Rather than continue operating Cox Television, Cox Radio and Cox Newspapers as separate businesses, the family-owned multimedia company combined them under the Cox Media Group banner and put Sandy Schwartz, a former newspaperman and business development executive, in charge. He discusses the thinking behind the restructuring, his hope that cost cutting is in the past and his conservative revenue forecast for TV in 2010.
Cox Enterprises late last year knocked down the management walls among its legacy media properties.
Rather than continue operating Cox Television, Cox Radio and Cox Newspapers as separate businesses, the family-owned multimedia company combined them under the Cox Media Group banner and put Sandy Schwartz, a former newspaperman and business development executive, in charge.
In Schwartz’s new order, unveiled in a series of press releases over the summer, Executive Vice Presidents Doug Franklin and Bob Neil report to Schwartz and have responsibility for the newspapers and most of the radio stations, respectively.
Franklin and Neil will also oversee some of Cox’s 15 TV stations as part of a plan to create operational efficiencies and regional cross-media selling opportunities by putting TV, radio and newspapers under common management in some places.
Niel’s radio-laden portfolio includes WPXI Pittsburgh and nearby stations in Johnstown, Pa., and Steubenville, Ohio. Franklin’s newspaper lineup gets WHIO Dayton, Ohio, to go along with the Dayton Daily News and the radio stations in the market.
Two other Schwartz reports split the rest of the TV stations.
Group VP Jay O’Connor oversees the TV stations in San Francisco; Seattle; El Paso, Texas; and Reno, Nev., as well as the radio stations in Hawaii.
And Bill Hoffman continues to run the Cox flagship, WSB Atlanta, as VP and general manager, while advising Swartz on TV matters and coordinating the buying of syndicated programming for all the stations. He also oversees the TV news bureau in Washington.
Doling out the TV stations among several executives also solves the management riddle that Cox was presented with the retirement of its top two TV executives. Andy Fisher, who was in charge of all the stations as president of Cox Television, left at the end of last year and his chief lieutenant, Bruce Baker, followed him out the door several months later.
Two other operational executives report to Schwartz: Marc Morgan, senior vice president and chief revenue officer, whose duties include developing news sales opportunities and sales training, and Jim Monahan, president of Cox Reps (TeleRep, HRP, MMT and Cox Cross Media).
Sterling Davis, the vice president of technical operations, reports to Neil and Franklin with a dotted line to Schwartz.
Although Cox was founded as a newspaper publisher and prospered as a pioneering broadcaster (radio in 1934 and TV in 1948), the legacy media that Schwartz now commands accounts for just 10-15 percent of the parent company’s $15 billion in annual revenue. Cox Cable Communications, the nation’s third-largest cable operator, is now the company’s big driver.
But despite the diminished role and the struggle of the legacy media, the company remains committed to them, Schwartz says in this interview with TVNewsCheck Editor Harry A. Jessell. He also discusses the thinking behind the restructuring, his hope that cost cutting is in the past and his conservative revenue forecast for TV in 2010.
An edited transcript:
Can you explain what you hope to achieve through the reorganization?
We really believe that we can obtain not only economies of scale, but also a lot of back-shop savings. We also have executives in Cox who have worked across radio, television and newspaper and have a lot to offer all across our landscape. Why work in silos and have TV people only talk to TV people when we can take these bright leaders who have done great things and spread the talent around.
Another of the by-products, which I just think is phenomenal, is the opportunities for people. If you were a TV executive producer for news, your upward mobility was pretty much was within TV. This is really going to give you a chance to see if you fit across other media. Some people can do that, can make that transition. We think we have a lot of good people who have a lot to offer.
Another reason is research. Bob Neal is simply a brilliant researcher and he now has Roxann Miller as the head of research. We are going to be able to take their expertise, combine it with the phenomenal research that Andy [Fisher] and Bruce [Baker] did [for the old TV group] and spread that across a lot of other properties.
