TV Stations Must Reinvent Local News To Survive

Here's a little-known fact: Local TV stations depend heavily on their news operations, which typically account for about half their revenues. As a result, they're also highly vulnerable to the death spiral that's overtaken newspapers as news migrates to the Web.

But there may be a way out, if these stations can reinvent their business strategies by playing up their unique ties to community news makers and advertisers.

Troubles are clearly mounting for grassroots broadcasters, thanks to rising bankruptcies, plummeting advertising revenues and faltering ratings. Local stations are also rapidly losing turf to a new strain of hyperlocal Web sites and social networks.
Although their local news generally represents almost half a station's operating costs and largest single expense, it also generates about half their revenues. The loss of viewers and ad dollars to Internet competitors is compounded by the dwindling economic support and programming clout they've long expected from their affiliated national TV networks.

Local TV newscasts generally have lost 20 percent of the key 25-to-54 demographic the past four years; and as much as 30 percent in major markets such as New York and Los Angeles. This comes in part from lower-rated lead-ins from network programs in the afternoon and in prime time.

Local TV station revenues fell 27 percent the first half of 2009, according to the Television Bureau of Advertising (TVB), prompting dramatic reductions in local TV station news staff and budgets. Many have resorted to merging their news-gathering resources and newscasts with market rivals and are and are relying on third parties like Growthspur, which provides turnkey advertising sales, search, operational and management support.

Instead of trying to salvage their broken business model, it is clearly time for TV station broadcasters to think outside the box and to financially leverage what remains of their exclusive local news and advertising connections using new digital technology and platforms.

"We have a hard time believing that local news, weather, traffic and sports at 7am/5pm/6pm/11pm can sustain viewership levels, and in turn, advertiser interest over the next several years," Pali Capital analyst Rich Greenfield writes on his blog. It's do or die time, he says.

One unexpected foil is the rising popularity of competing hyperlocal Web sites: often independent hubs of detailed news and information down to the city block on a 24/7 basis. AOL has aligned with Patch (started by AOL CEO Tim Armstrong) and MSNBC recently acquired EveryBlock, which tracks news, events, crime, entertainment and even blog posts by zip code. Outside.In, supported by $7.5 million in venture capital, has been an active partner of NBC stations for a year.

Such local hubs are proving so effective, they are forcing some of the newspaper hyperlocal sites to fold, such as Washington Post's two-year experiment LoudonExtra.com.

The several hundred newspapers expected to fold in 2009 are being replaced by dozens of hyperlocal Web sites providing more personalized, interactive news and sports, gossip and classified ads, local restaurant reviews and reservations, and even real-time arrest information.
Greenfield points to NBC's ongoing efforts to decouple its owned and affiliated TV stations by remaking them into more autonomous local online hubs that augment the network. NBC's flagship this month is scrapping its conventional 5 pm newscast for a live, daily New York entertainment and lifestyles show produced by WNBC-TV, NBC's local media division and its recently acquired LX TV production house.

"The reality is consumer interest is waning by the day -- implying more drastic changes are needed; the question becomes will anyone follow NBC's lead?" Greenfield asks.

TV stations risk losing their community ties, advertising and news traction in the Internet age faster than they can leverage new media business options. Digital survival strategies recommended by Greenfield and other experts, which some stations have begun to embrace:

• Let go of what Greenfield calls "the antiquated" vestiges of TV news coverage, from the helicopter to the rigid anchor desk. Experiment in the trenches with interactive reporting online 24/7, integrated with real-time user contributions.
• Create shorter, more frequent TV and streaming video newscasts that provide a deep-dive into community events and issues.
• Retrain all staffers to become multimedia experts.
• Partner with every relevant local service and Web site, and share resources and revenues. This should reach beyond rival TV stations to include local newspapers, radio, magazines, Web sites and community organizations.
• Make the TV news shows an extension of a core 24/7 real-time Web site with streaming video, running user dialogue and other dynamic interactive features.
• Sell local advertising through highly efficient organizations such as Google AdSense, allowing both self-service and tailored campaigns. Provide e-commerce and transactional functionality.

"Local TV is becoming the 5-foot man in an increasingly fragmented environment," Sook told me. But less than 10% of television stations are being used as a catalyst for potentially lucrative digital strategies. "We can 'out-local' every other kind of media player anywhere on the digital spectrum, if we play our cards right," says Sook, whose Nexstar also manages digital TV properties for groups such as Sinclair Broadcasting and Four Points Media Group.

Sinclair is among the rising number of local TV broadcasters filing for bankruptcy. Others include Tribune Co., Young Broadcasting, Granite Broadcasting, Freedom Communications, NV Broadcasting and Ion Media Networks (formerly known as Paxson Communications).

Part of the problem underscored in a recent speech by News Corp. heir-apparent James Murdoch is that broadcasters remain heavily regulated in a free-wheeling digital media marketplace.

Even as local TV stations reel from the collapse of major auto, financial and retail advertisers in their worst recession ever, experts warn that biannual political election year windfall spending will no longer save them as candidates become more comfortable with the Internet and mobile media. "That money will not come back. It is not that ad-funded television is dead: it is just a permanently smaller fish in a bigger pond," Murdoch cautioned last month while delivering the annual MacTaggart Lecture at the Edinburgh International Television Festival last month.

Others point out that TV stations are saddled with costly legacy operations and a collapsing business model. "We have analogue attitudes in a digital age," said Murdoch.

Notes Patrick Moorhead, director of emerging experiences for the digital ad agency Razorfish, "The music will stop and TV stations will be left without a chair."