Phase 1: Local News Consolidation

A friend of mine posted a link on twitter to an interesting news article today.

Three of the four local news producing stations in Central Ohio are joining forces to make more efficient use of their resources in our troubled economy.  It seems you can blame anything on our troubled economy and everybody just nods their heads understandingly.  It must be true, right?

Not in this case.  The situation that the local TV stations are facing right now is not due to the economy, but rather a broken and outdated business model.

In 2007, I participated in a focus group that was organized by WBNS-10TV.  The focus group consisted of a group of twenty-somethings.  WBNS was trying to figure out what they could do to help improve the utterly dismal ratings in the under 30 demographic.

It was at that focus group that I made a prediction.  I predicted that within 10 years (by 2017), we will see all but one of the broadcast TV towers in Central Ohio go dark.

I know.  It’s a rather grave prediction, but the truth of the matter is, we are witnessing a drastic shift in content delivery that is being propelled by two major forces.

The first, and probably most significant driving force behind the shift is that we, as consumers of media, are no longer willing to settle for “push” technology.  Broadcast TV is a push technology.  It is one way.  The programming is static.

As consumers, we are very quickly becoming accustomed to the ability to pull up the media that we want, when we want it.  Web sites like YouTube or Hulu are usually mentioned as examples of ways that users are transitioning to on-line sources of media.  Of course, the real threat to broadcast TV isn’t computer users watching internet video on their computers, but rather  TV viewers watching internet video on their TV sets.

Tivo began a revolution.  They enabled viewers to use a set top box to free themselves from the restrictions of the broadcast schedule.  I have heard friends describe their DVR’s as “life changing”.  I would have to agree.

Now, a new generation of set top boxes are set to continue the revolution, and probably accelerate the rate of change.  The DVR eliminated time constraints.  The next logical step is to eliminate the source limitations.  Products like AppleTV, Roku, and Vudu are only a few examples of products that allow users to pull content from the internet and watch it on their TV.

“Pull” is a very important word.  The drastic shift in content delivery that we are witnessing is the transition from a push model to a pull model.  As this transition progresses, it will become impossible for the traditional push broadcast model to survive as a business.  I’m not saying that local news outlets won’t survive.  They will need to reinvent themselves with a focus on internet publishing.

This brings me to the second driving force behind the shift:  content.  More specifically, content that is independently produced and published.  The barriers to entry no longer exist as they did just five to ten years ago.  The tools to produce and publish content are readily available at a cost that is trivial.  The success of internet video sites has proven that viewers are less concerned with picture quality and production value than they are with truly engaging content that they can connect with.

The shift to a pull model will also usher in a shift from broadcasting to narrowcasting, something that was not feasible until recently.  Independent content can be extremely focused, and easily cater to niche markets.  An independent producer will never be able to expect to see the type of advertising revenue that a big budget network show can command, but it isn’t necessary because of the difference in production overhead and delivery costs.

Advertisers are already taking notice of narrowcasted content.  The producer of show can charge a higher cost per thousand viewers (CPM) because the advertiser knows that the ad is being targeted at exactly the audience that they want to reach.  Even at a higher CPM, the advertiser can spend less money overall and expect to see a higher rate of response than they would see with a traditional broadcast ad.  Simply put, it is a more efficient advertising model.

I see the consolodation of local TV news operations as the first step towards paring down to one local TV station.  Who knows, maybe my prediction was too conservative.  We could see it happen well before 2017.