2012 In Biz, DC, Programming, New Media

The Great Recession was finally in the rear view mirror as the television industry hit the accelerator in 2012. It was a bounce-back year — both for revenues, thanks to an open spigot of election ad spending, and for station trading activity.

The trickle of major station sales in 2011 — Scripps buying the four McGraw-Hill stations for $212 million; Sinclair buying the eight Freedom Communications stations for $385 million as well as the Four Points Media stations in four markets for $200 million; and CBS buying WLNY for $55 million as a New York duopoly partner for WCBS — all closed in the last week of 2011 and early 2012 as a prelude to more intense M&A activity.

One seller alone made 2012 qualify as a come-back year — Newport Television. The company backed by Providence Equity Partners had bought the former Clear Channel TV group in 2007 for $1.1 billion. But despite the unfortunate timing, with a recession hitting the next year, the private equity investor still managed not to lose money by waiting for a market rebound.

Nexstar and alter-ego Mission bought the most Newport stations, 14 in 10 markets for $320.9 million — adding two later to the initial dozen — but Sinclair focused on the larger Newport markets and spent the most money. Including a recent add-on deal to buy WHAM Rochester, N.Y., for $54 million, Sinclair and virtual duopoly partner Deerfield Media paid $466.5 million for six stations and rights to operate two other stations in the same markets.

Cox Media Group and new virtual duop partner Bayshore Television bought four Newport stations in two markets for $235 million. WXXA Albany, N.Y., went to Shield Media for $19.5 million to enter into a virtual duop with Young Broadcasting’s WTEN. And the sale of KMTR Eugene, Ore. for $8.5 million to Roberts Broadcasting was recently announced, which will create a virtual duopoly with Fisher’s KVAL.

That brought the Newport sale total to $1,050,400. Since Newport had previously sold off five of the former Clear Channel stations for $50.2 million, it ended up right back at the $1.1 billion it paid for the group, with maybe a tiny profit.

As for cash flow multiples in those Newport deals, it all depends on your point of view. The seller claimed pricing just above 10 times, while Nexstar and Sinclair said their synergies (and higher retrans rates) brought the effective multiple to a mid-single-digit number.

In another big deal this year, LIN Media bought the eight New Vision stations and rights to operate three virtual duop stations for $342 million.

Those were the big deals of 2012, but there were plenty of smaller transactions as well. Notably, three speculators — Ted Bartley’s NRJ TV, Michael Dell’s OTA Broadcasting and Blackstone Group’s LocusPoint Networks — were out buying stations which they hoped would become more valuable when the FCC conducts its planned incentive auction to clear more TV spectrum and re-sell it to wireless broadband companies.

Following the Citizens United court ruling that allowed unlimited spending by super-PACS, it was widely expected that records for political spending would be shattered in 2012. Nonetheless, the dollars flowing to television were breathtaking. Wells Fargo Securities analyst Marci Ryvicker put the final take for broadcast television at $3.1 billion, with $2.9 billion of that spent on local TV stations. The final tally showed 2012 political spending on local TV up 38.4% from 2010 and 85.5% from 2008.

In addition to all that political money, NBC stations (O&Os and affiliates) got an extra boost from the London Summer Olympics. More importantly, perhaps, major TV groups reported consistently throughout the year that core advertising business was up, led by automotive, and core was on the upswing in December, the first month in a while with no political spending. So, broadcasters are upbeat on 2013, despite the tough comps from politically-inflated 2012 numbers.

Retransmission consent revenues also grew for broadcasters in 2012. CBS Corp. CEO Les Moonves has set a goal of $1 billion in retrans and reverse comp for his company by 2017 – and recently said he expects to hit that mark even sooner.

Broadcasters, meanwhile, were fighting to kill-off online companies with schemes to get around paying retrans fees. The latest is Barry Diller’s Aereo, which continues to operate in the New York market as battling continues in court.

