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  1. 1. Local Television Business Model Evolution <ul><li>Hank Price </li></ul><ul><li>Senior Fellow </li></ul><ul><li>Media Management Center </li></ul><ul><li>Northwestern University </li></ul>
  2. 2. One Page History of US Television <ul><li>1948 – 1960 New Experience Drives Viewership Program Quality & Choice Secondary </li></ul><ul><li>1961 – 1990 Limited Viewing Options Control to Networks/Station Owners </li></ul><ul><li>1990 – 2006 Unlimited Viewing Options Control to Consumer Program Quality Critical </li></ul>
  3. 3. Increased Options move Power to the Consumer
  4. 4. 1980 Viewer Options <ul><li>Local Television (734 Stations. 4 Networks) </li></ul><ul><li>Limited Cable </li></ul><ul><li>Some Afternoon Newspapers </li></ul><ul><li>Library Books or Paperbacks </li></ul><ul><li>Music (FM Radio, Record Player, Audio Tape) </li></ul>
  5. 5. 2006 Viewer Options <ul><li>Local Television (1,747 Stations, 9 Networks) </li></ul><ul><li>Cable/Satellite/IPTV (75 – 300 Choices) </li></ul><ul><li>VHS, DVD, TiVo, Hard Drive Devices, Servers) </li></ul><ul><li>Personal Video/Audio Devices </li></ul><ul><li>Wireless Devices </li></ul><ul><li>Unlimited Internet Services (43% Homes BB) </li></ul><ul><li>Barnes and Noble/Borders Bookstores </li></ul>
  6. 6. The Trend Can Be Summed Up In One Word <ul><li>Fragmentation </li></ul>
  7. 7. New York Late News Ratings ___1975_____2001__ WNBC 13 8.2 WNJU - Telemundo n/a 1.8 WPXN- Pax n/a 0.6 WABC 10 7.5 WCBS 11 4.5 WNYW - Fox 8 4.2 WWOR - UPN n/a 3.9 WPIX - WB 2 2.9 WXTV – Univision n/a 2.1 Total 44 35.7
  8. 8. Greensboro/Winston-Salem 6:00 pm News Ratings/Share <ul><li>1980 </li></ul><ul><li>WFMY 22/37 </li></ul><ul><li>WGHP 18/31 </li></ul><ul><li>WXII 14/24 </li></ul><ul><li>Total 54/92 </li></ul>
  9. 9. Greensboro/Winston-Salem 6:00 pm News Ratings/Share <ul><li>1980 2005 </li></ul><ul><li>WFMY 22/37 11/20 </li></ul><ul><li>WGHP 18/31 8/14 </li></ul><ul><li>WXII 14/24 10/18 </li></ul><ul><li>Total 54/92 29/52 </li></ul><ul><li>NSI November 1980 vs. November 2005 </li></ul>
  10. 10. Greensboro/Winston-Salem 6:00 pm News Ratings/Share <ul><li>1980 2005 </li></ul><ul><li>WFMY 22/37 11/20 -50% </li></ul><ul><li>WGHP 18/31 8/14 -66% </li></ul><ul><li>WXII 14/24 10/18 -25% </li></ul><ul><li>Total 54/92 29/52 -46% </li></ul><ul><li>NSI November 1980 vs. November 2005 </li></ul>
  11. 11. Greensboro/Winston Salem 6:00 pm News W 25-54 <ul><li>1980 </li></ul><ul><li>WFMY 16 </li></ul><ul><li>WGHP 10 </li></ul><ul><li>WXII 9 </li></ul><ul><li>Total 35 </li></ul>
  12. 12. Greensboro/Winston Salem 6:00 pm News W 25-54 <ul><li>1980 2005 </li></ul><ul><li>WFMY 16 5 </li></ul><ul><li>WGHP 10 4 </li></ul><ul><li>WXII 9 6 </li></ul><ul><li>Total 35 15 </li></ul><ul><li>NSI November 1980 vs. November 2005 </li></ul>
  13. 13. Greensboro/Winston Salem 6:00 pm News W 25-54 <ul><li>1980 2005 </li></ul><ul><li>WFMY 16 5 -69% </li></ul><ul><li>WGHP 10 4 -60% </li></ul><ul><li>WXII 9 6 -33% </li></ul><ul><li>Total 35 15 -57% </li></ul><ul><li>NSI November 1980 vs. November 2005 </li></ul>
  14. 14. <ul><li>“ Cohort Groups do not change.” </li></ul><ul><li>Hazel Reinhardt </li></ul><ul><li>Director of Research </li></ul><ul><li>Media Management Center </li></ul>
  15. 15. Who is Your Competitor? <ul><li>Any Activity Which Uses Time </li></ul>
  16. 16. Who Determines Your Future Success or Failure?
  17. 22. Mass Audiences Growing Smaller <ul><li>Survival Means Serving Fragmented Audiences </li></ul>
  18. 23. Current Landscape <ul><li>Media Usage All Time High </li></ul><ul><li>Cohort Groups Decide Content/Platform </li></ul><ul><li>Choices Rapidly Expanding </li></ul><ul><li>International Barriers Less Important </li></ul><ul><li>New Media Development Accelerating </li></ul><ul><li>New Media Generally Unregulated </li></ul><ul><li>Economic Pressure Growing </li></ul>
  19. 24. Can Stations Survive? Can Stations Grow? Do Stations have a Future?
