Forecast 2009: Local TV and Radio

As advertisers and agencies seek to capitalize on one of the best buyers’ markets ever, TV and radio stations are working to adopt new business models and innovative sales approaches to keep rates and business intact. Doing things differently (with far fewer employees on staff and on air) may be the only solution to dealing with a shrinking advertising market that often turns into a losing game of fighting for share among local media outlets.

Stations as a whole won’t bring revenue into the positive column in ’09, but they can set the groundwork for re-creating their businesses amid more favorable economic conditions in 2010. At the same time, they’re also betting they can capitalize on alternative revenue streams through online and other new media (and additionally for TV stations, retransmission negotiations and digital multicasting).

“We need to diversify away from the single revenue stream of traditional advertising support,” said Perry Sook, chairman, president and CEO for Nexstar Broadcasting Group. Bucking the trend of many TV groups, Nexstar’s revenue was up an astounding 9 percent in third-quarter ’08, thanks to a strategy that relies heavily on retransmission and e-media revenue, a total Sook fully expects to double in ’09.

Even with a 1 percent increase in off-air revenue, the radio business hit a new low in November, down 20 percent overall, a condition that isn’t likely to change much in the first quarter. It’s a wake-up call radio groups are taking seriously. “We need to challenge ourselves to do things we haven’t done before. We’re trying to create more demand, but it’s going to be a challenge for everybody,” said Bob McCurdy, regional president, Clear Channel Radio Sales.

Instead of selling a schedule of spots which could be easily ground down by buyers, Clear Channel, for example, plans to seek partnerships, throwing aside traditional definitions of inventory to create integrated promotions and sponsorships, complete with advertiser-defined metrics to gauge the success. “To maintain our share of voice, we need to go from an anecdotal focus that radio works to an empirical focus,” said McCurdy, who is talking with research companies to help out.

For TV stations, going after new money seems to be working, especially money that used to go to local media in even worse straits. “There is some ‘jump-ball money’ as advertisers pull out of Yellow Pages and newspapers,” said Kathleen Keefe, vp of sales, Hearst-Argyle Television, which employs a retail development program targeting hyperlocal categories such as plumbers, car dealers, painters, etc.

Though it still accounts for less than 4 percent of station revenue, both radio and TV outlets have stepped up new media efforts in pursuit of an additional revenue stream, even as forecasted growth in online is expected to be  moderate to the high single digits, according to Borrell Associates. Radio stations are using online and mobile media (both Clear Channel and CBS Radio offer free iPhone applications) to increase distribution and audiences and provide integrated campaigns for advertisers. Clear Channel, for example, boasted a 24 percent increase in traffic and 16 percent increase in audience across its Web portfolio in ’08.

But evolving the medium beyond audio poses unique challenges. “Radio stations don’t have the content that translates to the Internet. They don’t have video, they don’t have news, they don’t have classifieds,” said Gordon Borrell, president of Borrell Associates.

TV stations are more naturally suited to the Internet, and seem to be pursuing several strategies. Some are using their Web sites as a media extension with a heavy emphasis on news; others are creating entirely new, local brands, such as the approaches adopted by Nexstar and more recently, NBC Local Media.

“We’re not trying to build a mass audience to resell to national advertisers. Like the Google model, we have lots of small-market transactions,” said Nexstar’s Sook. According to Sook, 70 percent of the advertisers on his sites have never used TV before, including pizza parlors, dry cleaners and dentists.

Still virtually untapped by radio and TV: mobile advertising. “More people are going to Web sites and stations are monetizing them while mobile is still two to three years down the road,” said Chris Rohrs, president of the Television Bureau of Advertising.