JESSELL AT LARGE

Diversification: Broadcasting’s New Alter Ego

TV station groups are realizing that broadcasting is no longer enough — that, while it may be a solid business, it is no longer a great growth business. So they are looking to reinvent themselves by moving into new businesses like digital media and programming that can provide some upside.

This spring, I was invited to a Scripps Investor Day in Manhattan. Without bothering to read the entire email, I showed up at the Warwick Hotel on the appointed day (June 29), expecting to hear CEO Rich Boehne and TV chief Brian Lawlor talk about the Scripps’ broadcasting business — the outlook for political advertising, the health of the auto category, the timing of retrans and reverse comp contracts — you know, the stuff you routinely hear about on the quarterly conference calls with securities analysts.

But, no, broadcasting wasn’t on the agenda. Rather, this dog-and-pony show was mostly about the $124 million Scripps has spent over the past three years to acquire a foothold in the national digital media businesses — Newsy (OTT news), Midroll (podcasting) and Cracked (digital content).

The show, in essence, was about diversification.

In his opening remarks, Boehne told investors that broadcasting is the “best business that God ever created,” what with its high barrier to entry, multiple revenue streams, predictable expenses and strong local brands.

But broadcasting, which was first fragmented by cable, is being further fragmented by digital, Boehne said. Understanding that, he said, Scripps is reinventing itself as a company that provides the “security” of broadcasting along with the upside of national digital video and audio media.

Scripps’ foray into digital is impressive. Newsy seems to have cracked the code on how to produce news clips that resonate with young people and is tailored for their smartphones and short attention spans.

BRAND CONNECTIONS

Podcasting is an odd direction for a TV company. But I’ve been a fan of the many audio shows available on public radio for years, and, as Scripps tells it, there has been a resurgence of interest in the medium.

Cracked is a producer of comedy and satire that are similar to what I’ve come to expect on Comedy Central and latenight on the Big Three.

Scripps is not alone among broadcasters in realizing that broadcasting is no longer enough — that, while it may be a solid business, it is no longer a great growth business.

Even those who believe that ATSC 3.0 will trigger a renaissance in the over-the-air medium are investing not only in digital, but also in national TV programming. Scripps, for instance, has a partnership with Raycom Media to develop new shows for broadcast syndication.

In my profile this week of new Raycom CEO Pat LaPlatney, former CEO Paul McTear said LaPlatney was chosen to be his successor because of his non-broadcast experience and the expectation that he can lead the company into new realms.

“I will not say a negative thing about local TV,” McTear told me. “It is the engine that fuels the future of this business, but we needed somebody to add on and challenge the business unit leaders here to change their business.

“The days of serving up news at the specific hour in the living room or den are going to be over pretty soon.”

Raycom’s latest diversification play came last fall when it purchased PureCars, which assists auto dealers in targeting their advertising. At $125 million, it was Raycom’s biggest non-broadcast buy ever.

Diversification has also been the watchword at Tegna. CareerBuilder and Cars.com are integral parts of the company. At the same time it released second-quarter earnings last week, it announced that it had acquire DealerRater, a website of consumer-written reviews of car dealers.

The company is also into broadcast syndication in a big way. During the analyst call that followed the earnings report, Tegna Media President Dave Lougee said Tegna’s first offering, a talk show with preacher T.D. Jakes, is now cleared in 43% of the country and set to debut in September.

And Jakes is just the start, Lougee said. “We have six different pilots of new live local shows underway in six markets and in the syndication space.”

No company is more dedicated to broadcasting than Sinclair. It invested millions developing the new ATSC 3.0 broadcast standard and it is investing millions more developing business models for it.

Yet, Sinclair is not banking entirely on broadcasting. And Sinclair being Sinclair, its idea of diversification is different from that of its peers: more linear TV.

Last fall, it launched a second multicasting network, Comet (American Sports Network was the first), and purchased the Tennis Channel. The Wall Street Journal reported this week that it is sniffing around The Weather Channel.

It does have one interesting digital initiative. Last year, it bought the moribund Circa News service with plans to relaunch it this year. We await its resurrection.

Sinclair, too, set up an original programming shop and put Arthur Hasson in charge. So far, there has been talk, but little action.

Finally, some of Sinclair’s plans for ATSC 3.0 — datacasting, for instance — could also be perceived as diversification.

Univision, the Spanish-language broadcaster, has diversified in an unlikely fashion — with the acquisitions of two English-language online services, The Root, an e-zine for African Americans, and The Onion, the satiric website that has been bulking up on video.

Having read this far, I think you will agree that diversification is a bona fide industry trend.

And I think we are going to see more of it for the entrepreneurial side of the business. Nexstar has picked up some digital assets along the way and I suspect it may gather more once it is finished digesting Media General.

Same with Gray. It’s going to look around in the not-too-distant future, see that there is nothing left to buy inside broadcasting and look for opportunities outside.

Some big stations groups will never get in the game because they are not in a position to. They are merely units of bigger companies (the Big Four groups, Hearst, Cox Media) that would call the shots on diversification.

Behind the diversification is the tacit acknowledgement that broadcasting is no longer — sorry, Rich — the best business that God ever created.

But it also shows that the leaders of the industry are smart enough to expand into new arenas while broadcasting is one of the best businesses that God ever created and still throwing off plenty of cash for investment.

Harry A. Jessell is editor of TVNewsCheck. He can be contacted at 973-701-1067 or [email protected]. You can read earlier columns here.


Comments (10)

Leave a Reply

Gregg Palermo says:

August 5, 2016 at 3:31 pm

Maybe Jessell’s circle-the-wagons approach to defending broadcasters will fade away, too. Over-the-air had a great ride in the 20th century, but the party is winding down.

    Brian Bussey says:

    August 5, 2016 at 4:05 pm

    they said that after VCRs, DVRs, Cable, Satellite, Hulu, Apple TV, Google Tee Tee and whatever wonderment digidiots dream up. I will keep my money on broadcasting until they unplug the transmitters at the base of the towers. You know why ? In no sane world can free over the air distribution can be replaced with some hybrid form of subscriber based distribution and can be called broadcasting. I have local broadcast advertisers with 20+% growth (for the 4th year in a row) with 95% of their budget on broadcast and 5% of their budget in digital just to have somewhere for FB leads to land…

Bruce Morrison says:

August 5, 2016 at 4:12 pm

I’m with HopeUMakeit. Nothing I know of can replicate the TV experience. Couch, big TV, relaxation and basically a hypnotic experience. Everything else is short snippets foisted upon anyone and everyone anytime possible, usually smack dab in the middle of a stressful event or when 25 other things are happening.

Trudy Rubin says:

August 6, 2016 at 12:18 am

Can’t but help, but to compare broadcasters to other businesses, adjusting to digital. One example Kodak, made good money with film, but never got the same profitability with digital. It will be interesting to see how broadcasters fair

Joe Jaime says:

August 6, 2016 at 9:18 am

Gotta go with the combined reach of Network programming and local news … it will be a long time before that combination is equaled by any web provider.

Tony Alexander says:

August 9, 2016 at 5:01 pm

So, Harry: Is this much different than what has happened to newspapers or cable?

Mark Featherston says:

August 11, 2016 at 6:59 pm

How about “the best business God created to marry with a digital medium?”

    Darrell Bengson says:

    August 15, 2016 at 10:37 am

    Last I know, God never created any modern business, entrepreneurs and investors did, “HE” stopped meddling in human affairs 2000 years ago.


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