TV outsources the Internet
Few would argue that building and running a TV-station Web site with up-to-the-minute news, sports, entertainment and other compelling local content is an easy task. But given the inclination, time and resources, stations can make it happen. For those stations looking for help with their online operation, there are companies ready to take on the job.
Two prominent examples of this relatively new business are Internet Broadcasting Systems (IBS) and WorldNow. More than just constructing Web sites, their aim is to unite those station-group sites into a dominant Internet network.
Their approaches differ, but both provide services to build, host and maintain TV-station Web sites.
IBS furnishes staff-Web journalists and sales people-and the technology to build and maintain the site, but it does not provide an on-site tech person. All technology support is centralized in Minneapolis, one of the company's two locations (it also has an office in New York). An editorial staff in Minneapolis also provides national news and information content. A launch team works with the station to design the site, which is then coded in Minneapolis. The broadcaster supplies local news coverage and video and promotes the site on the station.
According to Tolman Geffs, CEO of IBS, the company covers all expenses until the site sees a profit, which usually occurs roughly 12 to 18 months after IBS launches the site. At that time, revenue is split between the station and IBS.
"That's the only way," says Geffs. "If you're going to win, you've got to have somebody who cares. And we're in business with them to make this win."
One station executive, who asked not to be identified, says that, for stations that want to avoid out-of-pocket expenses, IBS may be a very good way to do that. "But when you add up the amount of promotion time they want from the station and the amount of staff time from the newsroom and sales staff to cooperate with them," the source observes, "we're very skeptical that you'll ever see that investment back."
WorldNow provides the Internet technology to host and maintain the station Web site and offers training, support and some national content from content aggregator Screaming Media and content producers Sporting Network and AP. Its New York-based staff assists stations in developing sales, Web content and site design. The station puts up the local content, promotion and sales efforts.
WorldNow would not disclose its fees but offers both a straight license fee and a partner-revenue-sharing plan. Contracts with stations usually cover five years, during which the company provides hosting services, upgrades in technology, ongoing training and strategic support.
Each company points out that its station portfolios reach significant percentages of TV households. IBS says it has station customers in 29 of the top 50 markets that reach 40% of homes, while WorldNow goes to 70% of households in 33 of the top 50 markets. IBS says its target is the 150 leading stations in large markets; WorldNow expects to top out at 250 stations in all market sizes.
Geffs says the higher numbers reported by WorldNow do not concern IBS. "For us, it's not an issue of numbers. It's getting into the right markets with the right players and building sites that deliver traffic and revenue back to the TV stations." IBS, he says, does not compete with WorldNow. "They do a good job at serving smaller stations that just want to get a brochure up. They are not building big local-consumer services that are driving big traffic. We're just not in the same business."
IBS has launched 27 sites-the company prefers to call them Web channels-including five in Canada. There are 23 in development scheduled to go live by the end of 2000, bringing the total to 50. The company focuses on signing "top stations in the top 75 DMAs" and on station groups. Its portfolio includes Hearst-Argyle Television (see page 82) with 26 stations; Post-Newsweek Stations with six properties, and McGraw-Hill Broadcasting Co. with four.
The TV groups all are equity partners in IBS. Hearst-Argyle a year ago invested $20 million for a 30% interest, and Post-Newsweek last December kicked in $10 million for 11% equity. In July, McGraw-Hill put up an undisclosed amount. The five Canadian stations are owned by CanWest Global Communications, which also has an undisclosed share of IBS. InfoSpace.com, which provides infrastructure services for Web sites, merchants and wireless devices, joined the partnership in February. But Geffs emphasizes that a majority of IBS is owned by broadcasters.
Although IBS' clients primarily are TV groups, it does service individual stations, including KCBS-TV Los Angeles and WCCO-TV Minneapolis, its original flagship station where the founder and president of the company, Reid Johnson, worked as news director in the 1980s.
WorldNow has 46 sites up and running, 38 in development and another 56 in predevelopment-a total roster of 140. Mark Zagorski, vice president of marketing and development, says the company expects to have 100 sites live by the end of next January and all 140 up and running by April 2001. The development and launch process runs about eight weeks.
Like IBS, WorldNow services mostly station groups. Those include Young Broadcasting with 17 stations, LIN Television Corp., which owns 19, Cosmos Broadcasting with 13, Raycom with 28, Jefferson-Pilot with three, and Quorum Broadcasting with 14. But there are single stations in its portfolio, including WorldNow's first customer, WMTW-TV Portland, Maine. The company is owned by Gary Gannaway, former principal of Genesis Entertainment, which he sold in 1995 to New World Communications. He bought WorldNow in 1998 from DataMark Holdings of Salt Lake City.