Political, automotive, Olympics, retrans, economic recovery — the stars were all aligned for broadcasters in 2012. With data in for the first three quarters of the year, Matrix Solutions reported that total TV spot revenue was up 16.1%. Even excluding political, core advertising was up 4.5%.

Wall Street was impressed. Through mid-December every pure-play TV stock was up (we’ve adjusted for the $10 per share special dividend paid out by Fisher Communications after selling Fisher Plaza, which gives it a 24% gain), with LIN Media up more than 67% as the top performer. That’s still a long way from a peak of $19.87 in mid-2007, but a heck of a run-up if you managed to buy LIN’s stock in 2009 for 66 cents. Numerous TV companies and multimedia companies with major TV holdings are up by double digits in 2012 stock trading. NBC owner Comcast is up more than 58% for the year and CBS Corporation more than 31%.

Indeed, TV-newspaper combinations are rapidly decreasing in number, with little indication that major broadcasters have much interest in acquiring newspapers. Even News Corp. is splitting in two so that Wall Street will value its newspaper and television/movie assets separately. [LINK] Rupert Murdoch will still control both the publishing company, News Corp., and the broadcast/cable/movie entity, Fox Group.

Media General got rid of all of its newspapers in 2012 — selling most of them to Warren Buffett’s Berkshire Hathaway for $142 million and the Tampa Tribune to Revolution Capital Group for $9.5 million — making Media General a pure-play TV company.

The next big TV group sale could involve Barrington Broadcasting. TVNewsCheck reported recently that Nexstar and Sinclair are the likely buyers of the 24-station group.

A big deal announced just before the year ended could make cross-platform measurement easier. In a move that had been rumored for years, TV ratings giant Nielsen struck a bargain to acquire radio ratings giant Arbitron for $1.3 billion. Arbitron had already been inching back into TV (its original ratings business) with out-of-home measurement using its Portable People Meter and the merger makes Nielsen once again the big player in its original business, radio ratings.

Washington

The FCC got back to full strength in 2012 with the addition of Commissioners Jessica Rosenworcel (D) and Ajit Pai (R), succeeding Meredith Attwell Baker (R), who left in 2011 to take a job with Comcast, and Michael Copps (D), the only commissioner to vote against approving Comcast’s acquisition of NBCUniversal. Copps’ resignation became effective on New Year’s Day 2012 and he has since continued his broadcaster-bashing at Common Cause as leader of its Media and Democracy Reform Initiative.

Chairman Julius Genachowski (D) wasn’t able to get work completed by the end of the year on new ownership rules, bumping the proceeding into the New Year. Opponents of media consolidation were up in arms that the chairman’s proposal was likely to allow newspaper-TV combinations in the 20 largest markets — even as existing, grandfathered crossownership situations were being abandoned left and right.

The big move by the FCC in 2012 was preparation for the incentive auction to buy back spectrum from TV broadcasters and sell it — at a profit for the U.S. Treasury — to wireless broadband companies. While it will be a few years before any spectrum is actually cleared and reassigned, the incentive auction plan moved forward dramatically in 2012. President Barack Obama signed legislation authorizing the first ever spectrum auction of its type in February after congressional allies of the NAB and the wireless companies agreed on language to make the process voluntary and protect the signals of broadcasters who choose not to participate. Once the UHF spectrum to be cleared is determined, remaining TV stations will have to be repacked on channels within the remaining spectrum, although a few will be moving to VHF in return for cash payments. The legislation also provided $1.75 billion for the FCC to pay broadcasters to cover the costs of relocation.

The FCC is now hoping to complete rules next year on how to conduct the auction and, barring any delays (hey, this is Washington — there are always delays) to actually conduct the reverse and forward auctions in 2014.

A couple of FCC rule changes affecting broadcasters took effect in 2012.

Effective Dec. 12 cable systems no longer had to offer an analog tier with must-carry stations to accommodate subscribers with older TV sets that lack digital tuners. Broadcasters had fought to keep the “viewability rule” in place years longer, but the FCC voted unanimously in June to let it die six months later. Some cable systems still offer an analog tier anyway, but for those that don’t, the FCC is encouraging them to make low-cost set-top boxes available so people with only analog sets can watch television.

