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Economic tailspin batters local TV

Did you see the news? Ratings, ad revenue continue to plunge.

CBS3 saved by replacing Alycia Lane and Larry Mendte with Susan Barnett and Chris May (top and bottom left).  6ABC let go Don Polec (bottom right), and Don Tollefson (top right) was let go by Fox29.
CBS3 saved by replacing Alycia Lane and Larry Mendte with Susan Barnett and Chris May (top and bottom left). 6ABC let go Don Polec (bottom right), and Don Tollefson (top right) was let go by Fox29.Read more

Morning train wreck on the Main Line. Copters flutter over Berwyn. That night, news viewers tune to Fox29 to see Dawn Stensland, Thomas Drayton, and the SkyFox footage. The anchors put a fresh spin on the very same pictures that have already appeared, direct from Chopper 10, on NBC10 in the afternoon.

That's because Chopper 10 and SkyFox are now the same helicopter, part of a deal that has had the competing stations sharing resources since January as they respond to a financial train wreck that has local TV broadcasters, both in Philadelphia and across the country, reeling and, in some cases, fighting for survival.

They're struggling to cut costs in many ways: Ditching highly paid veterans, combining jobs, pooling resources, and expanding to the Internet are the common ploys. And, as traditional advertisers have deserted the ship, they're looking elsewhere.

But advertisers want an audience. Ratings here slipped nearly 19 percent between November 2004 and November 2008, as the six major stations lost a combined average of 140,000 viewers at any given point during the day, according to the Nielsen Co.

More than 440,000 viewers, on average, are missing in prime time, a drop of 25 percent. Despite the excitement of the presidential election - or maybe because it moved viewers to cable news - ratings for local evening news shows nationwide dropped 11.4 percent from November 2007 to November 2008. (Late news shows dropped 3.7 percent, according to Nielsen.)

Advertisers, particularly in the auto industry, have headed for the exits. Nearly $200 million in revenue, 25 percent, vanished from the Philadelphia TV market between 2004, the previous Olympic and presidential election year, and 2008, according to BIA Advisory Services, the leading industry financial analysts.

Not only is that revenue not coming back, the forecasters say, an additional $50 million will be missing by 2012.

Broadcast revenues, which had reached $763.6 million in 2004, skidded to $572.8 million last year and would have been much worse without a windfall from political advertising, especially from the hotly contested Democratic primary here and the fall campaign, when Pennsylvania became a key battleground state. Revenues are expected to drop sharply this year, to $486.9 million. If that projection holds, the decline since 2004 would be 36 percent.

Smaller stations and those deeply in debt face the most risk. "There are bound to be bankruptcies nationally in broadcasting, as there are in every other industry," said Frank Kalil, of Kalil & Co., the top station broker.

The lights should stay on at Philadelphia's six largest stations, which represent more than 95 percent of the revenue in a market that also includes an additional six stations in communities from Allentown to Wildwood, each of which took in less than $7 million in 2008, and 20 noncommercial, low-power, or marginally profitable stations.

But all are hurting.

"The confluence of circumstances [has] brought about a situation more dire than I have ever seen in my 59 years of experience," said veteran Philadelphia TV executive Lew Klein, who supervised programming for all the stations ABC owned and once was executive producer of American Bandstand.

"The consumer is way more shut down this time than anything in our memory," said Chris Rohrs, president of the Television Bureau of Advertising, the local broadcasters' trade association.

Though the sour economy is the primary force behind local TV woes, stations also are losing money to the interactive digital media of the Internet. The Internet, and all the devices that process it, are exerting the same sort of pressure on television that they do on newspapers.

"The broadcasting and cable business has been strong since the '50s," said Rick Feldman, president and chief executive officer of the National Association of Television Program Executives. "Now, because of the technology, which makes it possible to distribute video content in all kinds of ways, the business is losing eyeballs."