On the digital side, we’ve got five different platforms that we’re running all our media businesses on. Our goal is to get it all onto one platform and be able to sell across markets where it makes sense and be able to do the regional deals. We’ve put digital under one person, Gregg Lindahl, who is our VP of digital. He reports to [Executive Vice President] Doug Franklin. That is going to give us the opportunity to spend a lot less time and money in the back shop and focus on the customer.
So the goal is to have one online platform for all of your local media properties.
It absolutely is. That’s not going to happen tomorrow, but all of that should be agnostic to the customer. We should be able to go out and sell and be able to give the customer what they need. We also own Adify, which is an online advertising platform. That’s one asset that can help us in a lot of ways. We’ve got a lot of assets and ad systems and, once we put them together, we’ll serve the customers extremely well.
Do you see the physical collocation of some of your media properties as part of the reorg?
It’s an absolute possibility. In Dayton, we would love to do that. It’s not easy. We’re in an old building in television and radio and in kind of a newer building in newspaper. I don’t know that it will happen, but it’s something that would be ideal simply because it would give our folks better proximity to work together.
You oversee three legacy media businesses: radio, newspaper and television. All are under stress because of the economy and competition. At this point, which of those three do you see having the most upside?
Each has their own unique opportunity. Newspapers have fallen so far so fast and they are so stressed that we’re trying like everybody else to totally reshape the expense structure, reshape the business and figure out where the opportunities are.
Now one of the things we’ve done is we’ve sold a lot of our small papers. They were wonderful properties and served their communities well, but they also took a lot of management time. Now we have four metro daily newspapers in Atlanta, Austin, Palm Beach and Dayton. Except for Atlanta, each is virtually the same size with the same kind of audience. So I think that we have some opportunities for economies of scale in terms of back shop and selling.
In radio, we have clustered like everybody else. We’re not as big as a Clear Channel or others, but we’ve got a great new sales strategy in sales that our folks have been employing for over a year. The big thing with radio is up until the spring we were a public company. Once Cox decided to make that investment and take it private, it gave us the opportunity to do a lot more. We don’t have to account to a public shareholder and explain why we’re perhaps doing some things with a newspaper or a television station that could have some fuzzy lines. When it comes to counting up the beans, all the beans go to Cox.
With television, there’s upside hopefully because the market is turning a little bit. I also think there’s upside on the digital side. We’re going to have a much bigger digital platform. Andy [Fisher] and Bruce [Baker] did a great job. We’re No. 1 or No. 2 at every one of our stations in news. We’ve spent a lot of money on research and a lot of money on marketing and promotion.
What’s the strategy for the TV division going into 2010?
That’s a hard one to answer because there really isn’t a strategy just for the TV division. It’s really a media strategy. I mean the clear strategy is to be No. 1 in every one of our markets in news and to be No. 1 in advertising share. We do that by putting in very strong managers who are laser focused on their markets. They know their markets inside and out. They know their viewers inside and out. They know their advertisers inside and out.
Once we do that, we think that we will run as strong a television station as we can. But when you are in a San Francisco and that market was doing over $600 million in revenue three or four years ago and now it’s down in the low 3’s, you can pick up a couple of points in market share and you’re not going to be able to change the dynamics. I don’t care how good you are,
Cox is one of those companies like Post-Newsweek that is both in cable and TV broadcasting, which must cause some conflicts when it comes to retransmission consent. Is retrans revenue a big part of your revenue planning?
We’re no different than any other television station group. We’re in the same boat with everybody else. I don’t want to go into what our deals are, but we believe that retrans is an important part of what we do. We think we’re fair, we think we’re good operators and we might even be ultra sensitive because we do operate out of both of those businesses.
I know the broadcast networks are now clamoring for a share of the retrans revenue. Are you willing to share with the networks?
Those are all discussions that need to be had going forward, but you are right: They certainly are clamoring. They see a pot of gold out there. We’re partners with the networks and we have to sit down, we have to talk and figure out what makes sense for both our business models.
2010 is supposed to be a better year for everybody. What kind of numbers are you looking at?
If we can come out with flatish to plus 3 percent next year, we probably would feel like we had a decent year. The wild card will be if political really goes bust in some of these markets.
That’s not very optimistic given how bad this year has been and how low the comps will be.
