Changing Channels

Local TV stations are investing heavily in high-definition technology and reaching out to viewers via the Web. Can the new strategy save their shrinking ratings—or are they just jumping the shark?

(page 4 of 4)

These new delivery systems are igniting some interesting discussions between newsroom and station management, which basically asks, How big does a story have to be before we break into regularly scheduled programming? Veteran newsman Kurtis says local news is being categorized into "different grades of stories." He adds, "If the mayor has a heart attack or a jumbo jet goes down, you break into regularly scheduled programming. Lesser stories get treated differently." Says WLS's Barr, "We're very aware, particularly with soap operas, of a very loyal audience that really resents interruptions."

TV executives are also aware that they're still highly dependent on the profits generated by their mainstream, old-line programming. Money from that part of the business is used to pay for ongoing operations and to help cover investment bets on new technology. "Traditional TV is now one part of a local station manager's business," says Paula Hambrick, a locally based media buyer. "The Web is huge; digital channels are on the way. They're playing with them right now, but at some point you have to monetize it."

Station managers would love nothing better than to turn a quick buck on these new bells and whistles, and they contend progress is being made. All five general managers interviewed for this story say their Web sites, which all carry some advertising, are turning a small profit. None would say how much.

"The revenue models can't be based on selling 30-second [commercial] spots, although they are not going to go away very soon," says Channel 5's Wert.

Although TV stations are known for crying poor, they still make a ton of money. The latest survey of the industry's profitability by Journalism.org, an affiliate of Pew, estimated that average profitability for TV stations was in the neighborhood of 40 percent. Local general managers won't reveal their stations' returns, but they're well aware that the newspaper industry's average profit margin has declined precipitously—from 22.3 percent in 2002 to 16 percent in the first half of 2007, according to data cited in American Journalism Review—and they wish to avoid a similar fate.

* * *

With the number of local TV viewers dipping and the area's traditional TV advertising market flattening in recent years at about $1 billion annually, station managers are squeezing their budgets like never before to maintain profits and keep their bosses happy, or at least at bay. That means getting more from existing resources while pressing personnel to shoulder much of the new technological expansion, especially getting current staffers to do more work on the stations' Internet sites.

Even that approach may not be enough to stop periodic cost reductions, such as the cutbacks under way at the NBC network and its local stations, which are owned by the conglomerate General Electric. NBC is dumping about 700 jobs—nearly 5 percent of its work force—and slashing expenses by $750 million. (A spokeswoman at Channel 5 said the station hoped to avoid job cuts, opting instead not to fill positions that open through employee attrition; she declined to reveal how many people the station now employed compared with a year ago.) At Channel 2, Ahern's longtime second in command, Fran Preston, was dismissed recently, reportedly to reduce costs. (Preston declined to comment.)

Such belt-tightening may also mean that some well-paid, well-known local anchors are on the bubble. "As a businessman, I would eliminate all the million-dollar anchors. I think that's a big change," says Kurtis, who made a good buck when he fronted for Channel 2's news operation during the 1970s and 1980s.

Despite the uncertainty, local stations feel pressed to take the plunge into this new information age. "Some people embrace change; others are averse to it," says Wert, that veteran high diver. "This is not a good time for the latter."