"We're no longer broadcasters," said Chris Blackman, NBC10 news vice president. "We're in the business of content. Traditional TV is only one of our platforms."

Blackman was one of only two local TV executives to speak on the record for this article.

Unlike their peers in the newspaper business, where reports of trouble have turned into an almost daily dirge, TV people generally try to keep a tight lid on bad news at the office. Preliminary results of a new Annenberg School for Communication study of major newspapers and TV news outlets in the last nine years show that newspaper stories about declining readership outnumbered TV reports about declining viewership by a 41-to-1 ratio.

Automobile advertising, which used to represent 25 to 40 percent of ad revenue, is off dramatically - by half at local stations, according to some estimates. "When it goes away, it's very hard to recoup, no matter what you do," said Ellen Drury, president of local broadcast for GroupM Matrix, a major media buyer.

"With national advertisers dropping out, stations are having to shift back to local advertisers - if there are any left," said Bernie Shimkus, vice president of research for Harmelin Media, the Philadelphia market's biggest media buyer. "When you see a Circuit City go out of business and the carmakers, both national and international, cut back on their spending, you have to replace that with something."

The soft demand for advertising has created further problems for local stations, which not only have fewer viewers but are forced to cut the prices they charge to reach them. "The cost per ratings point is down," Drury said.

With 24 hours in a day, the supply of advertising time is constant. Same supply, less demand: Simple high school economics, as buyers negotiate at new, lower levels. "There's a recalibration in the marketplace," Drury said. "If the revenues are down, it's not necessarily because stations are doing anything differently."

But they are doing things differently to try to get them back up.

"The approach is to get advertisers who may not have been in television before to trade up," Shimkus said. "You'll see a lot more direct-response [commercials] in programs you wouldn't have seen them in before. . . . You're getting a lot more spots like Empire carpeting and certain insurance products and Geico and lawyers giving out phone numbers within a commercial.

"The big success this year has been the Snuggie. You'll see more ads like that, and hanging tomato plants, and watering globes. You'll see more products like that in areas and day parts [where] you wouldn't have traditionally seen them."

Then there is cost-cutting.

Some newscasts in some smaller markets, such as Yakima, Wash., and Lexington, Ky., have been eliminated. Elsewhere, stations are turning away from news altogether. WYOU, broadcasting in Scranton and Wilkes-Barre, stopped news operations last month.

"They just discovered that the market was not supporting a third local newscast," said Gordon Borrell, CEO of Borrell Associates, a media-research company.

"I wouldn't want to be No. 3 in most markets," Borrell said. "If you're in third place, you're screwed. You're not going to make any money, so you might as well go to Plan C. . . . You might contact another station and import their cast over."

Something like that has happened twice in Philadelphia. The nation's fourth-largest market may be able to support more than two newscasts, but it can't support six. And that's why stations No. 5 and No. 6 use the facilities and personnel of Nos. 2 and 3.

CBS3 (No. 2) and CW57 (No. 6), both owned by CBS Corp., are sister stations that share more operations and facilities than just their newscasts. At times, the relationship can seem a little screwy, as when CW57 anchor Dave Huddleston pops up in a CBS3 promo during NCIS at 9:20 p.m. and asks people to forget about sticking around for Without a Trace and tune to Channel 57 instead to watch his 10 p.m. news.

Eyewitness News at 10 on The CW Philly just started in February, product of a trend among stations to stretch facilities and personnel as much, and as cheaply, as possible.

Myphl17 (No. 5) was ahead of the curve in closing news operations in December 2006. "It was by far and away the hardest thing I ever had to do in my career," said Vince Giannini, station vice president and general manager. "It was agonizing."

Thirty-two people lost their jobs, and now Myphl 17 News at 10 Powered by NBC10 airs a half hour every night, anchored by Denise Nakano and featuring such NBC10 stalwarts as weatherman Glenn Schwartz and sportscaster Vai Sikahema.

