Raycom: Succeeding By Evolving, Innovating

In 2013, Raycom Media teamed with Nielsen and the University of Alabama on a study to find out what the future of broadcasting might look like.

What it discovered was that students were consuming bite-sized chunks of information primarily on laptops, smartphones and tablets.

“The speed of the evolution was a real eye opener for us,” says Paul McTear, Raycom’s president-CEO. “It really created a sense of energy and purpose of how we evolve our company.

“If you ask me what keeps me up most at night, it’s the evolution and changes of the audience.”

Innovation has been part of Raycom’s DNA since the company’s birth in 1996. It was an early adopter of cutting-edge newsgathering and editing technologies and an early entrant into the digital realm. And it is one of few station groups seeking to control its destiny with home-grown programming above and beyond news.

TVNewsCheck selected Raycom as its Station Group of the Year for 2015 largely because of its innovative spirit.

Now, facing rapid change in the broadcast world, McTear and Raycom are shifting the innovation drive into high gear.

RAYCOM’S ROOTS

Raycom was created in 1996 when Retirement Systems of Alabama (RSA) purchased 15 television stations, two radio stations and Raycom Sports from broadcast veteran Bert Ellis.

Over the next decade, the company grew quickly, first under the leadership of John Hayes, then McTear, who took over from Hayes in 2001.

Today, with 53 stations in 37 markets and 18 states, Raycom ranks 11th by revenue on the BIA/Kelsey Top 30 Station Groups list.

The company owes not only its existence but its financial backing to RSA, which holds a $2.7 billion stake in Raycom, including just under $2 billion in debt in bonds and preferred stock, and roughly $700,000 in stock warrants. While about 200 members of Raycom’s management team own all the outstanding shares of common stock, RSA controls the purse strings.

“It’s almost like they have the best of both worlds,” says Bishop Cheen, independent analyst and consultant for SNL/Kagan. “Because they’re part of RSA, they have to justify their own balance sheet, but they have a parent with deep pockets.”

That financial structure has enabled Raycom to grow while avoiding the whims and quarterly demands of Wall Street.

It’s worked out well for RSA, too.

“Especially with a pension fund — because what you have is a huge outflows of dollars, a couple billion a year — you have to have vehicles that demonstrate cash flow, not just appreciation,” says David Bronner, CEO of RSA.

Raycom generated about $275 million in cash flow from its stations in 2014, according to McTear. Since 2010, it has spent $25 million to $27 million in capital expenditures to invest in the company’s future.

DIGITAL SCREEN PORCH

Digital figures to be a big part of that future.

“It plays a large role, but we’re still not sure how large,” McTear acknowledges.

Raycom’s Digital Media innovation unit, headquartered in Atlanta and headed by Joe Fiveash, is tasked with exploring the digital frontier.

At the center of that is what Fiveash calls “Screen Porch,” a digital video project that aims to move beyond news and weather to offering lifestyle-oriented content on all screens, not just television.

Fiveash, a former Weather Channel executive and digital startup maven, is circumspect regarding details of Screen Porch, saving them for an unveiling that will come toward the end of 2015’s first quarter.

He does say this: It will focus on “what people do for fun,” and the mobile platform will be crucial.

“We think that a lot of the people watching us on TV are on those other screens,” he says. “We want to cement the relationship with them on the other screens they use. We want to go after additional people with new content. But it goes back to that local mission. We think we can program locally better than anybody else.”

Apps are also part of the group’s push. With weather and news apps nearly ubiquitous, Fiveash’s team decided to try something a little different: A high-school football app that offers scores, interviews, updates and video clips to Raycom’s two stations in Tyler-Lufkin, Texas.

“People in Texas like high school football a lot,” Fiveash says, in classic understatement.

Fiveash hints at future apps that capitalize on lifestyle interests — hunting, fishing and auto-related, for instance — that are popular in other Raycom markets.

Social media is another key variable in the digital calculus.