I’m just cautious because, even though we’re up against bad numbers, I don’t think that the light switch just goes on on Jan. 1. Here’s a theory that not many people agree with: The fourth quarter is going to be really interesting this year for all media. If we have a tough fourth quarter, there’s a chance that on the first of the year people are going to do what they did last year, which is tuck it in and just say, you know what, I’m going to wait for a month or two before I start spending money again. If that happens, we’re off to a bad start next year. Now there’s another theory that we’re going to have a decent fourth quarter where people will say, you know, things aren’t that bad so let’s start spending some more.
I’m not an economist, but I am convinced that all media and spending in a lot of places will not return to a predictable measure until America gets back to work. We have way too many people out of work. It’s going to be two or three years before people get back to work and we get back into some kind of a normal growth pattern. So I just don’t see that light switch going on Jan. 1, but, boy, do I hope I am wrong.
Are we beyond the cost cutting and all the layoffs at the TV stations?
We hope we are, depending on what happens with the revenue. We never say never, but our plan right now is to not do any of that next year. We have worked really hard to get our costs to the point where we still feel good about it. We are not going to put an inferior product on the air. We are not going to lessen our investment in research and marketing and promotion.
Are you going to be able to loosen up your capex budget for the stations next year?
The answer is yes, a little bit, but not as much as I would like. We are clearly looking at the things that we need to do and we’re going to do them. We did a number of things this year. We went HD where we needed to go HD. So we didn’t shut down totally. Being a privately owned company helps us in that vein as opposed to some of the public companies.
I hope that we can do a few more things next year that we perhaps put off and didn’t do this year, but I don’t see a huge shift. Then there’s also a domino theory here. You need to replace a truck. The trucks today are more compact, they use less fuel, they break less. So by putting some things off you’re just increasing your expense line. There may not be a win there. So you’ve got to be smart about how you don’t spend money, if that makes sense.
The other big cost center is syndicated programming. A lot of groups would like to cut back on license fees for their syndicated product. I assume Cox is among them.
We absolutely are. We want to be fair to our partners who have been with us a long time, but the dynamics have changed and so syndicators are going to have to change too. I think they know that. This isn’t news to anybody. They’re going to have to look at their business and see how it changes.
For example, if Oprah were to renew and if they were to think that they were going to get the same prices for that, you would see a big shakeout on the stations who would take her at that price. So, yeah, we’re going to see a big change.
To some extent, whether she renews is a matter of what you are willing to pay, isn’t it? She’s got to be willing to take a salary cut.
That certainly seems logical, but it’s also her passion for the show. If you look at the first three weeks of the show, clearly her passion is back. She’s doing better shows, her ratings are up and we feel good about that, but, on the other hand, for some shows, we can’t afford to continue to pay what we’ve been paying because they’re not profitable.
Would Cox be interested in getting more deeply into the TV business by buying more stations? Stations can now be had at sharp discounts off historic prices.
We’re a diversified company. Media is still an important part to us. Right now, we’re not looking at buying more traditional media. I can tell you we’re not going to buy more newspapers. I don’t think we’re going to buy more radio stations. I would doubt that we would buy more television stations, but, as I say that, alignment is always an important thing and you just never know what’s going to be out there. You are right. There are going to be some great deals out there, and I think that not only some companies, but also some individuals, will do really well with stations that are bankrupt.
For us, it’s not just a matter of owning stations. If we’re going to own them, they’re going to be the best ones around and that takes an investment and that takes some time.
This year was a year of digital broadcasting. Do you see any revenue potential from second channels or mobile? Is there any way to monetize your big investment in digital?
We’ve talked a lot about that. I think the answer is yes, but I don’t think it’s an instant jackpot. It’s little by little. The one thing that all of us in the media business have in common is that we don’t take real big dives. We kind of take smaller steps.
This might be the year where we really take some small steps and try to figure out these digital channels — what are they worth, how can I use them to serve the community, does this weather channel really make sense. We are also going to do some tests with mobile along with other broadcasters. It’s small stuff right now, but a lot of small stuff can add up to big stuff. I’ll be real interested in that answer a year from now.