There’s no doubt that times are changing, and have been since the World Wide Web came into existence. But the changes that have affected things from banks to sports to clothing and toys is really affecting the traditional media in 2008. This last week’s events spotlight the traditional media’search to adapt, evolve and survive the new media landscape.
As reported in the San Francisco Chronicle:
The TV news layoffs are more a reflection of a transforming media marketplace – and the financial expectations that are changing with it.
“If you’re used to 45 percent profit, then if you only have 20 or 30, it feels like you’re in the poor house,” said Bob Papper, a professor of journalism at Hofstra University who regularly surveys the nation’s TV and radio news directors. “KPIX is a strong station. This is not about them. This is a CBS thing.”
Revenue at CBS declined 14.6 percent in the fourth quarter. Papper said many networks lost viewers during the recent writer’s strike “when people got sick of watching reality TV and reruns. So they took it out on the local stations.”
The economic slump is hurting TV networks, too, mostly in the form of its largest advertiser – automobile companies. According to media analysts at the research firm TNS, in 2007, U.S. automotive spending on TV fell 8.3 percent to $7.62 billion.
“But they’re fighting a continued fragmentation of the market,” Papper said. “Just as newspapers have found out, there are a lot more places to go to get news.”
Other reports from around country confirm these points:
Layoffs of CBS veterans signal industry in crisis
The Mercury News
For television insiders, it was just a taste of what newspaper journalists have been experiencing recently as the industry downsizes in the wake of changing consumer habits and an ongoing economic slump.
“Local television news, as an industry, is actually losing its audience faster than newspapers,” said Tim Rosenstiel, director of the Project for Excellence in Journalism (PEJ). “That’s because newspapers are recapturing some of their audience online, and TV isn’t.”
Joe Ahern, a former KGO general manager who now presides over Chicago’s WBBM, told the Chicago Tribune, “We have to rethink how we do business.”
Generally speaking, evening and late-night newscasts long have been cash cows for local television stations in the Bay Area and across the nation. However, in 2007, local news ratings were down for the second consecutive year, according to the PEJ’s 2008 State of the Media Report.
Lower ratings lead directly to decreases in ad revenue. Among the other challenges local television faces are competition from the Internet and 24-hour cable news outlets and the usage of digital video recorders (DVR’s), which make it easy for viewers to skip over commercials.
However, television news has a couple of advantages that newspapers don’t, according to Rosenstiel.
“If you lose viewers at 6 o’clock because people are still working, or aren’t home yet, you can put on another newscast at 7 or 10 in an effort to recapture those viewers,” he said. “And there’s still nothing that sells quite like a TV ad.
“This was supposed to be the good year, with the election and the Olympics, but of everybody I’ve spoken with, not a single one is making budget,” says station consultant Mike Sechrist, who adds that everybody thought 2009, not this year, would be tougher for broadcasters.
Station executives speak of a confluence of negative trends: a hangover from the writers’ strike; a political windfall that, except for a few key markets, has failed to live up to forecasts; the nation’s crawl toward a recession; and, of course, the woeful automotive category, which spent 8.3% less on television last year, according to TNS Media Intelligence.
Many believe local television feels it more than the networks. “The networks have better-capitalized marketers who can weather some turmoil,” says RBC Capital Markets analyst David Bank, “and they’re much more focused on maintaining brand awareness and mind share” than local advertisers, who may be more keen to boost short-term sales.
But on top of these tales of change and loss comes very astute attempts at foretelling where things might be headed:
Local TV is no longer a cash cow
“There is no doubt about it, local TV stations are facing harder times, and what you’re seeing with the cutbacks and layoffs are media companies reacting to new economic realities,” says Douglas Gomery, media economist at the University of Maryland.
One reality involves the downturn in the general economy, with companies across the board looking to cut costs. The stations have been particularly hard hit as struggling car manufacturers and dealers have curtailed their advertising spending.
Automotive TV advertising fell to $7.6 billion in 2007, a drop of 8.3 percent from the year before, according to research firm TNS Media Intelligence. The decline has been even steeper in the first three months of 2008, according to analysts.
“Car advertising accounts for about 10 percent of TV revenue,” said Bob Papper, media studies professor at Hofstra University and author of the Radio and Television News Directors/Hofstra annual survey of local TV stations. “So, these cuts that you are seeing at stations across the country are in part a reaction to a drop in that revenue.”
And if the downturn continues, so could the layoffs, Papper said.
“NBC laid off at its local stations in December, and CBS is doing it now,” Papper says. I think it’s reasonable to think ABC might be doing it next – spreading out across its stations.”
But there are also “media-specific forces” driving the layoffs, Gomery said. “With a fragmenting of the audience and new strategies to reach customers in new online media, local TV is no longer as automatic a buy.”
“More of the focus in general is toward the Internet, and so more of the money is moving that way,” says Abe Novick, an advertising agency executive at Euro RSCG, a global advertising agency based in New York. “And that’s why the local TV news industry – as well as the newspaper business – is going through these convulsions of cutbacks and layoffs.”
While Papper says he knows layoffs at stations lead to headlines, he begs for a bit of context as to how “dire” things are – or are not – for the local TV news business.
“When I worked at a TV station in Minneapolis, I remember the general manager telling me that the owner demanded a profit margin of 45 percent,” he says. “I guess if you are used to making a 45 percent profit and now you’re only making 20 or 30, it feels like you’re in the poorhouse. But in some businesses that would still be pretty good.”
The answer is there somewhere. It just might be all of the above…plus surviving on smaller margins.