Just one day later, on Dec. 13, the FCC began enforcement of the Commercial Advertisement Loudness Mitigation (CALM) Act, which passed Congress in 2011. It provides for fines if TV stations, cable systems and satellite TV operators fail to ensure that commercials are no louder than the average volume of the programming they appear in.

The 21st Century Communications and Video Accessibility Act of 2010 also began to be phased-in this year. Effective in September the FCC required broadcasters to provide captioning for the hearing-impaired of all recorded video made available online if it had been captioned for broadcast. In other words, pretty much all recorded network programming. Local broadcasters will be more directly impacted come March 30, 2013, when broadcasters must caption full-length newscasts that they simulcast online live or stream within 24 hours of their original broadcast.

In the wake of the Citizens United decision by the U.S. Supreme Court, the FCC adopted new rules to require broadcasters to post online all political advertising contracts — rejecting an NAB proposal to require only online summaries of the material. The new posting rule applied only to Big Four network affiliates in the top 50 markets in 2012, but all stations must comply effective with the 2014 elections. What resulted, TVNewsCheck found, was information overload for anyone trying to analyze the avalanche of political ad contracts.

While the FCC kicked into 2013 a decision on whether to allow new broadcast-newspaper combinations in the top 20 markets, it did allow Tribune Co. to maintain its grandfathered print-TV combos as it emerges from Chapter 11 bankruptcy reorganization with new owners. Those crossownership situations aren’t likely to last long. The company is expected to put all of its newspapers up for sale — and perhaps some of its TV properties as well.

Network Programming

The 2011-12 television season featured the London Olympics, which gave NBC a big platform (5,535 hours across all its channels and platforms) to attract viewers and promote its fall schedule. Smart move, for in the first 12 weeks of the 2012-13 season, NBC has made a remarkable jump back into first place among adults 18-49 with a 3.1 rating average, up 24% from last season.

CBS was second, with a 2.9 rating average, down 12%. ABC was third with a 2.5, down 4% Fox was fourth with a 2.4, down 27%. CW finished last with a 0.8, down 11%.

Among total viewers, CBS is ahead for the season, averaging 11.638 million viewers. ABC is second with 8.949 million, followed by NBC with 8.888 million, Fox with 6.868 million and CW with 1.882 million.

NBC also won its first November sweep since 2003. The network’s push to the top was also helped by the Super Bowl, which on Feb 5 averaged 111.3 million viewers, a record for the most-watched program in TV history.

This year was also a very good one for PBS, with its runaway hit Downton Abbey generating big audiences and buzz, not just critical raves.

Speaking of raves, ABC’s Modern Family continued its run as television’s most honored comedy at the Primetime Emmys, winning the best comedy award for the third year in a row, a directing honor for co-creator Steve Levitan and acting trophies for Claire Bowen and Eric Stonestreet.

In what it hopes will be a reprise of its success in taking on ABC, CBS and NBC, Fox announced at the beginning of the year that it was setting its sights on the rapidly growing Hispanic population in the U.S. with a new broadcast network, MundoFox. Media agencies, Spanish-language broadcasters, analysts, program producers and even rival networks believe that News Corp. can pull it off if it is smart about the proposed broadcast network’s programming and can assemble a solid lineup of affiliates. Fox offered broadcasters one half of the advertising inventory, or six minutes per hour. It’s neither offering nor asking for cash. After a soft launch, MundoFox made its official debut on Aug. 13.

Another new network, this one on cable, involves News Corp. It was reported that it wants to challenge ESPN. While a final decision hasn’t been made to move forward, the company was said to be considering converting its Fuel action-sports network to the new sports channel.