"It was done as a cost-saving maneuver," Giannini said. "It allowed us to stay in the news game, and our ratings have been consistent."

Channel 10, figuring news is little competition for its 10 p.m. dramas, sees little or no ratings or ad-revenue loss. The additional money from Channel 17 helps make NBC10's news operation more profitable, and the promotion, complete with that mouthful of a show title and NBC10 logos all over the screen, can't hurt, either.

Such duopolies are seen as one solution to the economic woes. "Stations have a lot of investment in their news product," said media buyer Drury. "Finding dual purposes can help them take advantage of the facilities that they have built."

Philadelphia is also in the vanguard of the move of competing local broadcasters to share services. Fox29 and NBC10 started to experiment a year ago with something called LNS, Local News Service, and formalized the arrangement in January.

Blackman described it as a "quasi-independent" outfit with staff and resources from both stations, a sort of news cooperative that sets its own coverage agenda and responds to requests from both stations.

LNS covers meetings, news conferences, scheduled demonstrations and the like, providing footage to both stations. It also staffs the stations' shared helicopter. No one has figured out how to paint it yet. "Maybe we'll put 'Chopper 10' on one side, and whatever Fox calls its chopper on the other," Blackman said.

The co-op concept has spread around the country, most notably to Chicago, where all the big stations, except the ABC affiliate, started sharing camera crews May 5.

Emily Barr, general manager at ABC-owned WLS, said her station did not join the gang because she felt that such a move could compromise the independent image of the station, which leads the Chicago news-rating race, and dull its competitive edge.

"It has made us more, not less, competitive," said Blackman, even if NBC10 and Fox29 both use the same pictures. "It's allowed us really to concentrate on reporters and storytelling."

Like WLS, 6ABC in Philadelphia, no longer the tyrannosaurus it was years ago but still one of the most dominant local stations in the country, seems disinclined to share.

But it's responding to economic woes in another common way. Highly paid veteran wiseguy Don Polec was dumped in April. Popular - and pricey - long-timers across the country, including anchors Diann Burns in Chicago and Paul Moyer in Los Angeles and sports guy Len Berman in New York, have left the air or will depart when their contracts expire later this year.

In Philadelphia, Fox29 has been shedding salary since last year. Feature reporter (29 years) Gerald Kolpan and sportscaster (12 years) Bill Vargas are recent history. Sports anchor Don Tollefson, who had been a Philadelphia fixture for nearly 35 years, and Huddleston were let go last year.

The saga of KYW3's high-priced stars Alycia Lane and Larry Mendte was slightly more complicated than the simple cost/profit calculus involved in some of those other moves, but the station nonetheless is saving a bundle with its less flamboyant new anchors, Susan Barnett and Chris May.

While only a handful of the missing names may be recognizable, TV news layoffs behind the scenes are legion.

"2008 was the worst year I have seen in 15 years of surveying television stations," said Hofstra University journalism professor Robert A. Papper. "Except for 2002, when the technology bubble burst, TV news employment has relentlessly gone up every year."

Papper found that 1,200 jobs had been cut at local TV stations in 2008. "Based on what news directors have to say, I don't think 2009 will be as bad," Papper said, "but it's not going to be a good year. Let's make that clear."

It's not good at NBC10 right now, according to people familiar with the situation who, desiring to maintain their jobs, asked not to be identified.

They said that NBC10 would be reducing its writing staff from 36 to about 20 as it transformed its traditional newsroom into a "digital content center," part of a companywide move among stations owned by NBC Universal, which, in turn, is owned by General Electric.

The station is requiring current staff to reapply for the jobs and also reportedly has taken applications from more than 300 outsiders. "People are really angry and upset," one person said, "seeing outside applicants in their ties and skirts walking through the newsroom for interviews to get our jobs."

Other technology is changing local TV employment patterns, allowing, for instance, stations to employ a "one-man band" to do a remote standup that used to require at least two people. It won't be long, union observers say, before passersby see CBS3's Walt Hunter or 6ABC's Dann Cuellar out on the street, setting up their little cameras to shoot themselves, "Live!" from somewhere or other.

