The Future of Local Television News

Hank Price

Travel to any American city, turn on a television set, and you will find at least four stations producing almost identical local newscasts.  Each station will have about the same number of stories in the same format with the same look and feel.  Weather reports will not only mirror each other, all will air at the same time.

Hank Price

Not only will these broadcasts be copycats of each other, they will be remarkably like the newscasts you watch at home.

As we end the first quarter of the 21st Century, one must ask why a mid-20th Century linear technology continues to matter in a digital, on-demand age?  Why is it that metro newspapers, with their vast content offerings, have found it difficult to remain profitable, yet local television stations are still financially viable producing a product that has not fundamentally changed since the 1980s?

The answers to those questions also offer a look into the future of local media.

What Drives Television News?

More than anything else, television news is driven by the fear of losing audience.  Minute-by-minute ratings constantly report each station’s number of viewers, when they tune in and where they go when tuning out.  Those ratings tracks have shown that any change in format usually causes viewers to switch channels, thus explaining newscasts’ regimented structures.

Avoiding viewer loss is critical because news audiences continue to age.  Younger viewers still watch during major events, especially weather emergencies, but for the most part they gather information on their phones.  That leaves a core television audience whose average age is 55+.

Knowing newscasts are slowly aging out, why don’t stations develop new kinds of products that might attract a more youthful audience?  Many experiments have been tried, but to date every effort has failed, often leaving stations in worse shape than before.  Those results have only reinforced the fear of change.

Stations also suffer from what I call the inverse relationship between profit and risk.  As long as television news remains profitable, there is little appetite for risk.  The only exception is when a station is clearly dying, but of course by then it is too late.

Why Is Television News Still Profitable?

Television is the last form of mass media.  With metro newspapers having lost such a large percentage of consumers, that means car dealers, appliance stores and other major advertisers are left with little choice other than local television.  Internet advertising is great at targeting specific cohorts, but it is too piecemeal, too dispersed, to reach a mass audience. 

By the way, the largest category of local news advertising is biannual political spending.  The second largest buyers are trial attorneys. 

Television has another advantage in that stations receive lucrative payments from cable and satellite companies. Because spot advertising never completely recovered from the last recession, these fees are now essential to survival.  Fees are based on number of subscribers, so each time a consumer cuts the cord station payments are reduced accordingly.

If You are wondering by now if local television news is a house of cards, you are right.  Oversupply of look-alike product, loss of younger viewers and cord cutting mean any downturn in the economy puts television news at risk.

The Industry’s Plan

Group owners are fully aware of the problems.  Their preferred solution Is to have one owner control multiple stations in a single market, lowering news production costs while raising ad rates.  That solution would be achieved by owners swapping and trading hundreds of stations until every community would be dominated by no more than two owners.  Fewer owners also means stations would be in a stronger position to negotiate cable payments.

Unfortunately for the owners, Federal Communications Commission rules prevent any one company from owning two of the four highest rated stations in a market.  There are some exceptions in very small markets, but in general this rule is iron clad.

It is very unlikely the FCC or Congress will modify ownership rules anytime soon.  Many observers believe it would take a collapse of the industry for any regulatory change to come.

Owners say multiple station ownership in one market is essential for survival, not only because of a fading audience, but because of their need to service billions of dollars in debt. In this time of rising interest rates, debt payments have become a factor in every company decision.

What Happens Next?

Putting all this together means the likeliest scenario for television news is to continue a slow decline due to death of their most loyal viewers.  However, should the country suffer a serious recession, everything accelerates.

During the 2008/2009 recession stations became so financially desperate that many fired photographers, live truck operations, control room personnel, engineers, and many other positions just to stay afloat.  Those people were never replaced, so any future recession will leave stations with few places to cut.  That could mean some stations might be forced to exit the local news business.

No one can predict what a second half of 2023 economic downturn might mean, but given all these factors, a severe recession could change the entire face of local television news.

In a potential preview of this, Sinclair Television, one of the largest group owners, recently abandoned local news in five of their smaller markets, permanently laying off all news staff.  Sinclair also terminated news employees singularly in several other stations.  No announcement was made, so we do not know if there is more to come.

Sinclair’s expense reductions may have been related to the company’s disastrous investment in regional sports networks, but whatever the cause, those five stations were obviously not producing enough revenue from local newscasts to cover expenses. 

Because Sinclair is such a huge company, their decision to actually eliminate some news departments has become the talk of the industry. 

Most Likely Scenario

The bottom line is there are simply too many players in the local news business competing for the same viewers and the same advertisers the same way.   Because news audiences continue to slowly decline, that oversupply is not sustainable over the long term.  Some stations will eventually be forced out.

As stations exit local news, we might see something similar to the newspaper consolidation of the 1970s.  A reduction to one or two owners in each market would mean increased stability and profitability for the surviving stations.  That result would be similar to what owners have failed to achieve through deregulation.  The difference is some owners would grow rich while weaker ones might go bankrupt.

Even if the thinning of the herd scenario plays out, that does not address the core age problems television news faces.  Like the experience of newspapers, surviving stations could gain a windfall for now, only to be leapfrogged later by outside innovation.

Television stations do have a new technology called NextGen TV that offers great promise, including user interactivity, but its full implementation remains many years away.

One Opportunity

Since consumers are the driving force in the American economy, let’s now consider what consumers desire from local media.

Above everything else, consumers want information they can trust.  Unlike their elders who trusted institutions, today’s consumers trust their friends.  Because local television is intimate and local, studies show consumers are more likely to trust local television news than any other form of media. 

Viewers have also broadened their definition of local news beyond traditional media offerings.  This is especially true of younger consumers, who want products that are on demand, video centric, interactive, and ubiquitous.

Leading television stations might be well positioned to take advantage of these opportunities, but only if they step back and see linear television as only one part of a broader, multi-platform brand.  To do so, they must overcome two powerful cultural barriers:  fear of risk and a lingering gatekeeper mentality.

A third, and possibly even larger barrier, is the force of quarterly earnings.  Because the mega station groups are all public companies, the idea of short-term cost for long term gain is anathema to executives whose compensation is based in part on stock growth.

These roadblocks to innovation in the local television space mean reinventing itself as a modern, consumer centric news service, may be a bridge too far anytime soon. 

Looking at the whole, all of local news media is at an inflection point.  Traditional media, which still dominates the conversation, was never designed for a mobile, on-demand consumer driven world.  New media continues explosive growth yet is fragmented and thus disorganized with no clear voice. Add to that a consumer who is determined to play an active role and you have a classic opportunity for innovation.  If owners of television station groups choose not to seize the moment, then the door opens for outside innovators to possibly turn the industry upside down. In the past, it took emergence of determined visionaries such as Hearst, Pulitzer, and Neuharth to drive radical product innovation. Will such a person emerge now?  Who knows?  What we do know is that if local television news, and the rest of local media for that matter, are to morph into the future, bold and determined leadership will be required and the first place to start will be overcoming fear.