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Digital Trends

Digital Trends

Introduction

By the Project for Excellence in Journalism

Online advertising has been a small but growing part of local television revenue. But in 2008, it proved as vulnerable to the economic downturn as traditional on-air advertising.

As online advertising growth began to slow down, broadcasters looked hopefully toward a potential technological innovation: local television on cellphones.

If all goes as planned, the first Americans could begin viewing live television on their specially equipped handheld devices in late 2009 as broadcasters convert to digital transmission and broadcasters and mobile device manufacturers come to agreement on standards.

The potential for revenue gain though wider exposure to advertising or subscriptions is obvious. And it couldn’t come soon enough for many station owners, who have seen the once-meteoric growth in their websites slow despite new investments in sophisticated news-you-can-use content, including traffic and weather reports.

Digital Revenue Growth Slows

For local television news websites, 2008 was a year that began with forecasts of exponential revenue growth but ended with reduced expectations that would put the sites just above their 2007 figures.

Borrell Associates, a media research, consulting and project firm specializing in local Internet advertising, projected in March 2008 that local television stations would see brisk revenue gains online in 2008 — a 47% increase to $1.1 billion, from $772  million in 2007. In November, Borrell adjusted its projections and while it still saw online revenues growing year to year, it reduced expectations to a mere 8% growth.1

The slackening of digital revenues at local television stations suggests online advertising was susceptible to the downturn in the local ad market, although perhaps to a lesser magnitude than on-air advertising.

The collapse in the local automotive and home goods and improvement categories of consumer advertising in the last quarter of 2008 dampened expectations for what stations thought would be a good year for the Web.

Television stations have gained a greater share of local online ad revenue, however. Borrell Associates estimated that the stations’ share of the local online market grew from about 2% to about 10% between 2004 and 2007, the latest year for which data is available. Local television’s share still lags that of newspapers or online-only media outlets such as Citysearch and Yelp, but is thought to be gaining at the expense of local newspapers.2

But these revenues still make up a small part of station revenue. Most stations get less than 2% of revenues from online operations. Just 12% of stations, according to Borrell, made more than $1 million from online in 2007. On average, stations pulled in $480,000 from television station Web sites in 2007. (Small-market stations generally made less than $350,000, while large market stations averaged about $750,000.3)

While the money is small, stations are getting more serious with their online ventures, including hiring more people to sell online ads exclusively.4 The reason is simple. While small, the revenues from the Internet are growing and that makes them significant in the increasingly difficult world of local television.

But according to Gordon Borrell, the CEO of Borrell Associates, the sharp slowdown in digital ad revenues at local stations could have an outsized impact on budgets in 2009. He told Forbes.com in December that many stations that have come to expect rapid growth in online ad revenues in previous years have compiled their 2009 budgets based on the earlier, more generous, projections.5 In March, Borrell had projected a 26% growth rate for 2009. The company has not publicly released new projections, but doubtless they are expected to be lower.

Internet Staffing

The number of news people dedicated to local television station websites stayed flat for 2007, the latest year for which data are available.

Few stations are dedicating news employees exclusively to websites. Instead, station employees are adding the Web to their other duties. The average station in 2007 had four newsroom staffers dedicated to the Web, half of them working part time.

And many more newsroom staffers are dividing their time between the Web and responsibilities related to traditional newscasts than in previous years. More than half of news directors (55%) reported that staffers had at least some Web responsibilities, compared to 41% in 2006. Sharing responsibilities for the Web was more common at smaller stations than in the 50 biggest TV markets.
News directors are increasingly involved in their stations’ websites. All but 2% of them were in charge of news content or the entirety of Web operations. Eight in 10 news directors said they were in charge of Web news content, identical to the 2006 figure. However, fewer were in charge of all aspects of their stations’ sites. Just 18% of news directors were in charge of their Web sites, a 7 percentage point decrease from 2006.

Content

The Web is becoming more than the newscast online. While eight in 10 station news directors reported sharing on the Web, many also added text, still photographs, and even blogs. Fully 98% of station sites had text, nearly 90% had still photos and 59% had audio as of 2007.