  20. 25. YES! <ul><li>(But Not All Stations) </li></ul>
  21. 26. <ul><li>“ If we keep doing the same things the same way, we will get the same results.” </li></ul><ul><li>Mel Karmazin </li></ul><ul><li>CEO, Sirius Satellite Radio </li></ul>
  22. 27. The Good News <ul><li>Not in the hardware business </li></ul><ul><li>No longer limited to one platform </li></ul><ul><li>New Technology is an opportunity </li></ul><ul><li>Consumers Value Brand </li></ul><ul><li>Strongest Marketing Machine </li></ul><ul><li>Video Oriented </li></ul>
  23. 28. The Bad News <ul><li>Time is Limited Must act Now! </li></ul>
  24. 29. Two Key Opportunities <ul><li>Consolidation </li></ul><ul><li>Convergence </li></ul>
  25. 30. Consolidation Regulatory Issues <ul><li>39 % Ownership Cap </li></ul><ul><li>TV / Radio / Newspaper Cross - ownership </li></ul><ul><li>Dual Network Ownership </li></ul><ul><li>Duopolies </li></ul><ul><li>CableTV / Broadcast Station cross ownership </li></ul>
  26. 31. Convergence Issues <ul><li>Brand vs. Platform </li></ul><ul><li>Brand Extension </li></ul><ul><li>Brand Advancement </li></ul><ul><li>Risk Assessment </li></ul><ul><li>Culture </li></ul>
  27. 32. Traditional Television Model <ul><li>Mass Audiences watch programs linearly. </li></ul><ul><li>Sold as Commodity. Large Advertisers pay for access to Audiences. </li></ul><ul><li>Stations compete against other stations. Non-television competitors ignored. </li></ul><ul><li>Success measured by size of audience and revenue as compared to other stations. </li></ul>
  28. 33. <ul><li>“ There are still only a few ways to reach a lot of people at one shot.” </li></ul><ul><li>David Burwick </li></ul><ul><li>Sr. VP & CMO </li></ul><ul><li>Pepsi Cola NA </li></ul>
  29. 34. New Business Model <ul><li>Targets Audience Fragments </li></ul><ul><li>Non-Linear, On Demand </li></ul><ul><li>Unlimited Channels </li></ul><ul><li>Broadband a Key Delivery System </li></ul><ul><li>Offers New Products/Services </li></ul><ul><li>Audience Measurement Not Standardized </li></ul><ul><li>Extends Reach for Large Advertisers </li></ul><ul><li>Targets Smaller Advertisers now using Newspaper/Radio </li></ul><ul><li>Opportunity for Direct Consumer Payment </li></ul>
  30. 35. <ul><li>“ We must invest in digital businesses that make real profit.” </li></ul><ul><li>Terry Mackin </li></ul><ul><li>EVP, Hearst-Argyle </li></ul>
  31. 36. Key Challenges <ul><li>Research and Development </li></ul><ul><li>Individual Business Plans (Revenue/Expense/Profit) </li></ul><ul><li>Products Must Be Hard to Duplicate </li></ul><ul><li>Brand Extension or Stand Alone </li></ul><ul><li>Growth Potential </li></ul><ul><li>Staff Allocation </li></ul><ul><li>Culture </li></ul>
  32. 37. <ul><li>“ Culture is the biggest obstacle.” </li></ul><ul><li>Reid Ashe </li></ul><ul><li>COO, Media General </li></ul>
  33. 38. Will new Digital Businesses take audience from traditional Television? <ul><li>Yes </li></ul>
  34. 39. <ul><li>“ Someone is going to eat our young. It might as well be us.” </li></ul><ul><li> John Lavine </li></ul><ul><li> Dean, Medill Journalism School </li></ul><ul><li> </li></ul>
  35. 40. Which Organization is Best Positioned to Create Future Media Businesses? <ul><li>Traditional Media Company </li></ul><ul><li>New Media Company </li></ul>
  36. 41. Traditional Media Company <ul><li>Platform Dependant </li></ul><ul><li>Resource Rich </li></ul><ul><li>Vast Experience </li></ul><ul><li>Established Culture </li></ul><ul><li>Adverse to Risk </li></ul><ul><li>True R&D Rare </li></ul>
  37. 42. New Media Company <ul><li>Strategic Vision </li></ul><ul><li>Vision tied to providing relevant, differentiated stories, messages and experiences that engage the audience and are measured for their results. </li></ul><ul><li>Welcomes Change </li></ul><ul><li>Culture Supports Vision and Change </li></ul><ul><li>Rewards and Metrics </li></ul>
  38. 43. Barriers to Success <ul><li>Inside-Out Thinking </li></ul><ul><li>Adversity to Change </li></ul><ul><li>Risk Avoidance </li></ul><ul><li>Ignoring Fragmentation </li></ul><ul><li>Failure to Extend Established Platforms </li></ul><ul><li>Failure to Invest in New Media </li></ul><ul><li>Thinking Platform more important than Strategy </li></ul><ul><li>Lack of Strategic Planning </li></ul>
  39. 44. 21 st Century Media <ul><li>Technology Growth Accelerates </li></ul><ul><li>Consumers Determine Which Technologies Succeed </li></ul><ul><li>Consumer use of Time Key Determiner </li></ul><ul><li>New Media does not replace Old Media </li></ul><ul><li>Established Media Companies in Best Position to Create New Media </li></ul><ul><li>Strategy More Important than Technology </li></ul>
  40. 45. Common Misperceptions <ul><li>Mass Audiences going away </li></ul><ul><li>#1 Stations will survive </li></ul><ul><li>News Slogan is Station Brand </li></ul><ul><li>Our News Product is Unique </li></ul><ul><li>Viewers Hate Commercials </li></ul><ul><li>News Viewing Habits change as viewers grow older </li></ul><ul><li>We have plenty of Time </li></ul>
  41. 46. Current Television Station Business Model Not Viable in the future without Change

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