TV News in a Postmodern World

2005: A Year of Trouble for Broadcasters

by Terry L. Heaton
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:

  • The audience isn't coming back.
  • Disruptive technologies will continue to empower viewers.
  • Our brands mean less with each passing year.
  • Reinventing ourselves isn't a choice.
  • There are ways to make money beyond on-air advertising.
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:

  1. Bottom line pressures on broadcasters will cost people jobs. Increased layoffs, mergers, and creative ways of doing local news will all result in more former TV news people ending up on-the-street. Many others will quit the industry and find employment entirely unrelated to broadcasting in order to support their families. The effect of industry economics on the people who work in television is the most underreported media story to date.
  2. Newspapers will increasingly get into local television via the Web — opening the door for potential jobs for current TV news people. This trend has just begun, but it will accelerate during 2005 as newspapers capitalize on the revenue opportunities offered by online video advertising. The Associated Press will be providing more video feeds for its print members, and papers will put people on staff to shoot video of local news events. This will cut away at the core competency of television stations in the market. Look for more papers to begin providing actual TV newscasts online in 2005.
  3. Advertisers will continue to abandon broadcasting for the greener (and more reliable) pastures of the Internet. Viral, word-of-mouth marketing will continue to grow, as consumers and their friends are increasingly enabled to make purchases based on recommendations from each other rather than what Madison Avenue tells them. Mass marketing will continue to erode and marketing as conversation will continue to grow. There's no time like the present to get onboard The Cluetrain.
  4. Media attention about blogging will shift to the local level and for good reason. Citizens Media will explode in the form of aggregated local blogs and blogging. Using Greensboro, North Carolina as a model, communities will find an energy and a sense of involvement that's been missing in our mass-marketing world.

    Citizen journalists will tighten their noose around the necks of institutional America — including politics and government — because they will continue to defy the Modernist "rules" of engagement. This will produce a more involved electorate (in some communities) than the country has seen in over a century. Local video bloggers will also begin to make their mark.

  5. Universities will begin to abandon the idea of broadcast journalism as a degree option and steer young people to the multimedia skillset required for local journalists of the future. While many universities have begun teaching multimedia journalism, the broadcast journalism degree remains (probably because people will still pay for it). This will change, as counselors begin moving people to multimedia and video journalism degrees rather than broadcasting. The media industry will demand it.
  6. Independent videojournalists (VJs) will begin operating in local communities — selling their material to the highest bidder(s). Stations will buy their material, because it's cheaper than maintaining staff. Stations will also begin adopting the VJ concept for their own staffs, initially for cost savings but ultimately because technology has reduced the need for two-person crews.

    Sony and other camera manufacturers are already producing "broadcast versions" of the PD-170 camera used by most VJs, primarily so they can charge more money. Watch for more cameras that record directly onto DVDs or other portable digital sources that don't require "loading" into computers for editing.

  7. Al Gore's TV news idea will finally launch to tepid reviews, but it will build a solid foundation for the future. His use of VJs will break the traditional reporter/photographer mold, and that will get more attention than his politics.
  8. The anchor role at local stations will continue to diminish, as more people turn to the Internet for news. Stations will offer text and video news options to Internet users and begin experimenting with video content created specifically for the Web. In either case, an "anchor" to read copy is irrelevant, and this will lead to a greater emphasis on reporters and VJs.

    Stations will also see the economic value of using reporters to narrate stories rather than paying exorbitant salaries to cosmetically-gifted people who can read a teleprompter.

  9. We'll see an increase in Web publishers shielding their material with JavaScript and other technologies to prevent right-clicking (for copying) or to intercept what they view as unauthorized outside links to their content. This is a very complex issue. It will be presented by consultants as a way to protect their product and profit, but they'll ultimately find that they've built a wall around themselves in a culture that is increasingly open. This war against Internet users is foolish and ultimately self-destructive, because it does nothing except drive customers elsewhere. Moreover, any browser can disable JavaScript functionality, so at best, it's merely an annoyance.
  10. As consumers demand more and more portability in their media, local media companies will have to respond. The Telcos are pushing huge dollars into video delivery, and the creation and distribution of mobile content will become a significant resource demand, beginning in the coming year.

    Podcasting will continue to develop, and stations will begin providing video podcasts for users who want to take their newscast with them.

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?