“This past year, we had tremendous growth in digital platforms,” Fiveash says. “A great deal of that was driven by social media. If you can produce things that people are interested in they’ll share them. We created a nice program for sharing of content and a lot of it got shared and drove our audience up tremendously.”

Well before apps, mobile streaming and social media, Raycom in 1998 put a spoon in the digital pot with a 35% investment in Worldnow, a soup-to-nuts website service provider.

That investment appears to be paying off handsomely as Worldnow has grown into a leading provider of TV station websites with a Who’s Who client list that includes CBS, Fox, ABC, Cox, Gray, Meredith, Media General, Sinclair and, of course, Raycom.

In 2011, Raycom launched the Raycom News Network Digital Hub, a 24/7 digital news aggregator and exchange at company headquarters in Montgomery, Ala.

“It afforded us the ability to fund a 24/7 operation that would cover us when, in many instances, we would not have staff just for digital in place,” says Susana Schuler, SVP-news.

Raycom stations help finance the hub and contribute local content. The hub also aggregates content from regional, national and international providers, which is available not only to Raycom stations but also external Worldnow clients, including Meredith.

“This afforded us an opportunity to broaden the RNN-Worldnow connection,” Schuler says, noting that the hub now pays for itself and is headed toward becoming a revenue generator.

Streaming plays a key role in Raycom’s digital initiative, as well. It will begin live linear streaming of at least four of its Fox affiliates under the TV Everywhere banner in 2015 and hopes to stream ABC, NBC and CBS affiliates as those networks solidify plans.

CBS All Access, the $5.99 a month subscription service the network unveiled last fall, is intriguing at first glance, McTear says, but the financial details remain a question.

“When you look at it as an a la carte solution going forward, it gets to be fairly expensive. I think the networks are all going through the same kind of soul searching that we as local broadcasters are doing to find the right formula of content and ways to distribute that content and pricing for that content,” McTear says.

Digital content carries a crucial advantage over conventional television: Ease and precision of audience measurements and an enhanced ability to obtain qualitative data.

“Digital has given us a lot more data to work with, and that’s fun for a researcher,” says Billy McDowell, VP-research. “We can learn a lot about behavior, how people are turning to our news online, [and] know where the audience is in the DMA.”

That wealth of data enables sales people to guide buyers to better return on investment. It’s one of the reasons why digital ad sales are increasing by double digits while conventional broadcast sales are stuck at mid-single digit growth at best.

“We’re a digital media company with a bunch of solutions for advertisers,” says McDowell, underscoring the sea change in broadcast television.

DESTINY CONTROL

When it comes to local news, Raycom’s management team speaks with one voice: It is simultaneously the foundation and the launch pad for all other efforts. Raycom stations rank first or second in their markets based on news operations.

But Raycom has also made a mark by aggressively developing some of its own non-news programming. Last year, it launched two new strips — Flip My Food and Fix It and Finish It — as lead-ins to early news. It’s also a partner in the Scripps, Cox, Magic Dust team, producing and airing Right This Minute.

Several years ago, frustrated with the syndication model that included signing up for two years of a show that often had no pilot, Raycom took an early run at growing its own programming.

America Now was a lifestyle-oriented news magazine that seemed to have all the ingredients for success. Ultimately, hamstrung by a tight budget and unable to gain traction outside the Raycom universe, the final show aired in September 2014 after a four-year run.

Failure? Maybe. But it provided valuable lessons, says Raycom’s Pat LaPlatney, senior vice president.

“We learned a lot, maybe most important, that we need to continue to do more of our own programming, build more of our own library,” he says.

It’s premature to judge whether Flip My Food and Fix It and Finish It will succeed. But Right This Minute, which features viral videos, has racked up 91% coverage of U.S. households since it launched in 2011.

If you want to grow your own content, you need the production facilities, and Raycom has an ample supply. Last fall, LaPlatney engineered the purchase of RTM Productions in Nashville, a producer of auto-oriented shows under the PowerNation brand that are distributed on NBC and CBS sports networks and SpikeTV.

