Local TV stations face Net threat

Network affiliates watch prime-time content like Fox's 24 go online and wonder where they fit in.
Written by Greg Sandoval, Contributor
LAS VEGAS--The Internet is the cause of much fear and loathing here at this gathering of broadcasters.

Some attendees of the National Association of Broadcasters conference this week are worried that local television affiliates will be the next business species to be endangered by the Internet.

The warning signs are ominous for local TV outlets. Last month, NBC Universal and News Corp., parent company of Fox Broadcasting, helped establish a new online video network that will distribute full-length movies and TV shows across some of the top Internet portals. CBS announced its own video network last week.

Is there a place in this direct-to-consumers business model for local TV stations?

"Plenty of people are worried," said Richard Jones, general manager of Bay City Television in San Diego, which oversees the Fox affiliate in San Diego. "It's still so new nobody knows for sure what's going to happen. But there is some real concern about shows that have been seen a lot of times on the Web and whether it will affect ratings."

The pressures building on affiliates hit home for Jones on a recent flight when he noticed the man sitting beside him was watching Fox's 24.

"He told me he missed the show during the week so he downloaded the episode on his iPod," Jones said. "He wanted to get caught up by the time Monday's new episode aired. That's what we're dealing with."

Certainly, the outlook for regional broadcasters appeared troubled long before the Web. Over-the-air broadcasters have been challenged by cable and satellite distributors for decades and for the past five years by DVD sales. The Internet is just the latest technological threat to come along and carve another slice from the $75 billion market for TV advertising.

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It may also be the worst. A long list of rivals--mobile carriers, Apple, Joost, YouTube, NetFlix, TiVo, Sling Media and others--are all offering audiences alternatives to traditional broadcast TV. And most of the newcomers can offer features like on-demand viewing.

Two decades ago, it was a different story. Affiliates wielded much more clout because the networks needed local stations to promote and broadcast their shows around the country and paid dearly for that. The affiliates also represented a bustling market for reruns.

Now some wonder whether the Web gives networks even more clout when cutting deals with their affiliates.

"It's a question of leverage," said Doug Wills, a former spokesman for the NAB, who is now a marketing executive for Redback Networks, which offers video-centric routers. "Virtually all the networks have announced broadband offerings in the last year. There is no question that within 10 years people will be getting high-quality video from the Web. The temptation is probably there for the networks to ask their partners to pony up more money."

Calls to CBS, ABC and NBC were not returned Monday.

Among the nation's top four networks, Fox has shown the most willingness to cut its affiliates in on Internet revenues. Last month, Fox announced a landmark plan to distribute shows such as 24, Bones and Prison Break to the Web sites of 200 affiliates. Fox will also share ad revenue generated from the online offering.

Some local broadcasters, however, are trying to be creative as they confront Internet challenges.

Diane Sutter, CEO of MyTv, which operates Boston's Channel 50, has asked viewers to produce their own TV shows; her station will broadcast the best.

"It's silly to focus on which formats or mediums are better," Sutter said. "We should be focusing on enhancing viewer experience using broadcast, Internet, podcasts and whatever else we can."

The news isn't at all bad for local affiliates. The overall industry grew by 8 percent last year, and many are expecting continued growth this year. The switch from analog to digital signals could also represent a big payday for local broadcasters. In March 2009, broadcasters must switch to digital signals, and some local affiliates may find a market for the spectrum they own but don't use, said Steve Carlston, managing partner of VegasTV Partners, the parent company of KTUD in Las Vegas.

"It's kind of a burgeoning territory," Carlston said. "People have said cell phone companies as well as others may want our extra space. It's still early and we haven't made it the highest priority, but we'll definitely start taking a good look at the potential market soon."

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