TVNEWSCHECK FOCUS ON SALES

Gray’s No-Rep Strategy Draws Mostly Skeptics

While some other broadcasters say the move to bring its rep business in-house may work due to Gray’s size, many think it’s risky business, with the costs likely to outweigh the benefits. The decision to go it alone was not made lightly, said Gray’s Kevin Latek, SVP, business affairs. "We analyzed this every which way possible for pretty much close to a year until we came just to form a consensus ... that this was the right direction for Gray to go.”

Gray Television’s announcement last week that it was dropping its rep firms and bringing its national business in-house is being met by other broadcasters with surprise, admiration and mostly skepticism.

“You can save commission, which is between 5% and 7%, probably around 5% for Gray, but you still have to build out your staff,” said a top sales executive for a major station group. “By the time you’re done, there’s the headache of staffing and the potential disruption to business. It’s not worth it.”

Gray was “courageous” to try it in a year [2016] when political spending will be setting new records, the executive said.

“When you [rep yourself] you have to chase around a lot of buyers,” said a group CEO with stations in larger markets than Gray. “You have to have people in all the major cities — New York, probably Chicago, Los Angeles, Detroit, Dallas and maybe Atlanta. There are a lot of places where the buying comes out of.

“Gray seems like it’s slightly an outlier. I don’t know that it’s signaling a trend,” the CEO said.

It was not Gray’s intention to start a trend, only to bolster its bottom line.

BRAND CONNECTIONS

In its Aug. 31 announcement, which got the entire industry talking, Gray said that it would be terminating its contacts with Katz Television and CoxReps for “nearly all” its 80-some stations in January, noting that a quarter of them were already operating without reps.

The move was a bigger blow to Katz, which handled the bulk of Gray’s business. Katz and CoxReps declined to be interviewed for this story.

Gray said the move would save between $8 million and $9 million in 2016, even after factoring in the expense of new sales people.

Offsetting the savings over the next two years will be $6.1 million to buy out its contacts with the reps. Gray said it will pay the reps in monthly installations over the two years, although it will book the entire charge during the current quarter.

“We think this is the right time to do it and we are confident, said Bob Smith, SVP, Midwest and West Region, Gray Television. “We’re well positioned because we have seen it with our own stations. They are doing very well.”

It’s not just about saving money, Smith said. It’s about growing national spot, which now accounts for about 20% of the group’s total sales. “We think that the relationships will be stronger. We think the one-on-one contact between our stations and the [media] agencies without anybody in the middle is going to be a benefit for us.”

The decision to go it alone was not made lightly, added Kevin Latek, SVP, business affairs. “We analyzed this every which way possible for pretty much close to a year until we came just to form a consensus … that this was the right direction for Gray to go.

“We looked at lots of the permutations from retaining our current rep with our current fees, retaining our reps at a different payment structure, retaining our reps for some business, but not other business. It became clear that the major direct model just made the most sense.”

To implement the new strategy, Gray hired two executives from Katz — Becky Meyer, who will remain in Chicago and lead the initiative as VP of national sales, and Mike Jones, a political advertising specialist who is based in Washington.

Latek confirmed that Michael Spiesman, a one-time Katz executive who had the title of VP of national sales, left the company a few months ago.

Smith said there are no immediate plans to hire additional national sales executives. “We will just see how this goes and we will adjust accordingly if need be.”

Nonetheless, Smith said, Gray will be able to touch all the bases. Most of the national business now comes out of New York, Los Angeles, Chicago, Detroit and Dallas, he said.

“So we will travel to those markets. It’s not like everybody [at the rep firms] was making a ton of calls and a ton of market visits. I mean, once the buyers know you and know how to contact you, you can do business. A lot of this is done electronically.”

In an interview with TVNewsCheck posted yesterday, Mike Fiorile, CEO of the two-station Dispatch Broadcast Group, called Gray’s decision a “bold move,” but not one that he was likely to emulate.

“I like having as many sales people in as many cities as I can. For me, there’s no substitute for getting a sales person in front of a buyer and having a relationship. I think that’s a challenge when you start a new rep firm.”

Fiorile did allow that if he had 20 or 30 stations, he would at least consider giving up the reps.

Terry Hurley, president of Cordillera Communications, which, like Gray, operates small-market stations, said the in-house rep mode is “not sustainable” for Cordillera.

“Staffing, infrastructure and management would rapidly equal the amount we pay CoxReps. As long as they keep doing things as well as the have, they will be our partners.” However, he added, “we understand that [going it alone] may make sense for groups with significantly more revenue.”

Not everybody thought Gray had gone astray. “Broadcasters the size of Gray do have the scale to bring things in-house and handle it with national and general sales managers directly one on one with the buyer,” said a broadcaster with a group with fewer stations, but much larger markets.

