Faced With Unprofitability In ’25, Station Groups Must Pivot Now

Hank Price

For more than two decades local television has been a biennial business, feasting on political ads during even years, fasting during odd ones. This feast/fast nature has become baked into the business and is seen as simply a fact of life. Higher profits during political years, lower profit during odd ones.

But something about the odd/even cycle changed during the fourth quarter of last year. Some of the publicly owned television groups reported not just lower revenue, but actual losses. We’ve seen broadcasters report losing quarters before, but always during severe recessions, not in more normal times.

Wall Street’s reaction was immediate and negative. Several television group shares now trade for the cost of a fast food breakfast.

Part of the problem is the massive fragmentation of national advertising, which is affecting the entire media industry. This is not an aberration, but a seismic shift. With everyone from Netflix to hundreds of FAST channels competing for ad revenue, dollars are spread thin.

But the core issue with last quarter was more than just national advertising, which has been in decline for years. For groups to report a loss, their much more important local sales products must have also underperformed. Local advertising is the backbone of station revenue, so any deficiency is cause for concern.

Local television’s other revenue stream, retransmission consent, is also under attack. Cord cutting, lower vMVPD rates and unfavorable affiliation contracts are all chipping away at profits.

Add to all this the possibility of a major MVPD going out of business. Charlie Ergen’s recent announcement that EchoStar may not be able to continue as a “going concern” is the latest threat to stations. Should DISH exit the market, it would leave a massive audience of older, rural subscribers with over-the-air service only. That would take a huge bite of retransmission revenue. DirecTV would gain some of those subscribers, but how many?

And just to get all the bad news out of the way, network owners continue to divert billions of dollars in station program payments from over-the-air program development to their streaming services.  Because of this, several television groups reportedly plan to try to renegotiate their affiliation contracts, but one wonders what incentive the networks might have to change their business plans, especially after Paramount’s recent announcement that Paramount+ is on track to reach profitability in 2025.

Put all this together and we have a record political year with strong profits in 2024, followed by the possibility of some groups becoming unprofitable in 2025.

This is not good news. Local television is a critical public service that is far more than just a business. It is part of the fabric of the communities it serves. That kind of service will only continue if the best stations have the resources to produce first-class news and information.

For local television stations to keep operating at the highest level, owners need to do more than simply continue business as usual. Now is the time to put all options on the table, to look beyond today’s norms, to genuinely innovate, to even take calculated risks.

Forgive my heresy, but should some stations explore life without a network affiliation? WJXT in Jacksonville, Fla., made that decision years ago and has done well since. Of course, WJXT was a market-dominating CBS affiliate at the time, so dropping network service was done from a position of strength. Since then, CBS has never regained its former vigor in Jacksonville.

And think about this: The Disney/Fox Corp./Warner Bros. Discovery joint sports streaming announcement foretells a time when all major sporting events could very well be sold directly to consumers. If sports eventually go away, what real network value is left?

Would the Jacksonville scenario make sense for a station that is upside down in its affiliation agreement today? Probably not, but that could well be the case sometime down the line.

What would a future, locally programmed station look like? Possibly like the nascent FAST channels proliferating across every station group. Some of those products are quite watchable. That makes local FAST channels far more important than just added revenue. They are one way to develop the future without changing the current structure.

None of this is news to the major groups. One assumes they are already considering what a local television station might look like in the future. There are many possibilities, but one thing we know for sure: Today’s endless repeats of local news is not the answer.

The roots of local television are creativity, experimentation and a strong belief in the future. Our industry needs to recommit to those ideas, stop playing defense and start building something even better than what we have today. Let’s hope the best groups are working on that right now.

Hank Price spent 30 years leading television stations for Hearst, CBS and Gannett while concurrently building a career in executive education. He is the author of Leading Local Television and two other books.