of fun in the future.”
Brown suggested that the demise of daily newspapers may benefit TV stations since auto dealers recognize that they need mass media to give them a local “voice.”
“Without that voice, their name is not going to be known,” she said. “Without that voice, they are not going to be able to move cars.”
Sadusky also thought that broadcasters would gain from the loss of newspapers. “It’s sad for America, but it’s a good thing for us,” he said. “There are too many news outlets in our markets.”
Sadusky’s definition of “news outlets” includes TV stations. Stations have been in an “arms race,” mobilizing helicopters, graphics and other technology in the never-ending competition for viewers. “It’s just unsustainable,” he said.
Not only will the number of stations with news in each market have to shrink, so will the number of hours they produce. The flood of news programming has “cheapened the cost per point” of news advertising, he said.
Sadusky said that he has been encouraged by what he is hearing from auto dealers as he tours the LIN stations around the country. They understand the value of television and have begun shifting dollars from newspapers to television, he said. “They know that TV works.”
He predicted that the U.S. automakers would also eventually come back, but not with the same budgets they had before. They will spend much less on a per-car basis than they have in the past — in line with the foreign manufacturers.
The broadcasters were all bullish about mobile-broadcasting to laptops, cellphones, PDAs and other portable devices using the new ATSC standard.
“How much we can provide and what content and how we capitalize on that remains to be seen,” said Sinclair’s Amy. “But we will making money. I’m sure of that. It’s just a matter of when.”
Broadcasters will eventually overcome the chicken-and-egg problem and get devices built with chips that can receive the mobile signal, he said. “Anywhere you see a video screen, we will be there.”
The broadcasters were also encouraged by the development of retransmission consent fees as an important new revenue stream. Getting cable operators to agree to pay fees in the first place is significantly more difficult than getting them to increase fees, Sadusky said.
Bongarten voiced concern that the networks may try to pressure broadcasters for a share of their retrans fees. “One of the things that will propel us forward is that the networks are going to want some of that money and we are not going to want to lose what we have.”
But LIN’s Sadusky and Fisher’s Brown see the broadcast networks as allies in their efforts to negotiate with cable for retrans. The networks have been “incredibly supportive” as the affiliates have asserted local exclusivity to network programming, which is key to the negotiations, Sadusky said.
“I don’t see them [the networks] taking money out of our pocket,” said Brown. “I do see them being a part of helping us get the value that these stations provide to the distributors.”