THE PRICE POINT

Local Television’s Pivotal Year

Facing 2023’s major headwinds, TV stations need to confront their oversupply problem — and the need for new goods and services — or face dire consequences.

Hank Price

Last year ended with a wide range of major media companies announcing layoffs. This year began with DirecTV and NBC News following suit. Battered by disappointing streaming results, a constant demand for new hit programs and pressure from rising interest rates, Big Media is in trouble. But what about local media?

Owners of television stations have their own challenges this year. Much of the programming that built local television, including sports, is now spread over multiple platforms. Captive audiences are long gone, as are the great syndicated shows and network hits that created audience flow. For the moment, both retransmission fees and local advertising remain relatively reliable, but neither is recession proof.

With so many other things out of their control, every group owner’s first priority this year must be to ensure the financial viability of local news, which is the key to any affiliated station’s prestige and profit. But what happens when local news becomes oversaturated with too much product jammed into too many time periods on too many stations? How logical is 24-plus hours of combined local news in a single 24-hour period?

Not only do television stations produce far more product than viewers are willing to consume, pick any station in any size market and you will find a sameness of look, feel and format that leaves one with an overriding sense of repetition, the result of an ingrained copycat mentality where one station leads and all others try to beat the leader at its own game.

Standardization over many decades has conditioned viewers to think of television news in a single dimension. That’s why every effort to substantively change the look and feel of television news has failed. Instead, stations have tried to differentiate themselves around the edges, but in the end everything from the order of news, weather and sports to how reporter packages are produced, has been homogenized.

BRAND CONNECTIONS

This is not to say all television stations are the same. Some, through extrordinary service and long-term investment, have become powerful brands that stand out. A station with brand leadership is well positioned for the future, including the digital platforms essential to younger user growth. But with so many contenders seeking the same viewers the same way, the noise level alone makes brand a fragile thing that must be earned every day.

In the long-run, brand value will be the basis of any individual television station’s success, but what about the short term? How much difference will a strong station’s brand make to survival during a recession?

If we have a severe drop in advertising this year, endurance will depend more on a parent company’s financial stability than any individual station’s performance. That means a leading television station might still survive but eventually find itself with a new owner.

If not for outdated government regulations, stations would have consolidated under fewer owners years ago. Sadly, it is doubtful that even a severe recession would cause any change in regulatory policy.

Without relief, an owner unable to satisfy debt covenants would have few options. Jobbing out newscasts to competitors, regionalizing newscasts, producing bare bones news, even exiting news entirely would all be on the table. None of these solutions would work out in the long run, therefore the herd would thin no matter what because a station out of the local news business is simply out of business.

As TVNewsCheck Editor-at-Large Harry Jessell recently pointed out, some companies might be better off finding other ways to monetize their digital spectrum. There is a place in the future marketplace for a strong linear voice that is part of a bigger multi-platform brand, but four or five different linear providers? One thinks not.

There will be strong opposition to such radical change but looking beyond the pearl clutching tears of special interest groups, fewer duplicators of the same thing could be good for the viability of the industry and the consumers they serve. If television stations are to grow, they must do so through investment in relevant new products and services.

Why does local television matter to the future? Through their own arrogance and sense of entitlement, newspapers took themselves out of the game, leaving the field clear for what is now the only form of mass media still standing. Let the national services fight over the limited national ad market. The real growth potential is in the local markets where existing consumer and business relationships make the launch of new products possible.

If the herd thins would every surviving owner invest? Of course not. Some would simply squeeze short term profits, but that would mean being left in the financial wake of those willing to take advantage of a genuinely new opportunity. Just as newspapers did during the 1970s, one station in every community would likely rise to dominate the broader world of multi-platform local news and information.

Consider also the future of NextGen TV. Right now, ours is a business-to-business enterprise, selling advertising time and program streams to other companies. ATSC 3.0 will add a retail component, opening the door to direct consumer sales and subscriptions.

So, what is going to happen in 2023? If stations are hit with the kind of recession we experienced in 2008-09, spot rates could drop to the point even next year’s political revenue might be damaged. Consumer wallet tightening would also lower retransmission fees, further reducing revenue. Without obvious ways to cut already bareboned expenses, debt service would determine who survives and who becomes a memory.

Recession or not, a glance at ratings trends shows that consumers have been reducing their support for lookalike newscasts since the dawn of digital. That’s because linear television, though still important, is just one part of any consumer’s world of information and entertainment. On-demand entertainment is currently at the top of the list, but local news, severe weather, big events and other live programming continue to matter.

For the past decade the status quo of local television has been perpetuated by retransmission fees and political advertising. This has allowed owners to ignore the issue of oversupply, which is a roadblock to the future. Sadly, nothing will change until massive duplication of services no longer makes economic sense.

Depending on how this year’s economy goes, 2023 could be the year that begins to change everything.


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.


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