Local TV’s Last Hurrah

By Roger Franklin, CEO, Crystal

Few things are as fundamental, constant and reassuring as the buzzing cluster of local network affiliates and independents that dominate today’s broadcast airwaves.

“Tune in at 10 for breaking news.” “Start your morning with Mike and Liz.” “We’ll finance anyone on The Miracle Mile.”

But local TV’s days are inevitably numbered. Its original model, in which stations contracted with national networks to retransmit programming during certain hours, has eroded as:

(1) Consumer viewing and information-gathering habits continue to evolve. Time-shifting, binge viewing, cord-cutting, subscriptions, near-real-time news coverage in social media, and mobile “snacking” are destroying the legacy ad-supported one-size-fits-all model, as well as its ratings underpinning. An ever-smaller portion of the audience relies on local broadcasters.     

(2) Networks and content producers have multiple distribution alternatives that bypass local players. The Comcast/NBC and AT&T/DirectTV mergers effectively erase the boundary between cable and broadcast, and permit networks to route content directly to audiences–and profitability. In addition, OTT players like Netflix, Showtime, and HBO ignore local considerations as they simultaneously give video content a longer and more profitable life. Comcast’s Xfinity service is essentially a giant DVR that offers video-on-demand to customers.

(3) Broadcast spectrum is going away. Starting next year, the FCC plans to re-allocate the 600 MHz spectrum away from UHF broadcasters and toward mobile service providers. Stations will have to choose: Do we buy entirely new transmission equipment to relocate our frequency, or do we auction off our spectrum and just retire? A third of stations will likely decide not to re-invest.

(4) Local news-gathering is too expensive, and barriers to entry have gone. Why maintain a traffic helicopter when you can send up a drone? Why pay talking-head talent when audiences embrace local bloggers and podcasters as valid information sources? Why pay a meteorologist when an app like Dark Sky tells mobile users that “Light rain will begin in eight minutes at your location.”

Just as newspapers found it difficult to compete with low-overhead, “born-digital” services, local TV stations are nibbled to death by every sort of self-styled “journalist”–some of whom will emerge, YouTube-style, as legitimate stars. Even today’s often-abysmal quality will improve with the technology–and, consumers have shown less concern about broadcast quality than broadcasters would wish.

Do any silver linings exist for local broadcasters?

First of all, truly local information–sports coverage, political controversy, highway updates, real estate, cultural events–will always find a natural audience. The stations that survive will figure out how to efficiently corral this information and harness “crowd-sourcing,” fan communities, and neighborhood-level efforts.  Smart players will negotiate agreements with municipal governments (including police and fire departments), as well as local high schools and colleges, who will welcome potential revenue from subscribers or advertisers.

Second, local businesses need a way to communicate with prospects. The diminishing role of newspapers has shifted more local advertising online, but advertisers are unsophisticated about metrics. Wise local stations will become experts in consumer metadata so they can help advertisers target their messages with laser-accurate focus–then follow up with metrics that prove the impact on behavior. They can also take advantage of metadata insertion and content replacement to provide product-placement opportunities for local car dealers, restaurants, department stores, and others.

Finally, ambitious local stations can grow their regional footprint as individual stations fail. In addition to amortizing operating costs, a regional “Greater Atlanta” or “Chicagoland” station can aggregate the best local content for regional cable networks surrounding populations.

The television industry is slow to change, but the current pressure to do so is extraordinary. At some point soon, and with surprising swiftness, the entire local TV market will reshape itself, with many losers and a few next-generation winners.

“Over to you, Liz.”