Murrow Special: To Be Both Free and Enterprising

Tom Wolzien

Future business models for broadcast hinge on the changes in news consumption and our willingness to adapt to those changes.


Somewhere, often deep in the recesses of their minds, those under daily pressure to report and prepare the news remember “The Five Ws.” But there is another W—a consumer W—to consider these days.

That sixth W is whether: Whether or not to tune in or pick up and read in the fi rst place. Before contemplating new business models, we need to consider what Internet technology does to the consumers’ underlying methodology for news consumption.

The Internet has changed a three century tradition of news delivery in serial or sequential form; a tradition mandated by one-way technologies with limited capacity. Print, radio and television news all have start times for press runs and programs. Even the programs of 24-hour cable news are serial, as anyone realizes who is searching for headlines at 45 minutes after the hour.

Evolving business models for news will take into account the potential for parallel and on-demand delivery, but the underlying question is whether there will be as much consumer demand and revenue available going forward, or whether the efficiency of new distribution forms reduce news consumption time while dis-intermediating revenues simultaneously fractured by increased distribution capacity.

Problem 1: Learning That the Dogs Are Silent
When dogs bark, we listen, but when they don’t, we may not*. So it is with news, where decades of shows have been based on the questions: Am I safe? Is my family safe? Is my city and country safe? And when we checked in at the top of the hour to get the answer, we would see or hear teases that might hold us for the rest of the program, and the revenue generating advertisements in between. It didn’t mater if the dogs barked or not because we were teased, hooked and often stayed.

That was then, and it’s all changing now. Radically, fundamentally, no question about it, changing. The teases are still there, but the audience may not be…until something horrific happens. The Internet is changing consumption patterns, but perhaps not in the way we think. The web isn’t siphoning off news consumers who spend lots of time on web-based news sites. Instead it’s efficiently providing them with a quick answer to that basic series of safety question so they often don’t feel compelled to watch more news at all.

Check the headlines on the web or the screen on your phone. If there’s no barking news, no worries; you don’t have to go to the TV for more. And as the web provides an instant answer to the safety questions, it eliminates the place for the advertising that goes with them…and the rest of the program. Since there’s no “news,” defacto what’s left is “old” or less important, and can be consumed—or not—at will.

Even questions about the most compelling continuing item, the weather, can be answered with an icon and a few numbers on the screen of a cell phone. And the top-of-show teases are received by a smaller audience. So new business models—the overall available consumers and revenues—need to take into account this “negative space” created by easy public knowledge of a “non-news day.”

Problem 2: Out Flanking TV Stations
The second problem is brought by increased distribution of Internet data and video, which, over time, permits others to enter the space. This is well trodden ground as we see newspapers moving into video, TV into text, radio into classifi ed ads, and new, super-local sites trying to find their own place closer to the consumer’s world than the major regional players. This last, the sub-market or super local group, coupled with newspapers, is where the challenge may evolve for television news operations.

Local TV has failed over 20 years to cut sub-market deals with cable operators that would have permitted them to split feeds into county or smaller services. Economics, cable politics and, perhaps, a bit of big-market chauvinism were to blame. Today the Internet provides new players the chance to provide that super-local material to consumers. It provides the same opportunity to TV stations, but now in a much more competitive space than if they had solidified sub markets over the past two decades.

Snow days and police blotters provide quick answers to safety and the safety of our families. Snow days could be the biggest test of sub-market power across two-thirds of the country. It’s 6:30 a.m. on a school day. It’s snowing heavily. If you have the choice of listening to hundreds of closings on the radio, watching the crawl on TV or going to a trusted super-local news website, which would you do? Same for school lunch menus, local team scores, etc. Was there a burglary down the street?

Channel (pick your number) won’t tell you because the story is too small for the full market. But the old safety questions return with the local police blotter. Is there money to be made in reporting this? Some, perhaps, particularly as the new mantra of “citizen journalists” evolves into the old concept of “stringers,” paid an appropriate pittance**.

But of more strategic importance to a discussion of new business models is the interlinking of these sub-market services into a full-DMA consortium, perhaps owned by today’s dying newspapers. This could bring a threat to local television, as the interconnections permit sale of advertising on a full- or partial-market basis. This could provide a foundation for contracting with schools, churches and civic groups to be regular providers of material to the sub-market groups, possibly to the exclusion of competitors.

