Local TV Moves Shake Up Local Multimedia News Operations
Important Details: December 2007 saw a flurry of activity in US media. Sam Zell engineered a privatization of the Tribune Company, Rupert Murdoch closed his purchase of Dow Jones and the Federal Communications Commission (FCC) began to change the local print/broadcast ownership landscape in major cities. But, as it turns out, that was all just prelude. As the year ticked down, the new and expanding players starting doing deals with each other, deals that should make a significant impact on developing local multimedia operations.
The first announcement had the new Tribune bringing in radio exec Randy Michaels to head both broadcasting and interactive. Michaels, a veteran of leading broadcaster Clear Channel, had most recently headed Local TV, a venture-backed (Oak Hill Capital Partners) company that got into the local TV business last year. Then Tribune announced that it was entering into a new agreement with Local TV, to pool management of the nine Local TV stations and the 23 Tribune-owned ones, under Michaels. Then a few days later, Local TV added eight more stations to the mix, buying them from News Corp for $1.1 billion, a sum that amounts to more than a fifth of News Corp’s cost of buying Dow Jones.
Within a week a new station management group had been born, reaching about 36% of American households, seven of the top 10 US markets, and good number of mid-sized ones. Annual revenue for the stations is about $1.6 billion, which would rank it fourth after Fox, CBS and NBC. Said Tribune, “The management company will also look towards serving potential third-party-owned stations in the future.”
The new company is both about growth and cost reduction. “Tribune and Local TV expect to realize significant savings in management, technology, and other overhead costs,” said Michaels. “Things like research and development and automation technology are more efficient on a large platform. All of the stations get to share the benefits. We are going to find new ways to operate smarter, cheaper, and more efficiently.”
“The company will immediately focus on back office and administrative functions,” added Local TV’s Bobby Lawrence. “Then we will move to creating specialized knowledge teams for TV assets, addressing market-specific challenges and opportunities with special swat teams, developing vertical and homegrown content, and finding new ways to deploy capital. And that is just the beginning.”
Implications: The ink is hardly dry on the FCC ruling and already we’re seeing lots of market movement. Certainly, part of the movement is simply around efficiencies to be gained by streamlining operations. In addition, though, Outsell believes the moves set up the ability to create new broadcast/print combinations, especially if the FCC decision holds up in court. (See Insights 6 Nov 2007, FCC Cross-Ownership Debate Presages Local News Multimedia Future). Significantly, new Tribune hire Randy Michaels isn’t just heading up an expanding broadcast management company — he’s also heading up Tribune Interactive. In many ways, we can see a next transformation in the online space, as video ad revenue — growing at a greater 40% clip in 2007 and into ’08 — becomes an important local business driver. So putting broadcast together with interactive makes a certain future-reaching sense. In addition, as online revenue growth rate has slowed at online newspaper sites, it is picking up steam at local online broadcast sites. Such local broadcast networks sites as WorldNow, Internet Broadcasting and Broadcast Interactive Media — which collectively power more than 400 US local broadcast sites — are helping many broadcast stations get traction on the web.
Outsell believes this set of movements is indicative of a new changing order in local media, pooling broadcast and print assets as efficiently as possible, and taking advantage of internet and multimedia ad growth.