Both companies have structured their business models as networks. By creating a web of sites, IBS and WorldNow are able to attract national advertisers and offer a package of Web sites in a single buy. And for those advertisers looking for buys over the air and online, the setup offers a convergence opportunity complete with e-commerce options. Among the national ad deals signed by IBS are HotJobs.com, YouDecide.com, Lawoffice.com and AT & T. WorldNow is building its national sales team.
One station source agrees that "the opportunity offered by both companies is tying into a network of distribution. For smaller broadcasters, it may make sense because they don't have big distribution clout."
However, the same source describes both services as "very spendy." In the case of WorldNow, he questions whether the "price tag for the tool-set structure is equal to what you get." As for IBS, he says there are a "number of companies offering ways to migrate news content. They can stream a ton of news and whatever content you're looking for, so do you need all those people?"
Both companies' sales pitches encourage broadcasters to optimize their strong brand names and news operations to take advantage of the new revenue stream created by the Internet. For example, stations can make the most of their brand and drive viewers to their Web sites by promoting the sites on the station and, in turn, promoting the station on the site. This cycle of TV to Web to TV-also called spiral marketing or the ping-pong effect-is espoused by both IBS and WorldNow.
But Zagorski points out that the spiral-marketing phenomenon can go awry: "A Web site can help your broadcast incredibly, or it can actually hurt it. If you have a bad Web site, visitors to the site definitely will not think about your television station in the same way again."
The companies position their services to give broadcasters an advantage in their competition with local newspaper Web sites. But one station source points out that, even with the significantly higher traffic on newspaper Web sites, newspapers are finding it difficult to sell local advertising on the Web. "It strikes me as a real stretch to think that a site with less traffic will be able to sell more advertising when newspapers are struggling."
Content is key to both companies' strategies. IBS says big local audiences are built through "great content," the essence of which is news. And news is winning the game for IBS stations, Geffs says. "In every market, we are the very best source of breaking local news-hands down, period. We win the news contest online. And then, in the older sites, we win the [over-the-air] ratings contest. The sites that have been established for a while generally are the dominant sites in the market."
Local news content from 13 IBS stations is provided to MSNBC.com, Yahoo! and latimes.com. That, says Geffs, "drives traffic back to our sites and, ultimately, back to our TV partners."
But it's not content alone that's at the heart of IBS' strategy; it's content combined with rich video. In April, the company rolled out VideoBlast, which presents integrated video with interactive text and graphics. IBS sites also offer streamed video. "On a good news day," says Geffs, "we push 100,000 video streams across our site." All IBS video operates over both broadband and narrow band.
Geffs says that, for IBS, the approach is simple: "Build dominant local sites. Drive cash from the sites and use the power of a national network to turn this into a real business. The proof is in the numbers." The numbers to which he refers are IBS' network of sites, which attracted 1.7 million unique visitors in August, according to Nielsen NetRatings, placing the network of stations ahead of CBSnews.cbs.com and latimes.com for the month.
"The next major-media network," says Geffs, "is this partnership of strong local broadcasters."
WorldNow also sees content as a core asset, and the company helps stations leverage that asset. "This is their business 100%," says Zagorski. "We are a tool set to leverage what [broadcasters] do best: create great content, which they know how to do; promote the heck out of that content to build their brand; sell their own local advertising; and make money off that content."
WorldNow has a team that creates national-content packages that are distributed to all its sites. The material is meant only to supplement local content, Zagorski says, emphasizing that "these sites are local, local, local." But if a Web manager is looking for ideas on ways to "spin the news" on the site, WorldNow has a 14-person affiliate-relations team that serves that function.
The company also has retained news consultant Frank N. Magid Associates to conduct comsumer testing on the look and feel of the sites, which Zagorski says helps WorldNow learn "how to leverage this new medium to get the most bang for the buck."
But the primary focus for WorldNow is its technology support. The service considers itself an ASP (application service provider) for television stations that want to outsource the technology aspect of running their Web sites.
"That's the first thing we focus on as a company," says Zagorski. "This is not the core competency of a station. It doesn't make sense for a station to build its own cameras and towers. And in the same way, we take the technology aspect off their hands."
WorldNow offers a custom-branded solution for video that allows each station to manage and control its video and deliver it over the Web in a choice of three viewers: A mini-player that's part of the Web page permits users to interact with text content; a pop-up player that wraps the viewing screen in the station's brand; and a full-screen option. One WorldNow station that features all three viewers on its site is kcal.com.
When stations sign up for WorldNow, the company conducts a two- to three-day training program on the basics of Web publishing for everyone from news producers to sales staff and promotion managers. The idea is to involve the entire station in the Web site. After the initial sessions, WorldNow offers ongoing training as software and other technology are upgraded.
"There are different models out there, and some people throw bodies at it. We're about giving someone the tools to make this part of their business. We're all about teaching and servicing. You know that old saying, 'Give a man a fish, and he eats for a day'?" says Zagorski in describing WorldNow's corporate philosophy. "We're teaching them how to fish so they can eat for the rest of their lives."
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