Market size makes a difference in local television. The biggest markets - and, thus, the biggest stations - capture the lion's share of revenue in good times or bad. As the chart below indicates, stations in bigger markets make higher revenue disproportionately to the number of households in their viewing area. Not only do stations in big cities make bigger revenues, but they also make a higher percentage of revenue per household: the 25 biggest markets contain 49 percent of the country's television households, but they receive 60 percent of local television revenue.

One thing that could make matters even harder for stations in smaller markets is that the cost of converting to digital is nearly as much for a station in the 150th-largest market in the country as it is for the station in the fifth-biggest market-since the equipment is the same.

TV Station Revenue Compared to U.S. Population, 2002

By market size

Design Your Own Chart [1]

Source: BIAfn MediaAccess Pro

* Chart compares percentage of all TV station revenue to percentage of all TV households.

In the end, broadcast stations have been able to keep their revenues healthy despite declining viewership for a simple but significant reason: In a fragmented media market, their audiences are still large and diverse enough to approximate the closest thing TV advertisers can still get to a mass audience. But as indicated above, stations have protected the bottom line through a variety of means-from cutting costs to adding more commercials to creating sponsored segments, putting sponsor logos inside programming on weather maps or sports scores to looking for other revenue opportunities. All of these weaken the product, making it more cluttered, smaller and mixing news and sponsorship. The question is how long television stations can keep up these alternative ways of building revenue amid declining viewership.