Local TV Ownership
2006 Annual Report
Changes in Ownership
The ownership landscape for local TV news was stable in 2005 and is expected to remain so until the regulatory environment in Washington is clarified.
At the risk of restating the familiar, the Bush Administration took power in 2001 declaring its intention to relax the rules limiting how many stations a company could own, and perhaps eliminating the cross-ownership rules that prohibited companies from buying radio, TV and newspaper properties in the same city. But legal challenges and a political backlash against some of the actions of the former FCC chairman, Michael Powell, effectively froze the rules as they were. The TV industry, though, still appears poised for quick action if the rules change.
As a report by the market research firm BIAfn on the revenue for the top 10 station groups from 2000 to 2004 noted, “In order to grow revenues, many television groups have had to continue to expand into new markets or add stations in existing markets.”1
Who are the big names at the local television level? The biggest parent companies by revenue, in order, are Rupert Murdoch’s News Corp., NBC Universal, Viacom International Inc, Tribune Company and the ABC/Disney group.
Top Local Television Companies, in order of Parent Revenue
Source: BIA Media Access Pro, August 2005
Some prominent names shook up the local television scene in 2005 and early 2006, as some companies split apart or left the business while others consolidated their assets.
One of the biggest names in U.S. television, CBS, saw the completion of its split with Viacom in 2005 and in early 2006 caught the industry by surprise by announcing a new network in partnership with Time Warner.
CBS/Viacom, an offshoot of Viacom International Inc., was the largest U.S. television network in terms of revenue.2 In June 2005, Viacom split its cable and broadcast divisions into two separate companies. Its broadcast networks retained the name CBS Corporation, while the cable operations were placed under the banner Viacom Inc. It now consists of CBS Television and UPN (broadcast television), the CBS Television Stations Group at the local level, and Showtime (cable television). It also has varied operations in other media businesses, including radio (CBS Radio), digital media (CBS Digital Media Group and CSTV) and theme parks (Paramount Parks). (See also Network TV Ownership).
The local television group consists of 39 stations, reaching 15 of the top 20 American television markets. The total comprises 21 owned-and-operated CBS stations, 15 UPN-affiliated stations, 1 WB station and 2 stations not affiliated with the major networks.3
The split cleared the way for Viacom to separate its high-growth assets, namely its cable networks and movie studio, from its more mature businesses, its broadcast-TV and radio stations. In other words, Viacom was seen to be splitting its booming business (cable entertainment) from the not-so-profitable (local and broadcast TV). Richard Greenfield, an analyst with the Wall Street firm Fulcrum Global Partners, believed that while “the split wasn’t a ’cure-all’ for the malaise affecting Viacom and the broader media sector” outside the Internet it would increase the company’s lagging stock value.4
With the split a reality, the CBS leadership was under pressure to show results from the broadcast portions — especially UPN, which has struggled not just to make money but was also to attract top talent. Time Warner’s WB network, although doing better than UPN, has also been struggling to find a niche for itself. In January 2006, CBS and Time Warner’s Warner Bros. Entertainment announced that they would be merging and dissolving the two networks to replace them with a new network called the “CW.”
The CW Television Network was announced as a fifty-fifty partnership between the two parents (Tribune Co., which owned a 22 percent stake in the WB, gave up its interest and would not have any stake in the new channel) to be launched in September 2006. Operations at the WB and UPN will shut down, with the new network relying on existing programming from both. The two companies will share equally in profits and costs of all future programming on the new network. They are hoping that a stronger program lineup and removal of a competitor will make the CW a more effective player in the local TV market.
The contraction of the two networks will likely shake up the local television scene. The biggest impact might be on Fox, which faces the prospect of losing valuable programming. It owns UPN affiliates in six of the top 10 markets, and in each the CW affiliation will go to the Tribune-owned WB stations. Fox reacted to the news by announcing the launch of its own broadcast network, “My Network TV’ in late February 2006.5
In the mid-size markets, the CW is still determining which owner the stations will affiliate with.6 While it’s too early to decide what impact the shift in affiliations will have on news operations, the new network will undoubtedly be an important factor in the local TV scenario of 2006.
On another front, Emmis Communications, a smaller local television company in the news, sold 13 of its 16 television channels by January 2006.7 Why did it leave the local TV business? Emmis had entered the field seven years ago, anticipating that cable operators would begin paying broadcast companies for the rights to local station signals, and that it would be able to pull together new content and sell it to digital subscribers as a low-cost alternative to cable TV. Neither event came to pass. Others attributed the sales to the company’s investors, who viewed its traditional radio businesses as a more attractive proposition than its television entities. Nevertheless, the revenue from the sales left analysts feeling good about the local television market as a whole. The company sold the first nine of its stations for $481 million over their book value.8
The sell-off wasn’t all good news for local news, however. The group sold the stations to the private equity firm Blackstone Group and, as part of the deal, stations were immediately notified about the employee cuts. On- and off-air employee layoffs and cutbacks were announced at stations in Oregon (KOIN 6), Kansas (KSNW TV) and Hawaii (KHON 2).