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Credit crunch impacts TV broadcasting - TvTechnology

Credit crunch impacts TV broadcasting

The country’s economic woes could affect broadcasters’ operations and jobs
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As the economic crisis spread throughout the world last week, it impacted broadcasters — especially terrestrial television stations — at a time of sagging advertising, lower viewership and the transition to digital television operations.

“I am not aware of any broadcaster out there that does not rely on the credit markets, and most rely too much so,” Brandon Burgess, chairman of ION Media Networks, said at a Media Institute luncheon in Washington, D.C. last week.

The credit issue affects broadcasters’ operations and jobs, Burgess said. “One of our deposit banks is Wachovia,” he noted. “We have a lot of our deposits in Wachovia.” Yet, even with millions of dollars of ION’s money being held as collateral, the bank refused to loan ION $1 million so that it could open office space, pay one year’s rent, and hire staff in New York, Burgess said.

Warren Buffett, considered one of the world's most astute investors, called the current environment an “economic Pearl Harbor.” Yet, last week Buffett pledged to buy $3 billion in preferred stock in General Electric, the embattled parent of NBC Universal.

GE Capital, the finance unit that accounts for roughly half of GE’s annual profit, has faced a dire struggle given its involvement in the troubled credit markets. For Buffett, the GE investment was equal parts crisis management and value investment.

“General Electric is the backbone of American industry,” Buffett said on CNBC. “They've become tainted, as every company is that has to borrow a lot of money all the time. They're going to be around in five or 10 or 100 years from now and, if you buy at the right time, you'll probably make some money.”

Burgess said the business outlook for television broadcasting is now unclear and that operators need to expand their business models beyond the over-the-air business model. He cited NBC and FOX as examples of companies doing this well.

Noting that buying TV stations would not head his list of investments today, Burgess said broadcasting is no longer “the college career of choice.” Even with investment in new technologies, he said the long-term payoff for broadcasters remains “an open question.”