CEO of 21-station group sees future in muliticasting, multiple Web sites, multiple stations in a market, multiple revenue streams.
Roger Ogden sees the future of TV broadcasting as a collection of as many as 10 different businesses built around and driven by TV stations. These businesses may include duopolies, digital multicast channels, local and national Web sites and broadband video on demand.
As president and CEO of Gannett’s expanding group of 21 stations, mostly affiliates of NBC and CBS, Ogden is working hard to create new businesses. “We know we don’t have a lot of the answers yet, but we know there are extraordinary opportunities,”Ã‚Â he says.
Driving Ogden is the realization that the broadcasters’ current principal source of revenue—local and national spot advertising—isn’t growing much anymore. Gannett reported last week that TV revenue was up just 3.2% in the second quarter.
Ogden seems to be pushing ahead on all fronts.
In an interview with TVNewsCheck, he says Gannett followers should look for stations offering second Web sites that target niche audiences, closer cooperation between Gannett stations and newspapers on the Web, a new multicasting channel from WUSA Washington, D.C., and never-ending experimentation.
An edited transcript:
Gannett has suddenly plunged into the duopoly business, buying stations in Denver [KTVD] and Atlanta [WATL] where you already own stations. In Denver, I understand that you plan to go with My Network Television at 7 followed by a half hour newscast at 9 where it will compete with two others. What makes you think another newscast can fly in that market?
It has to do with our having a substantial news organization already in place, and the cost to us of producing that half hour of news is not enormous. If we were operating the station as a standalone it probably wouldn’t make sense. But we have a very strong brand there with very strong personalities and we are going to promote a couple of people into that newscast that have a lot of potential to compete. They are not the same people who are going to be on at 10 [on KUSA] for the most part. Given our brand and news capability, we can be an effective competitor at a very significantly reduced price.
You’re buying Atlanta from Tribune, but haven’t closed yet. What’s the programming plan there?
It’s similar. They had already planned on My Network, and we have agreed to assume that contract. We haven’t announced our programming plans there yet, but a lot of what we see there is similar to what we saw in Denver in terms of the opportunity to combine operations and take advantage of what we already have in place. We will take advantage of the same synergies.
Is that the way Gannett grows going forward—through duopolies?
We would not necessarily do this in all our markets, even if we had the opportunity. We are going to be very selective based on our current position in the market, our future profile there, the growth potential of the market.
If Tribune were to decide to sell its station group, should I consider Gannett as a possible buyer?
We look at every opportunity out there. To my knowledge, we have not had any specific discussions about that. By and large, we are the operators of stations affiliated with major networks. These two latest acquisitions are our first foray into stations not affiliated with major networks. Obviously, Tribune is based on a different model. It would be a change for us.
Gannett has been out front in developing local programming as a substitute for syndication in late morning. Are you still committed to that strategy?
So far, so good. The shows continue to work very well for us. Philosophically, local sales, local programming, local marketing has always been important to us. And it grows in importance in every passing month. We continue to look for ways to present more local programming. We do it in a whole variety of ways. We have expanded local sports. We have expanded the daytime advertiser-friendly programs that you are making reference to. We have done a lot of that and we will continue because we think it is at the core of the local broadcasting business.
Does some of this spring from disappointment with the syndicated programming coming out of Hollywood these days?
It’s a function of what local advertisers were interested in when we did some pilot work two or three years ago. And it’s another way to do two things. One is to provide a different product to local advertisers to sell their products and services. The other is to allow the non-profit, service-oriented groups in the community to have a platform to talk about what’s going on in their world.
We clearly have some key syndication shows in many of our markets that we value highly. We have Dr. Phil in eight of our markets now. We have Millionaire and Judge Judy and shows like that are strong performers. But beyond the handful that have a history of working, the more recent history is that it is very difficult for a show to be successful in today’s environment. It’s also easier to control the costs at the local level, and have that product be within your control.
We will still be involved with syndication, especially now that we are acquiring these [duopoly] stations. Syndication is their life blood, even though we will be doing some local news there and maybe ultimately creating some local programming.