Raycom has also partnered with Bellum Entertainment Group in producing two lifestyle shows, Flip My Food and Fix It and Finish It. Bellum was founded by former Raycom programming executive Mary Carole McDonnell in 2005. (Editor’s note: In the original posting, this story incorrectly reported that Raycom owned 50% of Bellum.)

It also owns Tupelo Honey Productions, a New York-based producer of live and studio sports programming; Broadview Media, a post-production studio in Montgomery; and Limerick Studios, a graphics production house in Charlotte, N.C.

SPORTS

Raycom Sports has long been a key component of the station group’s non-news programming assets. Its ACC Network, established in 2010 by Raycom Sports and the Atlantic Coast Conference, is a prime attraction in Raycom’s primary geographic cluster in the Southeast.

In 2010, after 15 months of negotiations, Raycom cut a sublicensing deal with ESPN that enabled the station group to remain the syndication arm for ACC content for over-the-air and regional cable distribution.

Raycom has proved adept at leveraging its assets, including content and the hardware to produce it. For example: Raycom Sports has three satellite trucks that can serve an ACC game, a high school game or a Tupelo Honey live production.

CORE STRENGTH

Early adoption of cutting-edge technology has helped Raycom maintain its strength in news, and David Folsom, who retired as chief technology officer at the end of 2014, was the point man.

Folsom recalls that when a series of tornadoes ripped through Alabama and the Southeast in 2011, satellite trucks provided live coverage, but the relay often wasn’t fast enough to move content from one station to another ahead of the storms.

The solution: A wide area network using its internally developed LiveLink video workflow and distribution system that enables swapping live content not just from one station to another but from one station to all others on the network.

“It gives us a presence that we would normally not be able to have in a small market station,” Folsom says.

Those storms also hastened Raycom’s adoption of backpack journalism — equipping reporters with an iPhone to provide live streaming from a news site wherever there’s cellular service. Over the last two years, Raycom has added JVC high-def cameras that can live stream.

“That’s going to be a game changer going forward, to have live capability without needing a live truck or satellite,” Folsom says.

Raycom was one of the early clients for BitCentral’s Oasys file sharing system and the Precis newsroom video editorial system.

So what’s next?

“To have the hardware to be able to create content and deliver on all those different platforms is the next great innovation,” Folsom says. “It’s more difficult than you think.”

FLUID ENVIRONMENT

Technology is hardly the only variable for broadcasting. A fluid financial and regulatory environment requires a steady hand at the corporate helm.

The balance between retransmission revenues and reverse compensation is shifting. A 2014 dispute between Raycom and DirecTV over retrans brought that into sharp focus as 43 Raycom stations went dark on the satellite platform.

“Network compensation is in a new world,” McTear observes.

Scale is crucial in retrans negotiations and acquisitions that enhance scale continue to be a focus.

“We’re a buyer,” McTear says, adding that Raycom was in the hunt for Local TV and Hoak stations, as well as LIN and Media General spinoffs, but it got outbid.

“We’re going to continue to grow the business but, we’re going to do it in a disciplined fashion,” he says.

The company’s not likely to participate in the FCC spectrum auction, but it will keep a close watch on opportunities that arise from the repacking that accompanies the auction.

Other opportunities will arise from ATSC 3.0.

“Eventually, the broadcast industry has to move to a new standard in order to interface with the rest of the world,” McTear says. “A new standard affords multiple opportunities to generate new business and therefore new revenue.”

In the meantime, understanding and adapting to the emerging digital audience will require continued innovation at Raycom.

“I don’t think the audiences that use those digital applications want to consume their news in same way as people who sit in their living room want to consume news,” McTear says.

“The whole format is going to change. Three or four [news anchors] sitting at a desk isn’t going to work on a going-forward basis. So we’re beginning to experiment.”

This story originally appeared in TVNewsCheck’s Executive Outlook, a quarterly print publication devoted to the future of broadcasting. Subscribe here. Read the other stories in the Winter 2015 issue here.