This could allow “bubbling up” of consumer stringer video to the full market, or even into national relationships. In short, the interconnection of multiple super-local services could out-flank the remaining television news operations.

The Models

By 2020, on a local basis, there will be less and there will be more. There will be fewer full-market/regional news organizations due to revenue pressures derived from changes in usage patterns. The half serious news operators will go away.

The serious ones that continue to exist will invest signifi cantly more to improve coverage, including moving into submarkets, and distribute on all available platforms. For TV stations remaining committed to news, this will mean much tighter margins*** and using retransmission consent leverage to gain sub-market access on cable while providing VOD content as well as sub-market inserts in serial broadcasts. Super local coverage will be essential for the web, with crossplatform marketing on TV to promote specifics of the online services.

Lines of demarcation will be drawn between super-local ad sales personnel and those for the full market, with clear territories and pay scales appropriate to the service. Arrangements will be made with contract stringers and organizations, who will be given basic training in video and journalistic skills and ethics. Editorial systems will be put into place to prevent errors from straight pass-through to the web, and to provide a necessary buffer against advertising abuse from skewing stories to product placement. Individual reporters will be assigned to the smallest geographical areas possible. “Neighborhood newsreels” will evolve to put the maximum number of faces on the service from the maximum number of events— emphasizing schools and churches—to drive super-local usage because everybody knows somebody and when you know somebody, you watch.

Entrepreneurial sites will try to out-sell the super-local efforts of established, fullmarket players by tying content directly to advertising and other intentional ethical lapses. The established players will try to push responsible, reliable journalism to a public that may be unappreciative. After a substantial investment, entrepreneurs will get a solid fi nancial start, as a result, but then, in fi ve to seven years, entrepreneurial super-local sites will likely be snatched up by newspapers. (Many TV players will think they can do it themselves, while newspapers will be desperate at that point.) As newspapers begin to consolidate sites covering a majority of a DMA, they will begin to tie them into umbrella sites with full market advertising. Newspapers will cut deals with cable and telephone companies for VOD and, possibly, serial TV news channels. Advertising-content ethics will begin to follow the larger companies into the submarkets, though there will remain pressure for sub-market managers to make their numbers any way possible. A reasonable (though so far not particularly supportable) view is that ultimately consumers will look toward reliability of editorial selection as the Internet becomes a primary source of news.

In that case, secondary news services to both the full market and sub-markets will fall aside. Fifteen years from now in most markets there will be no more than two or three significant news providers to the full and sub-markets: one or two TV based outlets and one newspaper outlet. Inmarkets with cross-ownership, two outlets will be the more likely.

Net Result

The Internet brings more news efficiency to the consumer, reducing the time spent on traditional news outlets for conventional news and the potential for associated revenues, but not fully replacing the reduced time and revenues online. Improvements in super-local and sub-market delivery will open up markets for lower paid citizen-stringers and associated advertising, partially—but only partially—offsetting declines at the higher levels of distribution. As consolidation occurs, the tighter economics of the sub-markets will prevail, with overall downward pressure on revenues, costs and earnings. Net result: more, lower paying jobs, in more, smaller journalistic entities with less total revenue than the larger businesses which they dis-intermediate or totally replace.

* With apologies to Sir Arthur Conan Doyle.
** The author’s first professional news job was as a stringer for a Boulder, CO, radio station in the early 1960s. Too young to drive, he rode his bicycle to the police station at dawn to collect blotter information on accidents, drunk drivers, break-ins and vandalism. Today he’d be called a “citizen journalist,” back then he was just a kid on a bike.
*** TV Affiliated Station EBITDA/OCF margins, according to NAB/BCFM 2005 data (latest available), were 38% across all markets; 54% in top 10; 37% in markets 21–30; 29% in markets 81–90, and 22% in markets 121–130.


—Tom Wolzien began his career as a news reporter and photographer at local TV stations in Denver, Green Bay, and St. Louis. He spent 16 years at NBC and 14 years as a media analyst on Wall Street and currently advises major media companies on strategic change through his company, Wolzien LLC (www.wolzien.com).


Originally published in the March 2008 issue of Communicator. All rights reserved.

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