Text, Pictures and Audio on Local TV Websites
2006 to 2007
Design Your Own Chart

Source: RTNDA/Hofstra University Survey
Based on survey responses of news directors

Video, the news element most closely associated with local television news, had the biggest growth of all in 2007.

More websites included news video, with 92% of stations making individual story segments available on their websites, up from 79% in 2006. Half of all station websites included live traffic and weather camera feeds on their websites in 2007, a 7 percentage point increase from 2006.

In May 2008, the Fox station in Chicago launched LiveNewsCameras.com to aggregate these camera feeds from local, national and international news websites. The website collects, and organizes live video streams from news sites in the U.S. and abroad. The majority of video on the site comes from local television station websites.

More stations also included full newscasts, although they were unlikely to be live. Slightly more news directors said their station websites have live newscasts, up 3 percentage points to 21% in 2007. Newscasts previously recorded were more common on station websites. Nearly half (48%) of the sites had recorded newscasts, compared to 37% in 2006.

Video Elements on Local TV Websites
2006 to 2007
Design Your Own Chart

Source: RTNDA/Hofstra University Survey
Based on survey responses of news directors

The adoption of interactive news elements on local television station websites is somewhat mixed. Blogs had a brisk 20 percentage point growth from 2006, to 53%, while podcasts were slightly less common than the previous year (17% in 2006 vs. 16% in 2007).

The creation of Web-only newscasts is a feature that has not caught on with most news directors. In 2007, 8% said their station website was assembling its own newscasts to offer the latest news developments online, compared with 10% in 2006.

Interactive Features on Local TV Websites
2006 to 2007
Design Your Own Chart

Source: RTNDA/Hofstra University Survey
Based on survey responses of news directors

More station websites also turned a profit or broke even in 2007, according to the survey. Nearly a third (31%) reported being profitable in 2007, up 8 points from a year earlier. Another 10% said they broke even, and 17% reported a loss. But all of these numbers, according to industry estimates, could become much bleaker in 2008 and 2009.

Local Television Website Profitability, 2007
Making Profit Breaking Even Showing a Loss
All TV 31% 10% 16%
Market 1-25 28 15 17
Market 26-50 38 7 14
Market 51-100 17 15 19
Market 101-150 18 8 18
Market 151+ 26 23 11

Source: RTNDA/Hofstra University Survey
Based on survey responses of news directors

Station Sites as “Local Portals”

Station owners are seeking to remake their websites into indispensable hubs for information about the cities and towns they serve.

In the battle for local ad revenue, NBC Local Media, comprising 10 of NBC’s owned-and-operated television stations that reach 27% of U.S. households, redesigned station websites, broadening the types of content to include local information from print, online and blog sources.

John Wallace, president of NBC Local Media, said in a statement that the unit’s goal was “to create a new type of user experience that’s less an extension of our TV stations and more of an online destination for the latest local news, information and entertainment.”6

To that end, the NBC Local websites dropped station call letters from the sites and re-titled them to reflect the focus on the areas served. New York’s WNBC site, for example, became nbcnewyork.com.

In 2008, stations moved beyond reformatting broadcast news content for their corresponding websites. They are increasingly looking to other local Internet business models for inspiration on how to augment their own sites as destinations for all types of information about the areas the serve.

Stations’ sites are no longer adjuncts for newscasts but instead are positioning themselves to serve a wider audience than that of their broadcasts and broadening the spectrum of information available to visitors.

Mobile DTV

Perhaps the next great arena for competition for local television, as it is for digital generally, may be mobile.

In 2008, the television industry accelerated efforts to bring over-the-air broadcast programming to cellphones and other hand-held devices.

Support for the new technology is nearly universal among local television stations. The group leading the charge for mobile DTV, the Open Mobile Video Coalition, includes 850 local stations and nearly every major station group in the U.S., and has the support of the broadcasting trade body, the National Association of Broadcasters. A separate organization, the Advanced Television Systems Committee, has the last word on approvals of voluntary standards for digital television technologies.

The costs to design and implement an industry standard for the use of the digital television spectrum to transmit programming to mobile devices are minimal compared to the investments stations made in preparation for the mandatory switch to digital transmission. The cost to implement mobile DTV through hardware upgrades at a station is estimated to be about $250,000.7

Early tests of the technology were encouraging to its backers.

