That’s just some of the advice from Steve Ridge of Frank N. Magid Associates. He says the key for television operators is to stop thinking like stations and focus on a combined model — broadcast, mobile, online. “You cannot write off one platform at the expense of another and just assume that you’re going to get those dollars. If you become reactive and defensive instead of proactive, you’re going to be chasing the other guys and you’re never going to be a leader.” And he offers a warning that if affiliates don’t share retrans dollars with their networks, “I think you’re going to continue to see the networks do a work-around and the affiliates become obsolete.”
Steve Ridge advises TV broadcasters to hang on to their spectrum, seize mobile and online opportunities, reorganize as 24-hour news operations, share retransmission revenue with networks and continue to build viewer loyalty with a strong anchor desk.
That Ridge has advice to share is no surprise. For the past 26 years, he has worked at one media’s preeminent research and consulting firms, Frank N. Magid Associates.
After several years working in TV broadcasting, Ridge joined Magid in 1983 as the firm’s first full-time manager of its TV consultation unit. Over time, his job expanded and he took on corporate responsibilities. Today, he is president of the Media Strategy Group and corporate executive vice president.
In this interview with TVNewsCheck Editor Harry A. Jessell, Ridge expands on his best broadcasting strategy and gives some of the thinking behind it.
An edited transcript:
So what do you make of all this fuss over the broadcast spectrum? Does it make any sense for broadcasters to give back some or all of their spectrum for a piece of the backend?
I don’t think it does and I will tell you the government has put itself in an awkward spot. How realistic is it for the government to, in essence, force consumers to buy expensive new TVs and then turn around and reduce or restrict the programming options. That’s kind of flawed thinking. It is not going to go down well with the population.
Local TV operators have the potential to amass a very powerful grassroots lobbying effort. TV operators have direct access to consumers in their markets and the ability to energize and motivate a huge base of opposition to a spectrum take-back. Sure, they can’t outspend Google or other lobbies on Capitol Hill, but they can win the war in their own backyards where they have huge influence.
But there are broadcasters out there who are underwater who might like the chance to cash out.
It’s very dangerous to think about a one-time cash-out when, in fact, over time, spectrum will continue to have value. If you own spectrum, you have the ability to either use it or lease it. Then, in many respects, it becomes an annuity. So, I would encourage people to avoid the temptation to take the one-time payout and really hedge their bets and protect their options for the future.
Do you have great hopes for some of these digital businesses that broadcasters talk about — mobile DTV and multicasting?
Mobile is a case where you can either jump in and be active and define the opportunity or where you can sit back and wait until somebody else fills the void. Eventually, mobile is going to dictate much of the new reality, and then the question is how will local broadcasters deliver unique value. Streaming video and live programming is but one piece of the larger puzzle. Transferring the loyalty of local consumers to that platform is going to require a complete rethink of what is unique.
So, I will tell you that mobile is a powerful opportunity and one that should not be overlooked. One in 10 are now watching video on a mobile device and that’s really where online was four or five years ago. So, it’s poised for growth and it’s not a window of opportunity that broadcasters should miss if they want to reestablish themselves and really own mobile in their local markets.
What about multicasting. There are a half a dozen diginets being carried on subchannels. Is that much of a business?
There’s a lot of experimentation going on with, perhaps, not a lot of advanced planning in terms of either consumer research or prototype testing. Just putting stuff up there is really not the way to discover a niche. It’s not about just throwing everything at the wall and seeing what sticks. It’s about really figuring out where the niche opportunity is, establishing that and then building on it in a smart way.
Are there any diginets or multicast channels that you would consider a success?
I don’t think that there are any home runs out there, but I will tell you that there is some product development going on that is definitely going to pay dividends in the next three to five years. I have little doubt about it.
When you say “product development,” do you mean other networks?
Other kinds of niche products. They are in the experimentation phase right now where we’re conducting tests to make sure that there’s a proper audience to support it.
When will we see these “products?”
Within a year to 18 months, you will see several potentially viable alternatives that aren’t currently in the marketplace.
OK, you’re the consultant. You’re supposed to be the guy who stands back and looks at the big picture. What’s the strategy for the smart TV station these days?
It’s a combined model — broadcast, mobile, online. You cannot write off one platform at the expense of another and just assume that you’re going to get those dollars. If you become reactive and defensive instead of proactive, you’re going to be chasing the other guys and you’re never going to be a leader.
Local television is really a wonderful platform to support and grow online and mobile because you have a huge brand advantage in a marketplace. Ninety-nine percent of Americans today have at least one TV in the household and 60 percent of 25-to-54 year olds watch local television news at least twice a week. That’s a huge amount of loyalty. It’s a matter of how you leverage and morph that into new business opportunities on other platforms.
What exactly should the TV station be doing in terms of online and mobile?
It’s a matter of reallocating resources in a very smart way. First and foremost, you have got to pay attention to the content that resonates with an audience on the current platform and then you have to simultaneously be looking at what’s going to resonate on the other platforms.
So, you really have to restructure the entire news gathering operation around a multiplatform basis rather than continuing to gather news for a television product and then figure, well, we’ll stick this online and we’ll shoot this out in the mobile space and kind of hope that something sticks. That’s not the way it’s going to work. You have got to reallocate those resources in a very smart strategic fashion.
