JESSELL AT LARGE

Falling National Spot Puts The Hurt On Katz

Double-digit declines in national spot since 2007, coupled with station consolidation, are the new reality for independent rep firms. Clear Channel-owned Katz Television Group recently whacked two top execs, Jim Beloyianis and Michael Spiesman; laid off about 10 other employees and closed offices in Tampa, Miami, St. Louis, Denver and Seattle. Those are cost-saving actions that Co-President Leo MacCourtney says will have a big impact as it moves to find new spot advertisers and get more orders from existing ones. It would be encouraging to know that the reps are working shoulder-to-shoulder with TVB in convincing advertisers and their agencies that spot is their best and most efficient buy.

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.

BRAND CONNECTIONS

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].


Comments (8)

Leave a Reply

Hope Yen and Charles Babington says:

April 6, 2012 at 4:22 pm

As we exited the commercial affiliate business in 2004, I was wondering what the next decade would bring. Would the business ever be the same? In 2004 comp was disappearing, now it isn’t just gone, it is reversed in many cases. Retrans and Must Carry are even more contentious now compared to 2004. B&C just reported that prime network viewing is ONE-THIRD of all cable+network viewing, with ad-supported cable getting the other TWO THIRDS. My God, had I had to deal with this in 2004, I’d be shooting myself for not selling in 1990!! Now the landscape shows falling national spot, falling prime time shares, and reliance on local spot where the competition is as fierce as ever, and a very dangerous trend to ‘rely’ on retrans! Retrans, like other non-advertising revenues, can vanish as fast as any income stream that is non-broadcast. At some point, I hate to predict, the commercial television ad-supported over-the-air business that many of us grew up with will vanish with hardly a whimper from the audience.

    alicia farmer says:

    April 7, 2012 at 8:36 am

    Couldn’t agree more. Stations and networks view retrans. as a pot of gold. Subscribers only see their out of control monthly bills. Stations believe their newscasts are long term viability insurance. The shrinking demos indicate an audience fed up with the commercial glut, non-stop weather hype, and news defined by crime, mayhem, and car crashes.

Frank Jazzo says:

April 6, 2012 at 6:46 pm

When times are tough, the worst place to cut is your most skilled and connected executives.. Compensation can be restructured to include equity and bonus based on success benchmarks. Upsettting your client base via salary reductions does not seem like a good way to inspire confidence. A 40 year executive cannot be replaced with “seemless” promotions. It seems as if the stations are being told to go elsewhere if they don’t agree.

Ricky McCray says:

April 7, 2012 at 12:41 am

Another company not caring about valued employees, but only the bottom line. Yes that’s just reality. Cheap Channel.

Yong-Chan Kim says:

April 7, 2012 at 2:38 am

Is anyone surprised by this trend and the resulting consequences? As the advertising pie has experienced significant fractionalization due to disruptive technologies, the shift to on-line, mobile and social is a reality. At the same time, we are seeing many national brands focused on local execution. The lower CPMs for on-line, coupled with improved performance metrics represent an attractive alternative to traditional ad budget allocation. The need to change the cost structure and focus at the rep firms is not a blip, but a trend.

Howard Winer says:

April 9, 2012 at 2:11 pm

The decline in national advertising is due more to the loss of existing clients and spending than to the lack of business development. The real failure of the rep firms is that they do not sell to their existing customers. The only way to reverse the slide of national spot is for the rep firms to re-engineer themselves from the ground up into being sellers instead of negotiators.

Jay Miller says:

April 11, 2012 at 12:13 pm

National Reps like Leo Macourtney have been talking about business development divisions for years….and its just that talk! They(National Reps) do not know how to develop business because they are commodity sellers and have not staffed up properly for the development of digital media. The national rep community or what is left of it would be well served to start getting advice from professionals like Jim Doyle and really learn what is going on in the sales arena at the station levels. They are reactive and until that changes they are a dying part of the business.They had their chance a few years but that train has now left the station!!!!!!

Sher Hanley says:

April 11, 2012 at 2:23 pm

National Reps would be strong today if not for their own station clients using every possible opportunity to take business direct. Practically every single station in the US has local account executives handling national accounts instead of developing local business!! It is hard to survive when you don’t have the support of your clients.


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