If one could sum up the past few years in local broadcast in a single word, it’s scale. As in, scale up quickly, or die at the hands of the increasingly bullying networks, the bare-knuckle syndicators, and the bulked up stations across the street. The tiny groups out there—the family owned, the regional, those with but one or two stations—were largely expected to bring to an end to what has been, for some, a half-century in local television, and cash out.
Yet as 2015 reaches its midpoint, a funny thing has happened. Several tiny groups, while acknowledging a rapidly altered landscape that has likely made their day-to-day travails more challenging, say they’re not going anywhere. With the proper mix of attributes, those broadcasters are able to not only plug along, but actually thrive. In some cases, it’s the right affiliation, or a regional focus, or a wealthy owner intent on winning the local battle. In just about all cases, it’s an entrenched local brand and community roots that have grown steadfast after decades in the game. The survival of the small guys is about being first and being best on local stories—the most resources, the sharpest local savvy—because an owner is fully committed, and shares a sensibility with viewers.
John Kittleman, general manager of KRGV Harlingen-Weslaco (Texas), part of the two-station Manship Family group, says being small has its benefits. KRGV is up against stations owned by Sinclair, Nexstar and Entravision, but having the same owner for over a half-century has cemented the station’s stellar reputation in the Rio Grande Valley. “I hear a lot of, corporate did this and we lost our traffic department, or we have to clear this show in all of our markets,” says Kittleman of his colleagues around the nation. “We can do one thing [here] in the Valley and another thing [at WBRZ] Baton Rouge. With the larger groups, their hands are tied.”
While the path for the Manships, the Dispatch Broadcast Groups and the Sarkes- Tarzians of the world will not get easier, and a lack of leverage with the more retrans-hungry networks and MVPDs may ultimately doom the smaller guys, they’re not, for the moment, complaining. With its outsize presence in Oklahoma, David Griffin, chairman and CEO of Griffin Communications, which owns Oklahoma City leader KWTV and Tulsa powerhouse station KOTV (and a smaller duopoly partner in both markets), disputes the notion that his group is even small. “Our strategy is, focus on the state of Oklahoma, be the best in Oklahoma,” Griffin says. “I don’t think anyone else has that strategy. If that’s your philosophy, you can have a great business.”
Go Big Or Go Home
The modern consolidation era started in earnest when groups including Sinclair and Nexstar saw mass acquisitions as key to their strategy around 2011, and became factors in most every group that went on the block. The challenge was clear for other broadcasters—if you’re not seeking out a partner for a merger or acquisition, your competition is. Gannett acquired Belo for $2.2 billion and Tribune grabbed Local TV for $2.7 billion in 2013. Media General, fresh off its acquisition of Young Broadcasting, jumped in bed with LIN Media last year in a $1.6 billion deal.
Station sales peaked in 2013, when $9.7 billion worth of TV stations changed hands. Last year’s total, $4.6 billion, was still greater than the value of stations sold from 2008 to 2012.
The broadcast landscape has been reengineered amidst the mergers and acquisitions. B&C’s annual Top 25 Station Groups list this year saw Media General crack the top 10; in 2010, it was No. 24. Five years ago, Tribune weighed in at No. 7, and most recently trailed only Ion Media in terms of U.S. coverage. The acquisitions era has seen major groups such as Belo, Newport and Local TV absorbed and, at least nominally, disappear. Smaller groups executing exit strategies from television include NEPSK, which recently sold WAGM in Presque Isle, Maine, to Gray Television; the Spain family, which sold WTVA Tupelo, Miss., to Heartland Media; and ICA Broadcasting, which agreed to sell KOSA Odessa (Texas) to Gray last month.
Perry Sook, president and CEO of Nexstar, speaks frequently of the need to scale up to best negotiate with networks, syndicators and MVPDs, to maximize corporate efficiencies, and make the most of the various digital assets the group has acquired. “Our thesis as a company is that continued consolidation in the distribution landscape…is going to drive further consolidation not only in local broadcasters, but also the national cable network level, that you’re just going to have to have scale to negotiate with scale,” Sook says. “That’s one of the themes that drives Nexstar.”
Few on the stations side would contest the idea that, despite sterling local news brands, it’s the networks that increasingly wield the power in the relationship; LIN had to whack $100 million off its deal with Media General after WISH Indianapolis was stripped of its CBS affiliation. Larry Patrick, managing partner of station brokerage Patrick Communications, says it’s a “considerably” harder world out there for the small-scale broadcasters. “You don’t have negotiating power with the networks at all,” he says. “You can’t get a great deal with the national rep firms, and you don’t get first crack at syndicated shows. And when you do, you pay more.”
Being sub-scale shaves 5-10 points off the margins, compared to the big boys, estimates Patrick. And a big group, he adds, is far better equipped to withstand the loss of an affiliation. A two-station group may not have survived what LIN went through in Indianapolis.