I’ve heard this talk of remaking stations into a 24-hour-a-day, multiplatform operations before. Are many broadcasters actually doing that?
Well, unfortunately, a lot of broadcasters are paying lip service to the concept. I don’t hear anybody disagree with the fact that you need to be on all platforms, but some are disadvantaged in this economic downturn or facing systemic changes that have really dried up resources. So they’ve been cutting costs as a means of bringing about financial viability instead of reinvesting and outreaching on other platforms.
Well, you can’t blame them for cutting costs.
No you can’t. But you can smartly move resources around in a way and leverage them so that you’re on all platforms and engaging people on each of those platforms in a unique way. I’ll just cite a couple of examples. About eight years ago, Bonneville in Salt Lake City [KSL] decided to really embrace the Internet and take a huge advantage of that opportunity. They have built a very successful online presence that includes being the leader in classified advertising and it’s really unduplicated across the industry. Another local powerhouse is WSB in Atlanta. The WSB brand dominates in television and radio and now online. They’re setting all-time records in terms of page views and uniques.
Given the drop in TV revenue, the tightening of the market, can TV stations that are not first or second in news make it?
Those operations are in serious peril in terms of whether they can be competitive as a local news provider because the competition is no longer just the other television stations. Now, in addition, they’ve got newspapers that out of desperation have concluded that they have to have a strong online presence and they have to compete with them. If you think about it, newspapers have more editorial capacity in terms of reporters and sometimes more sales capacity than all the television stations combined in a marketplace. So newspapers are a huge threat. Then, you’ve got the Googles of the world that are more sophisticated at delivering searchable products. So I think third-, fourth-, fifth-place stations are in a very tight spot in their ability to make the investment and really make it in the game.
Another important revenue stream for broadcasters is retransmission consent. Should TV stations willingly share some of that money with the networks to improve programming?
Well, I think if they don’t smartly share retransmission dollars with the networks they won’t have an affiliation. We have reached an era of serious hardball in that regard. The reality is the sharing of those dollars has the potential to be the glue that holds the local television operator and a network together. Short of that sharing, I think you’re going to continue to see the networks do a work-around and the affiliates become obsolete.
What do you mean by “work around?”
The networks’ outreaching on cable or other venues. It just may be that the local affiliate is going to be unnecessary in the distribution process because you’ve also got online and mobile. You reach a point where you have to ask how much are the local stations really needed if they are not providing revenue from the standpoint of retransmission.
Often, consultants are blamed for the sameness of the news. From market to market, from station to station, everybody is trying to do the same thing. Are we going to see any changes in the way the news is presented?
There’s little doubt that sameness is the crux of the problem for many operators. It’s why I’ve been pretty vocal in terms of saying the news sharing co-ops don’t make a lot of sense. I realize there may be certain things you want to cover, but you don’t want to invest a lot of resources the do it. But that’s a distraction from what you really need to be thinking about, which is how you’re going to differentiate your product and how you’re going to bring specific and different unique value to the consumer. That’s where the integrity of journalism has been lost in many cases. That’s where enterprise reporting remains an opportunity. When we see a station that does that and does it well, we generally see them as leaders in the market.
But what about the presentation of the news? Is that going to change at all? Are we ever going to get away from the anchor desk?
We’ve seen many attempted iterations and it ebbs and flows. Sure, there’s always room for creativity, but at the same time we’ve pretty much determined attitudinally that people have a comfort level with how they receive news and information.
There’s been a lot of talk about getting rid of high-priced anchors. Is that a real trend?
Well, it has been. Obviously, a lot of high-priced talent has gone away in the scheme of things and I think some stations have done a very good job of really differentiating their product in ways other than having the top talent in a marketplace. At the same time, I will tell you that our research is proving over and over again that the people in the front of the broadcast remain critically important. There’s a comfort level and a loyalty that is attached to it. So, to just assume that you have got interchangeable parts and anything will work is probably a flawed strategy.
How important is it for TV stations to win some relief on local ownership rules so you can operate multiple stations in a market without having to work around the rules with joint sales agreements and shared services agreements?
It’s time to clean that up because, as you just indicated, people spend so much time and energy to find a loophole or a creative way to do a work around. So let’s just clean it up and call it what it is because in these small markets the economic viability is just not what everyone hoped it would be. The reality is, if you want to perpetuate a multiple service in a marketplace, you need to have less control and regulation.
Is the industry past its financial crisis?
We’ve reached a point of re-leveling and there certainly has been tremendous shakeout, but and we’re in a holding pattern in terms of ownership.
As we begin to see improvement in the economy and we get a little better stability back under the advertising base, we are going to see more and more stations changing hands. There obviously have not been any recent tests of what the current marketplace multiple is, but it’s going to happen. We’re going to see some movement here in the next year to 18 months in terms of television stations changing hands. Right now, the multiples are just totally unrealistic.
What’s going to be driving that buying and selling?
Strategic decisions. Some may decide that this is not a business that they want to be in long term. They may be looking for the opportunity to get out. A number of them missed the window in the last couple of years. If they had known where things were going, they would have made a move at a higher multiple. Now they have got to wait for recovery and hope to get a better floor under the multiple.
On the other hand, there are operators out there obviously that are not highly leveraged that continue to make a very nice margin and a very nice return on their investment.
So, some groups are going to be in an acquisition mode and are looking for key opportunities to buy stations on a geographic basis or for some other strategic reason.