Is Gannett as bullish about retransmission consent as some of the other broadcasters seem to be?
We have been successful in generating revenue from retransmission consent, from MSOs as well as the satellite people. With the larger MSOs, we have used the rights primarily to launch additional digital channels. We are running 11 weather channels in our digital spectrum now. We are going to approach it on a market-by-market, opportunity-by-opportunity basis.
So you may go for cash if the stars align in certain markets?
We actually have cash payment from a fairly significant number of players, cable as well as satellite. And we will continue to do that, measuring that against other opportunities. Like anybody else, we are interested in cash.
The Web site of Gannett’s KUSA is praised for being a cut or two above most and for its good use of video. Do you believe Gannett stations are now on the right broadband path?
We are doing lots of things to grow the video components across not only the individual television stations, but also the Gannett newspaper sites. That’s fairly critical. I see our being linked up far more effectively than we have been in the past, sharing resources in a much more aggressive and effective way.
You have to have a strong gateway site that’s co-branded with your station and takes advantage of the assets you have at the station. But what we are beginning to experiment with are other addresses that aren’t necessarily linked directly to the station.
So your stations may actually offer more than one Web site?
Yes, in a couple of stations we are beginning to experiment with that. You are going to see more and more of that. It doesn’t mean that you are going to give up on what I call the portal site that really drives the larger numbers. But in areas where you see an opportunity to be effective in a niche because that niche is not being served, you try to address it with a different address and a different product. It will vary from market to market.
The company as a whole is actively looking at opportunities that are not just local in nature, but somehow tie together nationally and use the resources of the stations and the newspapers. There is no question we will be doing some of that.
I think we are in for a period of a great deal of experimentation. And I think the companies that are aggressive about the experimentation and taking what they’ve learned and sharing among themselves and across their companies and networks are going to fare well. That’s exactly what we are trying to go. We know we don’t have a lot of the answers yet, but we know there are extraordinary opportunities.
Are you concerned that affiliates are losing control of the exclusivity of primetime network shows?
Certainly, with all of the networks. We don’t have the same level of exclusivity as we had and we are likely to have even less in the future. That’s why you have to develop these properties around the notion of more local programming.
As other platforms become available, the networks are clearly going to experiment with them. What’s not clear to me is how effective those platforms are going to be. To the degree they are not effective, that process slows down. If they prove to be highly effective, it could accelerate.
Earlier this year, Gannett and the other NBC affiliates joined with the network in creating National Broadband Co. to jointly develop a Web site. It seems to be modeled on the joint venture that produces the NBC Weather Plus digital multicasting channel.
It’s modeled to the extent that it involves the affiliates in a business. I was deeply involved in Weather Plus and it involved an extended negotiation that went on forever trying to figure how to create the legal entities that would allow the affiliate body and individual stations to participate as equity partners. It was excruciating, but it gave us a model that could be applied to the broadband company.
But the idea here is that there are sources of video from throughout the NBC family—the network, O&Os, the affiliates—that could all come together into this giant video marketplace that could reach scale and be something fairly effective. I like the idea. It’s one of those ideas where you take what you already produce and own and find an effective aftermarket for it.
What’s the status of the project?
There are some business development people at NBC who have the primary responsibility of pulling it together. It’s my understanding that they are moving along pretty aggressively and hope to have something in the not-too-distant future.
The CBS affiliates recently signed a new agreement with the network that simply extends the contractual relationship. Are you happy with that?
We will have to see where that goes. I think if you are going to engage people in today’s world, you may have to think about a model similar to the NBC model.
Thanks to your joint venture with NBC, Gannett is among the affiliates offering a digital multicasting channel, NBC Weather Plus. How’s that going?
For the stations, it’s going reasonably well. It’s not an enormous revenue generator, but the cost is relatively modest. We see it growing. The important thing is to get in, provide a service and promote it. That’s exactly what is happening
Do you have any other digital multicasting ambitions?
