Several weeks ago, the NAB held its "Hundred Plus" conference in Aventura, FL. The invitation-only affair was designed to address key concerns broadcasters are dealing with today. But noticeably absent from the event were any executives from New York, LA, or Chicago. This conference was for those in much smaller markets -- stations with a Designated Market Area (DMA) of 100 and above.
There's enough economic worry in the broadcasting industry to go around, but the reason for the special small-market focus is that those in these areas sometimes feel the pain more intensely than their peers serving the major cities. When things tighten up because of increased competition for eyeballs and ad dollars, when network compensation shrinks, it's the station working on the tightest margins that often feels the pinch first.
"The cash flow in large TV markets is actually pretty healthy," said NAB president of corporate communications Dennis Wharton. "In small-market television things might not be as healthy. This can be difficult to convey to the [consumer] press because a lot of reporters think all TV stations are like WNBC in New York. But in reality, there's sort of a disconnect [between] what's happening in Boise with what's happening in Boston."
Indeed. For one thing, the stations in the 100-plus category, which reach fewer than 300,000 households (sometimes far less), likely face a more significant challenge complying with the FCC DTV mandate. "You're seeing a TV station paying upwards of $2-4 million to make this transition," said Wharton. "That's a lot of money for a major network affiliate in a top-ten market, but incrementally that cost for a very small station is phenomenal." Large or small, going digital costs a boatload of dollars.
"As of yet there's no tried-and-true business plan to recoup the costs of going digital. It's all loss. And for stations like mine that loss is harder to absorb," said one GM in a 100-plus DMA who's ordering equipment, modifying his tower, and doing everything else that has to be done to meet the standard.
But compliance is just one issue. National revenues are down in general and an affiliate in a smaller market may have a disadvantage when going after a slice of that ever shrinking national-dollar pie. This holds true for stations that bring top-rated network shows to their viewers. For affiliates of networks whose national programming is not sizzling, the decline, or even elimination, of affiliation fees is an even more serious problem.
So What To Do?
Cut costs? Sure. A lot of programming is created with older equipment, bought secondhand and patched together by resourceful engineers. People who work in the industry have heard news accounts of stations scaling back or even eliminating local news. Of course, if the station can't afford to do news, it can't afford to do news. But many see even a money-losing news operation as an absolutely necessary investment in a station's local profile. "Some people around the country are cutting back on news," said Mike Palmer, vice president and general manager of two stations in Bangor, ME, "But that is not on our agenda. We're broadcasters, not bankers."
Palmer manages WVII, a full-power ABC station, and WFVX, a low-power Fox affiliate. WVII puts on a news show at 6 and 11 p.m., and WFVX one news show at 10 p.m. "I lose money in news, and we have a lean operation," he said. But, like many, he feels the news is a key element to a station's role in a community and that can translate into revenues and other forms of currency.
Stations in smaller markets must do more than cut costs if they want to maintain their current profits, much less hope to grow them. Stations in these markets also need to come up with additional revenue streams. Palmer, for example, rents space and airtime on his Fox station to a local broadcaster who runs his own call-in show every Friday morning from 6-9 a.m.
"It costs nothing," he said. "They pay me to put on the three-hour newscast. It's a format [similar to] Don Imus where you have these two guys chatting about local events and issues. They take phone calls. The two hosts of the show rent the time from me and then they turn around and sell the ads themselves and keep the money that generates. My upside is limited... but it's guaranteed and I have this additional news but don't have the heartache every month of losing money."
Remember the old adage about thinking globally and acting locally? Well, forget the global part. In many smaller markets, the mantra is to think, act, eat, and sleep locally. If the stations in these markets are to compete for viewers, it is vital that they focus their programming heavily on items of local interest. "Hyper local news," Palmer calls it. The idea is to focus on local people, local businesses, local events--often to the exclusion of state and national news.
"The networks and cable can't be local like we're local," said Wayne Daugherty, who oversees ten of the 34 stations run by Montgomery, AL-based Raycom. Most of Raycom's stations have DMAs between the 75-150 range. This is as true for the sales staff as it is for the news staff. Stations are always on the lookout for new businesses to sell time to and for new kinds of promotions. "Our focus is and will be on local business, rather than national business, which is a shrinking pie," said Daugherty.
Stations like Daugherty's are constantly on the lookout for ways to fill that local niche as nobody else can, both as a sales tool and a method of keeping the station profile high in the community. "We'll spend time with boat shows," he said. "We'll have a video parade of local homes being shown by a real-estate agent and then we'll have people who can explain the pros and cons of financing. We'll put it in primetime. We'll get involved with community health symposiums, car shows, bridal fairs. And then we'll look at sponsorship from local businesses."
"The thing about any television station is that unlike cable, there's only one revenue stream: advertising," said Gary Bellis of the New York-based Television Advertisers Bureau (TVB). "Cable has subscription fees, but stations don't. There's been some experimentation selling advertising on station websites and generating visits to the site -- another form of advertising -- but for the stations to thrive they need to generate new business from their local communities."
"It's been an ongoing objective to create new categories of business for television and new promotional ideas," said Jon Lawhead, president and general manager at WTVH, the Syracuse, NY, CBS affiliate. "The station has been heavily promoting a summer fishing derby here for the past three years. Fish are tagged and put into the lake and winners have the opportunity to win big cash prizes and merchandise. It costs $35 to fish. We promote it heavily in the weeks leading up to the actual tournament and then businesses sponsor packages that promote themselves along with the tournament. It's been very successful for us.
"We have a great number of programs to bring in more local revenue" Lawhead added. His station, like so many others, has been working hard to develop new ways to bring in cash. He stresses that this is not really the result of a specific event, such as the DTV mandate: "There's an overall pressure to create new streams of revenue especially in small markets, because our revenue universe is getting smaller in general.
"In the old days," he said, "people weren't as innovative and creative with advertising packages. It used to be about selling spot airtime. Now the overall mindset is much more about helping your client actually market. You're not just thinking about selling spots. You have a mindset of marketing and creating events for advertisers in order to address business needs as opposed to just thinking about their advertising. The days are gone where you can just rely on car dealers and fast food to buy spot air time."
Think locally... and remember: You're now your advertisers' marketing partner.
Jon Silberg is a contributing writer. He can be reached at jsilberg@uemedia.com.