"New media has changed everything from prime-time television to local news," said Christopher de Haan, national director of communications for the American Federation of Television and Radio Artists, which represents workers at KYW3 and NBC10. "Our members want their stations to be competitive. They welcome new opportunities, but they want to make sure they receive fair compensation."

Catherine Brown, AFTRA Philadelphia local president, who will be meeting with NBC10 management today to continue negotiating the digital content center issue, said members "are standing together and working through our union to achieve the best possible outcome in these unfortunate circumstances."

On the other side, Blackman, who declined to discuss the employment aspects of the digital content center, said: "We have to adapt or die. We need to energize viewers and users in a way that's most relevant to them. They don't need us the way they used to, and we have to find a way to make them need us again."

"Their strategy is to be everywhere," said analyst Borrell of the NBC initiative - "backs of cabs, elevators, on screens as you pump gas, on digital billboards.

"They may have fewer people viewing them on television screens, but they want to be on as many screens as they can in the marketplace."

Which leads to the ultimate question of what local broadcast TV should be. Once, national TV companies saw the broadcasters as the brightest bullets in their gun belts. Now, stations have lost so much value, the corporations are cutting asset numbers on their books.

Once, networks wined and dined and paid big fees to independent broadcasters to carry network programming and its accompanying advertising. Now, that money is starting to go the other way because advertising alone does not cover the cost of programs. The broadcast networks aren't drooling over the prospect of providing their programs to cable, but the fat payments available have certainly caught their eye.

In a quote that echoed throughout the television business in December, CBS Corp. president and chief executive Leslie Moonves told a UBS Global Media and Communications Conference in New York: "People ask, 'Why not break the bond with the affiliates and go directly to cable?' It is something that down the road could happen."

"Step back and look at what the networks have done so far in the face of competition from cable," said Mark Fratrick, financial vice president at BIA and the man most responsible for mining market revenue figures and making forecasts.

"They've poached or started their own cable networks - ESPN, Disney, CNBC, Bravo, Fox News.

"There will be new series from the company-owned studios that make sense to put on a cable network, and the companies may ask, 'Does it matter if we don't have a local affiliate in the 190th market?' " Fratrick said.

Like most of those interviewed for this article, Fratrick sees hurricane waves now for local broadcasters and their employees that will smooth to rough waters that could be difficult to navigate for years to come.

"But will anybody ever turn in their license and walk away?" he asked rhetorically. "I suspect not."

Fall Prime-Time Lineups

ABC

New shows in bold.

Sunday

7 America's Funniest Home Videos

8 Extreme Makeover Home Edition

9 Desperate Housewives

10 Brothers & Sisters

Monday

8 Dancing with the Stars

10 Castle

Tuesday

8 The Shark Tank

9 Dancing With the Stars (Results show)

10 The Forgotten

Wednesday

8 Hank

8:30 The Middle

9 Modern Family

9:30 Cougar Town

10 Eastwick

Thursday

8 Flash Forward

9 Grey's Anatomy

10 Private Practice

Friday

8 Supernanny

9 Ugly Betty

10 20/20

Saturday

8 College Football

NBC

Sunday

7 Football Night in America

8:20 Sunday Night Football

Monday

8 Heroes

9 Trauma

10 The Jay Leno Show

Tuesday

8 The Biggest Loser

10 The Jay Leno Show

Wednesday

8 Parenthood

9 Law & Order: SVU

10 The Jay Leno Show

Thursday

8 SNL Weekend Update Thursday

8:30 Parks and Recreation

9 The Office

9:30 Community

10 The Jay Leno Show

Friday

8 Law & Order

9 Southland

10 The Jay Leno Show

Saturday

8 Dateline NBC

9 Trauma repeats

10 Law & Order: SVU repeats

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