2004 Annual Report - Online Economics

Television stations do not face the same threat as newspapers of losing large advertising sectors. But the transition from broadcast to online content is more difficult than it is for newspapers, for which text on paper simply can become text on screen. And the Web is an even more paltry part of television company revenue at this point. The national television networks and cable channels have been able to build popular sites, but while most local television stations now have Web sites and are accustomed to adding new content quickly, they have difficulty competing with the depth of the local newspaper.

Who’s Making a Profit on Local News Web Sites, 2002

Survey of station managers

Design Your Own Chart

Source: RTNDA/Ball State Survey by Bob Papper, RTNDA Communicator, April 2003

As part of his annual survey for the Radio Television News Directors Association, Prof. Bob Papper of Ball State University asked local television news directors if their Web sites were making money. Only 13 percent indicated a profit while 25 percent reported a loss. About 44 percent of respondents said they did not know if their sites were making money. This could indicate widespread detachment of news directors from the online activities of their stations, a theory supported by the fact that news directors in the largest markets were the most likely to be in the dark (74 percent). In the smallest markets the figure was only a third, 34 percent. As the market grows, so does the newsroom, and news directors could be somewhat more specialized in their responsibilities. Or, perhaps, many of those surveyed chose for one reason or another not to reveal the financial status.

Stations' online profitability does not seem to be in proportion with its market size. The highest percentage of news directors indicating an online profit came from the middle-sized markets. Yet news directors from both the next larger and next smaller markets were less likely to report online profits.

Many television stations turn over their sites to companies that specialize in creating television Web sites. Two of these companies - Internet Broadcasting Systems (IBS) with 65 stations and WorldNow with 143 stations - are in the Nielsen//NetRatings top 20 News Web sites list. "All IBS sites over a year old are profitable, and we are growing those margins," the IBS chief executive, Tolman Geffs, said in an article in the Online Journalism Review.²²

Certainly, the television station sites' audience growth suggests the potential for profit. From September 2002 to September 2003, IBS's aggregate monthly online audience grew by 50 percent to 8 million unique visitors. In the same period, WorldNow's total traffic increased by 32 percent to 3.3 million unique visitors

In the end, the economics of news on the Web are promising but still evolving. While revenues are growing, and audiences are robust, generating big-time revenue remains a struggle and the model is unclear. While Web journalism is trying to sort out reliable ways to make money, it is also having to fend off new forms of online competition for ad dollars, such as Monster.com, that are not engaged in journalism. For now, the biggest Web sites and newspaper companies are faring best. Smaller ones may thrive in chain combinations. But in many ways, the economics of the Web might be analogous to radio in the 1920s. It is not clear yet what the industry will look like even 10 years away.