Communications Markets and Media Broadcasting Term Paper

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Younger people (18- to 34-year-olds) are much more likely to view television news as mainly interested in serving the public interest (57.5% vs. 46.7%). Creating a local brand and attracting the most viewers is the name of the game in the battle for ratings and revenues. The local newscast defines the image of the station, and now more than ever local stations need up-to-date newscasts to keep audiences tuned in. Local stations have problems that the bigger markets do not have, tapping into news and information-gathering networks for state, national, and international news, sports, business, entertainment, politics and weather. The newsgathering services they utilize truly define their on-air and online brand. They can even build audience share with videos, audios, graphics, photos, text, newsroom systems and online multimedia. It will take this kind of up-to-date technology and style of newscasts to attract the younger people in today's market.

Digital Television's Impact on News Profitability

Multimedia is appealing not only to young people and seniors alike. But it creates a quandary for advertisers and networks as they try to sell advertising in what has been an unpopular medium, the internet. Statistics show that internet advertising does not work as well as TV ads, in spite of the fact that $100 billion of assets are now managed online (Survey 11). Yet the quandary must be solved soon, because soon every network must go digital. Some TV providers who have begun to really see the light are the broadcast networks such as ABC and CBS and local affiliate stations that broadcast the network content over the airwaves. Attempts to go full HDTV broadcasting has happened not only because the broadcast folks are simply being good TV citizens, but because the FCC has mandated a transition from analog to digital TV. Eventually, all broadcasters will need to turn off their analog signals and send out DTV broadcasts. It will be DTV, and not HDTV broadcasts, since lower-resolution 480p or even 480i signals can be broadcast (HDTV 2007).

George Gilder says "The Internet will be the central nervous system of the new global economy." In 1998 only 40% of households had a PC and only 20% of those were connected to the Internet and only 2% were regular users. Internet consumers purchase less than $1 billion per year in goods and services, compared to $8 trillion annual market. Besides these holdups, going digital is not a cheap transition for broadcasters or consumers. This cost breeds skepticism about programming on high-definition format, and how readily consumers will adopt the new technology completely. According to FCC mandate, the big four network affiliates in the top 30 markets are required to be broadcasting digitally. Eventually all stations will be able to transmit digitally, and stations are supposed to stop sending out analog signals-in a complete digital conversion, making older TVs obsolete.

It won't happen. Bob Turner, vice president of engineering at Belo says, "There are a few thousand (digital) sets out there in the whole U.S., and that's it."

Eighty-five percent is supposed to be the magic cut-off number. If digital set penetration is not 85% in a market, a station does not have to shut off analog broadcasting.

I have to admit, I'm a little skeptical about HDTV," says James Marsh, senior broadcasting and publishing analyst at Prudential Securities. "It just doesn't seem to me something that consumers are really clamoring for right now." One top network official says it's hard to believe Congress would allow millions of people to be suddenly shut off from TV. "It's a joke. Twenty to 25 years from now, analog will shut down." Turner says he doesn't know what the solution will be. "I know that we have 15 stations to go on the air ourselves, and I am concerned about it. I'll say that for sure. it's economically devastating to the small stations" (RTNDA, 2006).

The cost to broadcasters will vary widely, Turner says. Figure $3 million for a tower and up to $1.5 million on a transmitter building. Some towers may be strong enough to handle the additional load-with added support-but even that will be expensive. Transmitters cost $500,000 to $1.4 million. Antennas are $180,000 to $500,000, depending on configuration. Turner says to figure $3 million to $5 million just to get on the air. Add some digital equipment in the control room, like a file server and some routing and other related equipment, and you're up to $5.5 million to $6.5 million.That's just for what's called "pass through," meaning that digital signals coming in to the station can be broadcast digitally. Those figures don't include anything to gather or originate digital programming. This will be the biggest hold-up in the digital market.

While digital studio equipment is heading down in price, transmitters are holding steady, and towers are getting more expensive. "It's going to get much worse when you have 1,200 stations trying to get on," says Turner. "The problem is just awesome."

Smaller markets, the ones least able to afford the change, will get hit with the highest bills because they're least likely to have the strongest towers and extra transmitter space. "Those small markets aren't going to be 85% digital for a long, long time," says Turner. "I would think 2020, maybe. There is no [way] to pay for it. We'll do pass through, and we'll do it in as responsible way as we can." Any station that invests all this money is going to want something to show for it. The question is how soon will they get it? "There has to be compelling programming, and in my opinion, it must be HD (high definition) for people to buy [digital] sets," says Turner. "I don't think they will buy a $6,000 set in order to get five more channels of what they already get on cable and satellite.

The conversion to digital is not going to be an overnight thing, and it's not a part of what's required by the government," Turner continues. "The government requires you to transmit digital; it doesn't require you to originate it." Turner suspects that in five years, maybe less, high-definition equipment will cost no more than high-end standard definition equipment. But other than pass through, most gathering and origination equipment on the local level will not be purchased until the older equipment wears out (RTNDA, 2006).

A plan to look at certain news programs among the different networks and view their ratings in the past vs. their ratings more recently for the target demographics being examined.]

As to general radio and television news profitability, the data from 2002 follows. Percentages from year to year do not differ within a few percentage points.

TV News Profitability by Size and Affiliation

Showing profit Breaking even Showing loss Don't know

By Full-time staff

ABC

CBS

Fox

NBC

Big four affiliates

Other commercial

Note that other commercial stations are considerably less likely to be profitable than network affiliates. Otherwise, there are few consistent patterns within the numbers.

Percentage of TV Station Revenue Produced by News

Average Median Minimum Maximum Not Sure

All TV News

By Full-time staff

ABC

CBS

Fox

NBC

Big four affiliates

Other commercial

The percentage of revenue generated by news fell from 2001's all-time high -- "the average dropped from 44.0% to 41.0%, and the median fell from 45.5% to 40%. All of the decrease came from top 25 markets.

Internet Revenue is growing

No one's really making a lot of money on the Internet yet," says Bannister, who predicts Internet advertising will continue to grow rapidly as more people log on for entertainment and newscasts. "Internet usage is doubling every hundred days, so advertisers are going to go where the eyeballs are" (Papper, 2003).

But brand-building isn't easily done over the Internet alone, leaving the power to build brand in the hands of the networks and local TV and radio station owners. Experts see a strong potential for networks to extend their brands onto the Internet, and view the Internet as more a collaborative media than a competitive one.

In the future, the digital revolution will take on an entirely new dimension, with the development of ubiquitous networks and pervasive computing based on technologies like RFID (radiofrequency identification) and sensor networks. In a future of digital ubiquity, the world's networks will not only connect people and data, but also things. In this way, mundane daily tasks become increasingly automated, and the technology behind them progressively fades from the perception of the user. This will have important implications not only for society and individual lifestyles, but also for business strategy and policy priorities (Going 1).

Vertically integrated news media and broadcast media companies will be seen to create interest through broadcasting editorial content and driving audiences who have further interest to network and.....