CBS and ABC had a legal tussle over ABC’s Glass House. In May, CBS sought a restraining order, claiming the new show was a rip-off of its veteran Big Brother. That request was denied by a judge, but CBS went ahead with a lawsuit, but in August CBS dropped the suit. The Glass House producers (who had worked on Big Brother) in November filed their own suit against CBS, claiming harassment.

This year saw both movement and stability:

• After three seasons on ABC, the Courtney Cox-starring sitcom Cougar Town moved to TBS.
• Fox’s grumpy-doc hit House ended its eight-season, 177-episode run in May.
• David Letterman celebrated 30 years in latenight in February and in April signed a new contract that will keep him at CBS through 2014.
• Ryan Seacrest also got a gig extension, with a two-year, $30 million pact to remain on Fox’s American Idol.
• The Daytime Emmy Awards found a new home, moving from CBS to cable’s HLN in June.

Network Journalism

The year ended as it began, with NBC the leader in the network news ratings. The Brian Williams broadcast was No. 1, followed by ABC and CBS. But after seeing the biggest numbers in nearly a decade during the 2010-11 season, network evening newscasts overall shed viewers in 2011-12. Only CBS Evening News with Scott Pelley grew viewership, it was up 3%, although down slightly (0.5%) in adults 25-54. Compared to the 2010-11 season, NBC Nightly News with Brian Williams was down 3% in total viewers and down 9% in younger viewers. ABC World News with Diane Sawyer was down 4% in total viewers and down 8% in adults 25-54.

Much of the networks’ news resources were devoted to election coverage. NBC News partnered with TV One, the network aimed at adult African-American viewers, to provide it coverage of the 2012 election. The network also provided campaign coverage to The Daily Beast.

Also at NBC, the network’s Today show celebrated 60 years on the air since its inception on Jan. 14, 1952, when Dave Garroway introduced viewers to the morning news, talk and entertainment program.

Today created some news of its own when Ann Curry was replaced as co-host by Savannah Guthrie. The turnover came as NBC’s profitable morning show faced its most serious ratings challenge from ABC’s Good Morning America since the mid-1990s.

Later, in November, Jim Bell was replaced as the Today‘s executive producer.

More controversy at NBC erupted early in the year when it was revealed that NBC News edited the 911 call that Trayvon Martin shooter George Zimmerman made to police on the night of Martin’s death. It apologized, saying it deeply regretted airing the altered version of the tape. Then NBC fired three employees for the gaffe. And in October, Zimmerman sued the network.

NBC wasn’t the only news department to be embroiled in controversy during the year. In September, Beef Products Inc. sued ABC News for $1.2 billion in damages for what it claims are roughly 200 “false and misleading and defamatory” statements about “pink slime,” the product officially known as lean, finely textured beef.

And then in early December there was a second suit in which a former worker at Beef Products Inc. sued ABC News, celebrity chef Jamie Oliver and a food blogger for $70,000, claiming they knowingly and recklessly made untrue statements about BPI’s finely textured beef product during newscasts.

In non-slime ABC news, ABC and Univision announced in May that they were creating a new 24/7 news network featuring on-air and digital offerings in English targeted to Hispanic Americans with content featuring ABC News and Univision news anchors and correspondents. Keith Summa, the head of the CBS News Investigative Unit, was tapped to oversee the new operation that will be based in Miami. This still-unnamed network was planned to launch in July, but in November executives said that date could be pushed back. Univision has invested $11 million so far.

Another partnership announced this year involved Showtime and CBS’s 60 Minutes. 60 Minutes of Sports is set to debut on the pay cable network in January, and will feature regular 60 Minutes correspondents as well as CBS Sports contributors like James Brown and Jim Nantz.

And ending on a positive note, on Tuesday NBC News announced that correspondent Richard Engel and his crew were unharmed after being held prisoner for five days in Syria by more than a dozen pro-regime gunmen.

Syndication

Showing that they were still willing to gamble in first-run syndication, the Hollywood studios launched four new, big-budget shows in the fall. The one with the biggest build-up and the highest expectations was Disney-ABC Domestic Television’s Katie with former Today Show host and CBS News anchor Katie Couric. The show did well enough in the ratings, but failed to live up to those expectations.

