Rivals Have Friendly Advice for Networks

Television networks, beleaguered by declining market share and a fracturing audience, got advice this week from the broadcast industry’s major rivals.

In an unusual twist, the same satellite, Internet and cable companies that have eroded broadcasters’ dominance over television were the top-billed panelists and keynote speakers at the industry’s annual convention. Attended by more than 30,000 broadcasters from around the world, the convention was a sort of pep rally in which the opposing forces urged station owners to use their local roots and special relationships with advertisers to cash in on the new digital revolution.

“The last bastion of competitiveness is local advertising sales,” said Jerry Yang, a co-founder of Yahoo Inc., the Internet portal whose market capitalization exceeds those of the major networks combined. “There’s little being spent by local advertisers on the Internet. That’s where local media have leverage.”

Serving on a panel on the future of broadcasting, Yang urged local broadcasters to create online sites. He said one of his company’s alliances, with Granite Broadcasting Corp., promotes station personalities on Yahoo’s portal so that people who surf the Net at the office during the day will have reason to tune into the stations when they get home at night.

The convention’s messages reinforced what the television networks have been telling affiliates for several years now: Get on the bandwagon of new technology that is changing TV or be left behind.

Station owners came into the convention this week bludgeoned by new initiatives by the networks to overhaul the distribution structure that has dominated broadcasting since its origin but that they say no longer works.

ABC affronted affiliates recently with plans for a new soap opera channel that will be the first to rerun programs on cable during prime time after they air on stations during the day. Affiliates worry that the channel will encourage more viewers to shift to cable and that it undercuts the exclusive rights they have enjoyed to network programming.

Fox then sent tremors through the industry two weeks ago with its plan to reduce by 20% the advertising time it gives its affiliates in an attempt to bring into balance network and station profitability. Fox, which is losing money on its network, met with its affiliates over the weekend without resolution, and some local stations are considering filing a lawsuit for breach of contract.

The rising hostilities were a major undercurrent at the convention. The keynote speaker, Howard Stringer, chairman of Sony Corp. of America, urged affiliates Monday, “Stop crying in your chardonnay about lost [market] share . . . and step up to the digital plate and hit a home run.”

Stringer, who in an earlier incarnation as president of CBS under owner Laurence Tisch in the early ‘90s tried to strip affiliates of the fees they are paid for carrying network programming, is now peddling new digital equipment that can equip stations for new opportunities in digital TV.

Other broadcast rivals had their own suggestions for survival. Charlie Ergen, founder of Echostar Communications Corp., the nation’s second-largest satellite television provider, offered to one-up the cable industry by paying stations cash for the rights to retransmit their local signals. Several bills are wending their way through Congress that would allow satellite providers to retransmit local broadcast channels, which would make them a more formidable competitor to cable.

While Congress gave broadcasters in 1992 the right to demand payments for the retransmission of their signals by cable, the networks traded the right to the fees for space on cable systems for their new cable channels. Several station owners at the convention criticized the practice and urged the industry to recapture their right to retransmission fees in upcoming negotiations with cable.

Ergen seized the opportunity. “The single-biggest thing broadcasters can do to increase their revenues is to get retransmission fees. We’re the avenue for them to do this.”

AT&T;, a top cable operator after last month’s purchase of Tele-Communications Inc., encouraged local stations to put aside the long-standing battle against cable to form new partnerships in interactive television that would allow broadcasters to tap into electronic retailing, launch neighborhood-specific channels and bring higher ad revenues because of their ability to better target messages.

“We have the technology; you have the relationships with local advertisers,” said Leo Hindery, who runs AT&T;’s cable and Internet company, in an address Tuesday.

He said advanced cable set-top boxes gather information on household preferences, allow advertisers to pinpoint their messages, and enable impulse buying, creating the possibility of local stations and cable operators joining forces to take money away from newspapers and direct-marketing promotions, which draw twice as much revenues locally as TV stations.

In an endorsement of cable by a broadcaster, Tom Rogers, who heads cable and new-media investments for NBC Inc., said the cold war is over and encouraged local stations during a panel discussion Monday to forge deals with Hindery. “If you don’t know Leo, you should,” he said, explaining that cable operators, after a wave of consolidation that has concentrated ownership in individual markets, are now positioned to take local advertising dollars away from TV stations unless they forge partnerships with them first.

Rogers also suggested that stations seek alliances that can give them an Internet identity. Yang said broadcasters could extend their coverage using the Internet to create what Rogers called “personalized news.”

“For local traffic, there can be 10 cameras on 10 bridges,” Yang said.

One dissenting voice was CNN founder Ted Turner, who urged broadcasters to forget using new digital spectrum they received from the government to launch new channels.

“We should all agree right now,” said the Time Warner Inc. vice chairman, who worries that a proliferation of choices is undercutting his cable empire. “No more channels. There is enough competition.”