Scale may mean adding a Washington bureau chief, as Media General did last month. Stations are defined by breaking news coverage, and lacking a bustling family of sibling stations makes those giant news stories—the tornadoes, the wildfires, the acts of domestic terrorism—that much more challenging. When an Amtrak train that left Washington for New York May 12 derailed in Philadelphia, massive owners such as ABC and NBCUniversal could call on resources in all three markets to blanket the story. When a natural disaster strikes, such as fatal flooding last week in Houston, Gannett could send reporters and producers from outside the market to spell staffers exhausted from wall-to-wall coverage. A smaller group does not have that luxury.
It’s a reason why stations do a great job covering breaking news, but often drop the ball on the story’s aftermath, according to Steve Schwaid, VP of digital strategy at consulting firm CJ&N and a former news director. “Their crews are exhausted,” he says.
Joe Cook, consultant at Louisiana Media Co., which owns WVUE New Orleans, has seen the issue from both sides. He was GM at the station when it was the lone outlet in billionaire businessman Tom Benson’s TV portfolio, and he was there in late 2013, when Benson agreed to a shared services agreement with Raycom. Local ownership was key to the station emerging as a rival to longtime leader WWL, says Cook. (Perhaps Benson’s bankroll was integral to WVUE grabbing several ace managers and anchors from WWL.) But Cook admits the station was “vulnerable” to Fox’s whims as a standalone. “You can’t be in a position to have the network take the feet out from under you,” he says of the threat of an affiliation loss.
Punching Above Their Weight
Yet several independent groups forge ahead. Commonalities exist, such as regional synergies (Dispatch’s stations in Columbus and Indianapolis), a diverse range of affiliations within the tiny portfolio (Sunbeam TV’s Fox and NBC stations), ancillary media (Sarkes-Tarzian’s radio stations), lean corporate overhead and ratings-hogging local content.
Having a wealthy and locally based (not to mention highly competitive) owner can also help; such a figure is typically “more emotionally involved” than their counterparts at the corporate giants, says Schwaid.
Having a company chief who serves on network affiliate boards is some insurance against hardball tactics from networks. Michael Fiorile, vice chairman and CEO at Dispatch Broadcast Group, and chairman of the CBS affiliates board, says news ratings at WBNS Columbus and WTHR Indianapolis often surpass the aggregate numbers of the competition. “It’s not been more difficult for us,” Fiorile says. “We’re able to attract good talent, management, syndicated shows.” The ratings, he adds, “allow us to set the market rate.”
Just about every small-group executive cited the ability to move quickly on initiatives and decisions as a key factor in their success. For Fiorile, it meant getting WBNS’ CBS All Access mobile product to market when other CBS affiliates were getting the OK from brass.
Chris Wayland, executive VP at Sunbeam TV (WSVN Miami, WHDH-WLVI Boston), says management can consider changing a production element at 10 a.m., and have it on the air in the 4 p.m. news that day. “We can make decisions quickly, and move quickly on them,” he says. “There are not a lot of layers to go through to get approval.”
Staffers at smaller groups, he believes, also have more of a sense of ownership in the product. “They get a larger voice in what we do,” Wayland says. “It’s heard all the way at the top.”
While he’s as bullish on the major-scale groups as anyone, Larry Patrick concedes one point to the small fry—they’re typically free of the debt the acquisitive players haul around to each new quarter. “They don’t have the pressure that the big groups have,” he says.
One- and two-market station groups such as Griffin, Midwest Television and Sarkes-Tarzian show no indications of selling, though the calls from brokers continue to come in. “We’re very popular when we go to NAB,” quips David Griffin.
They’re popular back at home as well. Griffin’s Oklahoma and Tulsa stations both have their own helicopters; during recent tornado activity, they tag-teamed—one following the eye of the storm, the other focused on the damage in its wake. It was firepower that the rivals could not muster, and the ratings reflected this; KWTV put up a 35.5 household rating at 6 p.m. when tornadoes struck May 6, nearly double the nearest station. “You can own stories better,” says Rob Krier, Griffin VP/COO.
While hubbing various station functions became a popular cost-cutting trend for large groups during the recession—WRTV Indianapolis, for instance, is the master control hub for the Scripps group, while KARK Little Rock serves a similar role at Nexstar—that option is typically not available to the small guys. And that’s OK with those who feel the client benefits from a wholly local operation. “We feel good about having full service at both stations,” says Wayland.
There are no easy days for these small groups, and these are merely the ones left standing amidst the consolidation wave. But the Manship Family appears to be one of the little guys in it for the long term. That’s good news for John Kittleman, who mentions, among other things, the “freedom” of being able to invest in community events around town when others may not have the budget, or in enterprise projects such as a reporter embedding with a migrant family for several months to show the viewer what life is truly like as a migrant along the U.S.-Mexico border. “I see the benefit of a large owner,” says the KRGV GM. “But between the two, I like who we are. I like the autonomy.”
The television industry's top news stories, analysis and blogs of the day.