We have other hybrid weather-news efforts in four other stations, NBC and CBS affiliates. In those cases, it’s all being done locally. And we have two or three stations where we haven’t decided what would be the most effective use of the spectrum. One of them frankly is right here is Washington at WUSA. We are looking at a lot of different options there and hope to make a decision sometime soon of what would have the greatest interest locally. Again, I think these digital services have to be locally focused.
It sounds like you have something close to concrete.
We’ve got two ideas and now it’s just a matter of deciding in the next few weeks which one is best. The difficulty is you don’t have a lot of evidence to guide you. You ultimately have to go with your gut and decide what you think is your best opportunity.
Is a law or FCC rule guaranteeing stations carriage of all their digital services important to you? It’s not with every broadcaster I’ve spoken to.
We’ve been successful in getting carriage with the larger MSOs either through retransmission consent or simply because they had a lot of interest in the service. Almost all the NBC Weather Plus deals got done because the operators saw it as a service that helped them compete with satellite because satellite doesn’t have the bandwidth to carry these channels at this point.
Now, there are probably going to be times where they don’t see the benefit of carrying our services or that [these services] may even compete with something that they have an interest in. That’s a different matter.
We have tried to avoid characterizing this as must carry. It is an amount of spectrum that we have available to us that we are able to use in multiple ways. All we are asking is that the entire piece of spectrum allocated to us by the FCC be carried by the cable operators. We see it as an anti-stripping bill.
What does the revenue pie look like for Gannett Broadcasting in five years?
There are many components that will make up this business in five or 10 years and none on them alone is big enough to drive your success. It’s going to be the combination of five or 10 things that you’ve put together in a way that takes advantage of your basic assets—your local brands.
You will see more and more of our revenue come from local advertisers. That’s a pretty consistent theme you’ve heard from other broadcasters. The national side has been shrinking and will continue to shrink a little bit. Hopefully, there is a point of equilibrium coming up where that stabilizes.
Our Web revenue will continue to grow at a very rapid double-digit pace. I see a lot of promise for growing that revenue, particularly as we are able to connect into network and sell more than just the local site. It wouldn’t surprise me if the Web represented in the high teens as a percentage of total revenue five years from now.
We would like to experiment at some point with some sort of subscription driven revenue base, probably driven by partnership in video on demand, but probably more focused on the broadband Internet applications. Not many people have had success with that up to now because most people expect things that come off the Internet to be free. I think there will be a gradual change that goes on there.
Multicasting will be a piece, too. Which one becomes the biggest one and which one is 15% and which is 5% and which one is 10%, who knows? I don’t think there is anyway to know for sure. But they are all going to be important.
Let’s focus on what you said about offering programming via the Web on a pay basis. Would you like the rights to offer network shows over your Web sites?
Yes. We helped create the value of those shows through our local affiliates and I think it is only fair that we have that opportunity. I also think that we can help the networks in that distribution. This experiment that we are doing with CBS and Big Brother this summer is more designed to figure out what value the affiliates can bring by promoting a download after the fact, what kind of numbers can be driven.
We have pretty compelling local sites and we certainly have the ability to reach people over the air. The combination of those assets can really help grow this video download business. To the degree we can, we want to participate in that revenue stream.
Do you really think the networks would play ball with you on a service like that?
Yes, if we can prove that it’s in their business interest to do it. Even if that evidence is a little bit soft, there is an argument to be made that we helped to create the value through the distribution and promotion of the product locally and that we ought to share in it in some fashion.
Putting the future aside for a moment, how would you characterize business in the first half?
The first half has been OK. Automotive is a big driver, and to the degree that it is still down a little bit, that obviously impacts your business. Retail has been a little bit on the soft side. But services, telcom, medical, home improvement have been very robust categories. So, we have offset the two big ones to a significant degree by growth in other categories. And actually political has been fairly good for us. Luckily, we’re in markets where there have been some pretty good activities. It’s been better than OK.
What’s the word on auto for the third quarter?
Slightly better, but not tremendous.