Katie scored a 2.3 national household rating in her first week — the highest for a new show since Dr. Oz debuted in 2009 — but could not sustain it. For the November sweeps, the show averaged a 1.9, good for sixth place among all talkers.

For better or worse, Katie Executive Producer Jeff Zucker announced that he would be leaving the show to take over struggling CNN in January.

The other newcomers were Jeff Probst from CBS Television Distribution (CTD, Ricki with Ricki Lake from Twentieth Television and Steve Harvey from NBCUniversal. Of those, only Harvey has attracted sufficient viewers to insure a second season.

For the first time since Oprah’s exit, the usually hotly-contested talk show race was won decisively. CTD’s Dr. Phil posted a 3.2 average household rating, 23% above any other talker.

Live with Kelly and Michael from Disney-ABC averaged a second-place 2.7 household rating, down 18% from last November, which was Regis Philbin’s farewell sweep after more than 28 years.

Ellen  from Warner Bros. Domestic Television Distribution was a strong third, up 4% from last year to a 2.6 in households and up 13% to a 1.8 in the women 25-54 demo, which was second only to Dr. Phil.

Judge Judy, in the November sweeps, retained her crown as the top syndicated show. She posted an average household score of 7.2, beating out the nearest court rival by five full ratings points and edging out Wheel of Fortune, which recorded a 7.1. Both Judy and Wheel are distributed by CBS.

Despite the long odds, there is more first-run to come next year.

In the fall 2013, Sony Pictures Television will roll out Queen Latifah featuring the singer-actress. Her shot at being the next Oprah was sealed when the CBS Television Stations agreed to picked up the show in October.

Warner Bros. has set Bethenny for a fall 2013 national debut after a successful six-week test run on six Fox-owned stations. Bethenny is hosted by Bethenny Frankel, a reality TV star and author of self-help books. The show is being produced by comic and talk-show star Ellen DeGeneris,

CTD insured that the late-night wars will be more competitive than ever before come next fall, clearing a new talk show with Arsenio Hall in most of the country. This will be Hall’s second turn in talk. From 1989 to 1994, he hosted a successful eponymous talk show from Paramount (now part of CTD).

In the off-net sitcom side of the syndication market, the year’s big news may have been the return of Charlie Sheen in Anger Management from Debmar-Mercury.

After walking out on the hit CBS network sitcom Two and A Half Men in 2011, Sheen hooked up with cable’s FX and Debmar-Mercury to produce Anger. They would produce 10 shows for FX and, if the show drew an audience, they would produce 90 more and offer it in broadcast syndication. As they hoped, the show did well in the ratings and the Fox Television Stations stepped up to be the major-market broadcast syndication outlet.

Meanwhile, Tribune Broadcasting decided to opt out of the market and develop original programming in which it has an ownership stake. Along with Fox, Tribune has been a major buyer of sitcoms.

While off-net sellers bid good-bye to Tribune, they welcomed CBS Owned Television Stations. As part of a strategy to boost the fortunes of its duopoly stations in 10 markets, including New York and Los Angeles, CBS has replaced Tribune as an aggressive sitcom buyer.

Over the summer, CBS made deals for top-rated two comedies from Warner Bros. — Mike & Molly for fall 2014 and 2 Broke Girls for 2015.

Tribune wasn’t the only broadcast group pursuing an original programming strategy.

After nurturing America Now for two seasons on its own stations, Raycom Media brought in distributor Trifecta Entertainment to shop the newsmagazine show starring Leeza Gibbons and Bill Rancic to other station groups. The show is produced by ITV Studios America.

Right This Minute, a joint venture of Raycom, E.W. Scripps and Cox Media Group, entered its second season in the fall with a new set and new hope of attracting stations outside the ownership groups. Right This Minute is a video-clip show where Beth Troutman and four other co-hosts with local news backgrounds riff on the clips.

