Falling National Spot Puts The Hurt On Katz

TV stations would like more from national spot, but they are not nearly as dependent on it as they were before. They have local spot and they are seeing steady increases from retrans and various digital efforts.

TV’s three big independent rep firms cannot make the same claim. Katz, Cox and Petry rely on national spot for most of their revenue. They work for a percentage of the national spot they sell on behalf of their client stations, and what they sell has been slowly dwindling.

From 2007 to 2011, to use two similar off-political years, national spot dropped 10.7%, from $10.8 billion to $9.7 billion. That’s according to Veronis Suhler.

As told by SNL Kagan, the story is even grimmer. From 2007 to 2011, it says, national spot fell 20.5% to $7.8 billion.

I can’t explain the disparity in the totals, but the percentages are what count here.

Making matters worse for the reps has been the station consolidation. The more stations a group amasses, the more it can grind the reps on their commissions. In an industry where 15% was once standard, I understand that reps are now working for a vig of less than 6% from their biggest clients.

And it’s not just station totals that give broadcasters leverage. They can still play off one rep against another in negotiations, threatening to take their business elsewhere.

Early in March, these negative trends finally caught up with Katz Television Group as they did to Petry a few years ago. Katz has the added misfortune of being owned by Clear Channel Communications, the once humble radio group that is now something of a financial mess.

As we have dutifully reported, Clear Channel whacked two top executives — Jim Beloyianis, president of the Katz Television, and Michael Spiesman, head of Continental, one of Katz’s three operating units. In getting rid of Beloyianis, Clear Channel got rid of the biggest salary.

In place of Beloyianis, Clear Channel appointed Leo MacCourtney and Craig Broitman as co-presidents. MacCourtney and Broitman were heads of the other two operating firms — Eagle and Millennium, respectively. They, in turn, appointed new heads of the three units — each an executive vice president.

But that’s only the half of it. In an interview with me on Wednesday, MacCourtney said that Katz also laid off “about 10” other employees and closed offices in Tampa, Miami, St. Louis, Denver and Seattle.

MacCourtney also confirmed that Katz lost about a third of its Hearst Television business to Cox. That must have been a particularly hard blow. The relationship between Hearst and Katz goes back to the 19th century when Hearst was strictly a newspaper company.

Beloyianis may have been a big salary, but he was also the face of the company. He had been with the company for 40 years. I don’t believe that I have ever been to a gathering of broadcasters in New York — reception, black-tie dinner, conference — where he wasn’t also there making the rounds. That’s no small thing in a business built on relationships.

MacCourtney acknowledged the losses of Beloyianis as well as Spiesman (“they are the best managers I have known”). He wouldn’t say why Clear Channel decided they had to go, offering only that it was Clear Channel’s call. To me, that means it was a salary dump.

In any event, he said, Katz is still in great shape and prepared to do what it can to provide top service to its clients and arrest the spot erosion.

The business from the shuttered offices will be picked up by the brahches in Atlanta, Chicago and Los Angeles. The real estate savings will be as significant as the impact on the business will be insignificant, he said.

“The [closed] offices account for less than 4% of my billing and, frankly, most of it I can cover from a regional standpoint. Those are all good, smart decisions of putting your money where the money is.”

Offsetting the loss of the Hearst business is some new business, MacCourtney said. It picked up the McGraw-Hill stations when one of its existing clients, Scripps, bought the group. It also has managed to bring in some of the Granite stations.

By MacCourtney’s reckoning, Katz accounts for 35%-38% of the independent TV rep business; Cox, for somewhere in “the mid-40s”; and Petry, for the rest.

But the big point that MacCourtney wanted to make was that Katz was committed to business development — finding new spot advertisers and getting more orders from existing ones. He and Broitman would have the “bandwidth” to devote to it and Clear Channel would make the investment.

“The truth is, every television station that we represent spends a huge amount of their equity and time on business development in the local market. Katz and my competitors have an obligation to do the same thing.”

MacCourtney stressed that Clear Channel is on board for all this. “There is an incredible desire on their part to give us all the assets we need to be the best in the game and those aren’t just words. I mean I absolutely wouldn’t be part of this if I didn’t believe that.”

Katz has an existing business development unit, he said. “You are going to hear about expansion of that in the very near future.”

Every broadcaster should hope that “those aren’t just words.” Core national spot is in a hard way. In key categories like wireless carriers, movies, fast food, auto insurance, casual dining and financials, money has been drifting out of spot into network and other media.

TVB is now dedicated to reversing the flow. It would be encouraging to know that Katz and the other reps are working shoulder-to-shoulder with TVB in convincing advertisers and their agencies that spot is their best and most efficient buy.

As I said at the top, stations are not wholly dependent on national spot, but they sure would like more of it.

Harry A. Jessell is editor of TVNewsCheck. You may contact him at 973-701-1067 or [email protected].