“I wouldn’t be surprised if the volume of business for the larger groups, the volume of revenue in terms of billings, could possibly justify it from a cost basis,” he said. ”For what it costs them to use a Cox or a Katz, they could probably afford to build an infrastructure similar to the O&Os’ rep businesses.”


Comments (10)

Leave a Reply

mary lawrence says:

September 9, 2015 at 9:07 am

I applaud Gray for making the decision to take their rep business in house. A bold move, well not so much as one to increase the bottom line. The rep business has turned into an ’email business’ with the only contact between buyer and rep taking place by email. My question is how do you sell my station via email. Its as much the broadcasters fault as the reps….we let this happen….buyers would prefer to never talk to a station person or a rep. You will see more groups taking their national business in-house or smaller stations going repless.

Richard Perin says:

September 9, 2015 at 9:53 am

Reps are high priced emailers/texters.. only reason they still exist IMHO is due to the Donovan DARE system which made it easy for agencies to cut costs and reduce payroll in the buying department. Since DARE was proprietary to reps/agencies, it has bought them a lot of time. When buying software on the station/agency level is practical, the reps are gone. Technology exists to eliminate the middleman…the exact definition of the rep business.

Jayson Siler says:

September 9, 2015 at 9:57 am

When the general assumption is that station ad inventory is a “commodity”, then it’s only a matter of time before it is traded electronically just like corn, orange juice, and pork bellies… That assumption is common on both the buy side and the sell side.

Daniel Miller says:

September 9, 2015 at 11:01 am

Another example of poor leadership from a small market group who is operated and controlled by small market thinkers. This is a desperate move for a company to try and save money but how do they staff their stations now, where most of the GRAY stations cannot properly staff their stations with talented local AE’s. My guess is that Kevin and Bob will be able to hide the loss in a political year but once they get to 2017, the board members will push them out and be shopping their business around to the rep firms again. Its still shocking that a publicly traded company could make these kind of changes without any plan or strategy in place. They apparently put the responsibility on each individual GM to come up with a “plan” to handle the national business. The agency world will try and buy around them wherever possible and if not lower GRP’s or move money out of spot. There is already talk within the GRAY GM and I would be surprised to see Bob Smith booted before the end of 2016….

Patrick Burns says:

September 9, 2015 at 11:21 am

Since agys buy on even a .1 or .2 of a HH or demo cell, the slicing is getting thinner & thinner.
Gray by definition and self promotion is in small and very smaller mkts.

The could create better payback & legacy by revving up their event & NTR effort in each mkt so that they own 5 or 6 top events that are not cyclical.
I know one 170 th mkt that is in the 3 rd year of a wtr event that put a solid $ 35 K pure profit in their bank account. It creates more viewers, reinforces advertiser relationships and only gets bigger every year..

Buyers will not move dollars into small pop ctrs. Unless all of Gray’s mkts have HUGE new economic drivers, they are chasing their tail. Ad dollars follow sales potential not rating points.

I think their national reps did a good job but again the mkt sizes will always dictate heavily what goes into a area.
The in house vs rep scenario will not ameliorate that !!

That’s all she wrote !

Jamie Olofson says:

September 9, 2015 at 11:35 am

Most agency buyers, whether they are talking to a local AE or a National rep, push contact to email. However, the National rep is sending a lot more email to the buyer, and thus has developed a better relationship with the buyer than a local AE who has much less contact. Not to mention the benefits to the buyer of not having to explain their clients goals to multiple sellers.

Brad Dann says:

September 9, 2015 at 1:29 pm

Everyone is making assumptions about this decision and thinking in stereotypes. Has Gray said to anyone they’re going to build their own rep firm? Is DARE for sale to a station group? Gray has typcally, the #1 or #2 station in the markets they are in, why would a buyer want or try to buy around them if they offer the same thing as a rep does? The reaction and comments in this story just illustrate how provincial, rock headed and backwards some in the industry are. The reps are not the station’s salespeople, if they were you’d control their compensation plan. You can’t hire and fire them, they work for a company that has its own interests, not the stations. I am not saying all reps are lousy, just that there’s a time to look at new models and maybe this works or doesn’t but at least Gray is trying something new.

Keith ONeal says:

September 9, 2015 at 11:55 pm

These are the same people (GRAY) that just bought a TV Station in IOWA for ONE HUNDRED MILLION DOLLARS ($ 100,000,000.00) Unbelievable!!! You gotta wonder if they even know what they are doing!

Joe Jaime says:

September 16, 2015 at 9:27 am

As long as the station is #1 or #2 in news the station will be on the buy. In markets this size …..either the GM or GSM will have the responsibility for national sales. If they have to interface directly with each buyer, that adds a lot of time to an already busy job for either the GM or GSM. I’m not real fond of this idea but let’s give them a chance and see what happens.


More News