Local Newscasts Feel Financial Pinch

Local news shows, the once-vaunted cash cows of television stations, are no longer sacred.

With ad revenues shrinking and expenses ever climbing, TV station owners are wrestling with costs; in some cases, they are getting out of the local news business altogether.

Although previous economic downturns have led to some culling of local news operations, many experts say the current trend may not necessarily ease as the economy rebounds.

The combination of an explosion of news and entertainment options and changing lifestyles has led to a steady erosion of local news audience share, especially for the late news. Chicago’s big three network-owned stations, for instance, have seen the combined ratings for their late newscasts fall by more than a third in less than 10 years.

Although Chicago’s stations are clearly feeling the pressure from falling revenue, the prospect that one of them will eliminate its news operation seems remote. But such decisions have been made in smaller markets, with Sinclair Broadcast Group killing local newscasts within the last four months at its ABC affiliates in Winston-Salem, N.C., the nation’s 44th largest market, and in St. Louis, the 22nd largest.

Without a doubt, the weak economy and anemic ad market play major roles in the demise of these newscasts.

“Typically, No. 3 and No. 4 stations will bail out of news in tight times,” noted Tom Wolzien, senior media analyst with Sanford C. Bernstein & Co., an investment research and management company.

“And we’re likely in the next year to see more, as smaller stations and weaker stations have more and more problems,” he said. “A lot of small broadcasters are outside their debt covenants now because ad revenues have been so bad.”

Smaller stations are feeling squeezed by government mandates to digitize operations and by decreasing compensation from networks to run their programming, noted George DeVault, president and general manager of Holston Valley Broadcasting Corp., which decided to stop producing local newscasts this month at its ABC-affiliated and UPN-affiliated stations in Kingsport, Tenn.

Holston is negotiating to buy local newscasts from another affiliate in the region.

But other factors--including a proliferation of news and entertainment choices, changes in lifestyle and the expected further consolidation of TV station ownership--could lead to additional thinning of the ranks even when the economy turns around, some observers say.

“The past decade has brought too many new local newscasts, too many new competitors such as cable and Internet and too much audience fragmentation,” Hank Price, a senior fellow at Northwestern University’s Media Management Center and former general manager at WBBM-TV, wrote in a recent paper.

“For many stations, [local news] will never again be the ‘cash cow’ of the 1990s,” wrote Price, now general manager at WXII-TV in Winston-Salem, owned by Hearst-Argyle Television. “In the end, most communities will end up with one or two ‘mega’ news stations while other outlets will offer entertainment or specialized programming.”

His prediction may sound dire, but local newscasts, which generate 40% to 50% of stations’ annual revenues, clearly are no longer the moneymaking machines they were as recently as 2000.

“A review of traditional programming and advertising business models is going on everywhere, at every level; market size doesn’t matter,” said Larry Wert, president and general manager of WMAQ-TV in Chicago.

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Weaker players in markets around the country are exploring a range of steps, including greater use of syndicated programming, rebroadcasting shows in different time slots and greater use of paid programming, he said. Inside news operations, some stations have expanded use of freelance on-air talent, angering unionized reporters and anchors.

“Some are finding it more economical to purchase newscasts prepared by another station than to go to the expense of studios and all the infrastructure you need,” said Barbara Cochran, president of the Radio-Television News Directors Assn.

And some media companies are experimenting with merging the news operations of their newspapers and TV stations, Price noted.

Still, several observers think it is premature to predict that local newscasts will dwindle to one or two major outlets per market, as Price suggests.

“I can remember in the late ‘70s and early ‘80s, when people were saying all three networks cannot survive, and there was speculation on which would go out of business or which one would drop news,” said Bob Papper, a professor of telecommunications at Ball State University and co-author of an annual study on TV newsroom profitability. “And you know what? It hasn’t happened.”

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Kathy Bergen is a reporter for the Chicago Tribune, a Tribune company.