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TV News in a Postmodern World
2005: A Year of Trouble for Broadcasters
2005 will be the most important and difficult year in the history of local broadcasting, and by year's end, the landscape could well be littered with the corpses of those who hung on too long. The industry faces significant fiscal challenges and accelerating changes in viewer preferences and behaviors, things it is ill-prepared to handle, much less turn into profit. Absent some economic miracle or very smart and quick action, it will be a year of deep darkness and trouble for broadcasting and the people who work in it.
The networks face problems similar to local broadcasters, but they're part of conglomerates now, so the impact is somewhat shielded. That's not the case for local broadcast companies, whose basic source of revenue is the local community.
A given is an assumption that is taken for granted. A serious examination of events and trends over the past couple of years reveals there are five important givens that all decision-makers must accept as we look to the new year:
Of all the challenges facing broadcasters, none is greater than ignorance born of denial. Locked into old formulas and business models, the industry hasn't paid enough attention to teaching and training itself and its employees about what's been happening in the media world around them. The challenges faced by media companies — especially broadcasters — have been bubbling and brewing for years, but few have had the courage to act on them.
Remember the missing young men from the fall of 2003? Go back and read the reaction from network "experts," like NBC's head of research, Alan Wurtzel, "I do think we'll find out there was something wrong in the (Nielsen) methodology." Fortunately, this kind of shocking denial has slipped into the shadows, but ignorance about the realities of a New Media world continues unabated.
In 2005, local broadcasters will travel down one of two roads. Those who insist on short-term returns will explore options like mergers, joint operating agreements, duopoly solutions (legal or otherwise) and anything else to cut the expense side of the ledger. James Marsh, the broadcast stock analyst for S.G. Cowen, predicts problems ahead.
The first will be operational, as tough year-over-year comparisons (Olympics/political ad spending) will slow revenue and EBITDA (earnings before interest, taxes, depreciation, and amortization) growth in 2005. Secondly, I think the TV stocks could suffer in 2005 as investors deal with lower growth and due to the higher risk related to DVRs. We believe long-term growth rates for TV Broadcasters could be cut in half over the next five years as DVR penetration increases.
Others will look to the revenue side for profits, and that will include options beyond television advertising. These companies — and they will be in the minority — will shift their emphasis to New Media opportunities, and their stock prices will go up, because investors understand the shifts taking place in the media world better than broadcasters do.
As a part of the shakeout, here are ten media predictions for 2005 that will surely come to pass:
These 10 prophecies are only the most obvious, for our world is changing more rapidly than we can possibly imagine. Most of these changes revolve around the Postmodern empowerment of the individual, and 2005 would be a good year for general managers and station owners to shift their thinking from revenue to consumers.
Many a local television station general manager has been asked this question while interviewing for a job:
Are we in business to serve the community or to make money?
Those who've favored the latter are the ones who've gotten the jobs in the past, which is why most GM's came up through sales. That's going to have to change for stations to make it downstream, because what good does it do to emphasize revenue, if your audience has abandoned you entirely? An old axiom is apropos: feed the sheep and they'll always give you wool. TV stations in the U.S. are so far removed from the sheep these days that they don't even know what kind of food they like.
If you are in the local news and information business, ask yourself this: where and how are people in your community meeting their information needs? THAT is where you need to be. It's the only way to maintain or grow market share. Stop spending your money on silly personality research about anchors, and start paying attention to what your audience is telling you. Talk to and LISTEN to those who used to be your audience. Where have they gone and how can you best meet their needs?
Time is a significant enemy in reinventing yourself. By the end of the coming year, stations who haven't adapted to market changes will find it's too late to do so. That's because at least one station (or newspaper) in each market will seize the opportunity and move forward, which will put the others in an impossible competitive position. Few stations cume the mass market necessary to do "turn-arounds" the way they used to be done, and the results will not be pretty.
2005 will be a watershed year in the lives of local media companies. Where will yours be?
© Terry Heaton
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