In November 2008, two Chicago local television stations (ION’s WCPX and Fox’s WPWR) led a successful mobile digital television test in which they streamed live television programs to handheld devices.8

A few hurdles remain. A technology standard must be given final approval by Advanced Television Systems Committee. The group gave preliminary approval for a technology standard backed by the Open Mobile Video Coalition and the National Association of Broadcasters in December 2008. Final approval could come in mid-2009, and Mobile DTV-capable devices and add-on chips could hit the market by late 2009.9

The new receiver chips, which were developed by the South Korean electronics producers LG and Samsung in 2008, could be added to an array of screens that deliver full-motion video, including seat-back video players in cars, laptop, portable game systems, cellphones, smartphones and global positioning system devices.10

The distribution of content over hand-held devices would provide local television stations with a new avenue for advertising and subscription revenues. One estimate, from the BIA Financial Network, indicates that mobile video ads could be worth $2 billion a year by 2012.11

Local broadcasters will not be without competition for mobile video. A mobile-only television provider, MediaFLO, owned by the wireless telecommunications research and development company Qualcomm, has been broadcasting audio, video and other data on spectrum originally allocated to UHF television signals since 2006. MediaFLO operated in 58 markets as of December 2008. It charges users a monthly subscription for exclusive content and that from networks that include CBS, NBC, Fox, MTV and Comedy Central.12

But the Open Mobile Video Coalition of 850 U.S. stations has some major advantages. While companies like MediaFLO have had to build their own transmitters, and negotiate license agreements for programs, stations already have  national and local programming ready for transmission to handheld devices.13

Local broadcasters also do not have to invest in new equipment to transmit to the devices because both mobile and digital television technologies use the same transmitters and broadcast infrastructure. Generally, both types of signals will reach the same coverage areas.14

Perhaps most importantly, stations can provide what the national mobile television providers have so far been unable to offer: local programming.

Footnotes

1. “2009 Outlook: Big Slowdown Begins for Interactive Advertising,” Borrell Associates, November 2008

2. “Benchmarking: Local TV Web Sites Gaining Ad Share,” Borrell Associates, March 2008

3. “Benchmarking: Local TV Web Sites Gaining Ad Share,” Borrell Associates, March 2008

4. “Benchmarking: Local TV Web Sites Gaining Ad Share,” Borrell Associates, March 2008

5. James Erik Abels, “Strapped Local Stations Look to Web for Cash,” Forbes.com, December 4, 2008. Online at: http://www.forbes.com/business/2008/12/04/television-internet-advertising-biz-media-1204localtv.html.

6. Brian Steinberg, “NBC to Establish Local Portals,” Wall Street Journal, October 13, 2008.

7. Glen Dickson, “ATSC Eyes Digital TV’s Future,” Broadcasting & Cable, December 8, 2008.

8. David Goetzl, “Mobile TV Gains Momentum,” Mediapost Publications, November 11, 2008 Online at: http://www.mediapost.com/publications/?fa=Articles.showArticleHomePage&art_aid=94489.

9. Glen Dickson, “ATSC Eyes Digital TV’s Future,” Broadcasting & Cable, December 8, 2008.

10. Deborah Potter, “On the Go: The outlook for mobile TV news,” American Journalism Review, August-September 2008. Online at: http://www.newslab.org/articles/mobiletv.htm.

11. Deborah Potter, “On the Go: The outlook for mobile TV news,” American Journalism Review, August-September 2008. Online at: http://www.newslab.org/articles/mobiletv.htm

12. Glen Dickson, “MediaFlo Primes for Growth,” Broadcasting & Cable, December 1, 2008.

13. Sarah Reedy, “One step closer to mobile TV,” Telephony Online, November 11, 2008. Online at: http://telephonyonline.com/iptv/commentary/telcotv-mobile-tv-1111/?cid=hcom.

14. Sarah Reedy, “One step closer to mobile TV,” Telephony Online, November 11, 2008. Online at: http://telephonyonline.com/iptv/commentary/telcotv-mobile-tv-1111/?cid=hcom.