Local Stations Struggle to Adapt As Web Grabs Viewers, Revenue

LOCAL STATIONS STRUGGLE TO ADAPT AS WEB GRABS VIEWERS, REVENUES
[SOURCE: Wall Street Journal, AUTHOR: Brooks Barnes brooks.barnes@wsj.com]
The 1,300 commercial television stations in the U.S., much like newspapers and magazines, are under attack as new technologies roil the industry. The Internet, in particular, is sucking away both viewers and advertisers. The shift is sending ripples through the broader media industry. For decades, TV stations have been a fount of cash for some of the industry's biggest players such as Viacom, News Corp. and General Electric's NBC. Newspaper publishers such as Tribune Co. and Gannett Co., also diversified into television. For many of these companies, steady profits from their stations funded expansion into other businesses. At News Corp., which at one time derived about one-third of profits from its station group, proceeds helped the company to become a global powerhouse. Tribune's station profits funded its efforts to become a newspaper giant with the 2000 acquisition of Times-Mirror Co. The picture has changed. Total local broadcast revenue fell 9% in 2005 to $16.8 billion, according to the Television Bureau of Advertising. The chief culprit: Big advertisers cutting back budgets or moving to the Web. Among auto marketers, which have long accounted for about a third of station revenue, DaimlerChrysler AG cut spending on local TV by 13% in 2005. Ford Motor Co. slashed its local TV budget by 15%. "Stations are getting beaten up," says Brad Adgate, senior vice president at media consultancy Horizon Media in New York. "They have to dramatically reinvent themselves and many don't know how." The slump in TV-station revenue and profits is causing some companies to consider drastic action. Tribune has spent months contemplating a spinoff of its TV-station group. Such a move could undermine the rationale for the Times-Mirror purchase, which was aimed at pairing Times-Mirror's collection of big-city papers like the Los Angeles Times with Tribune's TV stations in the same markets. Tribune's deliberations come six months after Viacom broke into two, separating its broadcast-TV operations from its cable channels. NBC Universal just sold four stations in smaller markets. News Corp., whose station group has been stung by operating-income declines for more than a year, is also considering selling some smaller stations. Local stations are suffering a full-fledged identity crisis. Networks used to need them to broadcast shows. But 85% of U.S. households now receive TV via cable or satellite, and the Internet is a fast-emerging competitor. As TV companies allow people to watch shows whenever they want -- on iPods, on-demand cable services and network Web sites -- local stations are apt to endure even more losses.
http://online.wsj.com/article/SB115007459811277478.html?mod=todays_us_pa...
(requires subscription)