The boldest move came in September when Scripps dropped CTD’s sturdy Wheel of Fortune and Jeopardy in seven markets and replaced them with the home-grown Let’s Ask America and The List. As of November, Scripps said it was happy with the shows’ performance in the Nielsens. But so are Scripps’ rival stations that picked up the abandoned Wheel and Jeopardy, syndication’s No. 1 and 2 games, respectively.

Warner Bros. is a partner on Let’s Ask America and will take the game show into syndication if it deems the ratings on the Scripps stations are strong enough. The List is a newsmagazine where the day’s top stories and best online video clips are counted down.

New Media

As 2012 began, broadcasters didn’t have to worry about one threat from the previous year — that of websites FilmOn and ivi that attempted to distribute TV station signals over the Internet without the stations’ consent. They were blocked by a district court judge. But that relief didn’t last long.

In February, Aereo, a start-up company backed by Barry Diller’s IAC, announced it that would distribute stations via the Internet to paying subscribers, starting in New York. Stations in that city sought an injunction to stop it, claiming unfair competition. They were denied, but still had a copyright infringement claim against the nascent service.

By fall, Aereo had expanded its distribution from selected Apple devices such as the iPhone, iPad and the Roku streaming set-top box to additional devices including Windows computers and on a wider selection of Web browsers including Chrome, Firefox and Internet Explorer.

At the end of November, the major TV broadcasters made their second attempt to shut down Aereo. Arguing before a 2nd Circuit Court of Appeals panel, they attempted to convince the judges that the technology is likely to irreparably harm the broadcasters and violates copyright laws.

At the beginning of the year, Nielsen research showed that that stations can use their websites to notably expand reach of their news content, helping drive cross-platform sales. The data, which looked at the ABC affiliates in Seattle and Portland, Oregon, shows that by using one metric, each received at least a 3% bump in the 25-to-54 demo in the May 2011 sweeps period.

Another study, this one released in April by Borrell Associates, said TV stations should see a 25% jump in online advertising revenue during 2012. And at the end of the year, another study predicted digital ad spending would grow by over 18% in 2013. That hot pace is on track with recent years, but what’s more interesting is that digital advertising now accounts for almost a quarter of all media spending, 22%.

Underscoring the importance to the public of station websites, during Hurricane Sandy 10.4 million unique visitors logged onto the websites of TV stations in states affected by the storm between Oct. 28 and Oct. 30. This was more than double their normal traffic.

2012 was the year when “second screens” moved into the foreground. Nielsen data suggests that the vast majority of television viewers use a tablet, smartphone or laptop while they’re watching TV, diverting their attention from the shows and the advertisements that finance them. To bolster engagement, networks have launched apps and websites offering content related to their shows and social media chatter around those shows.

The growth of second screens means advertisers and stations are trying to figure out how to take advantage of this growing phenomenon. Many advertisers and media agencies know the value of that second-screen engagement in helping to raise brand awareness or drive sales.

Sinclair Broadcasting’s engineering VP, Del Parks, says that while strategy and tactics are continually evolving for how to best incorporate desktops, laptops, tablets and smartphones, they are an extension of the station’s brand, “and because eyeballs are definitely there, we have to be there.”

Apps were another growth area during the year. According to a report at the beginning of 2012 from Nielsen, 33% of consumers downloaded news apps during the past month. Some 51% of consumers also said they didn’t mind advertising in their apps if it meant they could access content for free.

Stations and station groups released a variety of apps for a range of devices. Meredith Corp. CEO Stephen Lacy said in December that “approximately 30% of the [digital] traffic we generate is coming from mobile and tablet devices.” The company has looked to take advantage of that audience by introducing a series of mobile-specific site apps.

ABC’s new alarm clock app, launched at its KTRK Houston in May and the broadcaster’s seven other O&Os in June, gives users a morning wake-up call and a shot of local news headlines all before they’ve had their first cup of coffee.

Read the other stories in this Year in Review Special Report here.