Local Television Business Model Evolution

1. Local TelevisionBusiness ModelEvolution Hank Price Senior Fellow Media Management Center Northwestern University

2. One Page History of US Television 1948 – 1960 New Experience Drives Viewership Program Quality & Choice Secondary 1961 – 1990 Limited Viewing Options Control to Networks/Station Owners 1990 – 2006 Unlimited Viewing Options Control to Consumer Program Quality Critical

3. Increased Options move Power to the Consumer

4. 1980 Viewer Options • Local Television (734 Stations. 4 Networks) • Limited Cable • Some Afternoon Newspapers • Library Books or Paperbacks • Music (FM Radio, Record Player, Audio Tape)

5. 2006 Viewer Options • Local Television (1,747 Stations, 9 Networks) • Cable/Satellite/IPTV (75 – 300 Choices) • VHS, DVD, TiVo, Hard Drive Devices, Servers) • Personal Video/Audio Devices • Wireless Devices • Unlimited Internet Services (43% Homes BB) • Barnes and Noble/Borders Bookstores

6. The Trend Can Be Summed Up In One Word Fragmentation

7. New York Late News Ratings___1975_____2001__WNBC 13 8.2WNJU - Telemundo n/a 1.8WPXN- Pax n/a 0.6WABC 10 7.5WCBS 11 4.5WNYW - Fox 8 4.2WWOR - UPN n/a 3.9WPIX - WB 2 2.9WXTV – Univision n/a 2.1Total 44 35.7

8. Greensboro/Winston-Salem6:00 pm News Ratings/Share 1980 WFMY 22/37 WGHP 18/31 WXII 14/24 Total 54/92

9. Greensboro/Winston-Salem6:00 pm News Ratings/Share 19802005 WFMY 22/37 11/20 WGHP 18/31 8/14 WXII 14/2410/18 Total 54/92 29/52 NSI November 1980 vs. November 2005

10. Greensboro/Winston-Salem6:00 pm News Ratings/Share 19802005 WFMY 22/37 11/20 -50% WGHP 18/31 8/14 -66% WXII 14/2410/18-25% Total 54/92 29/52 -46% NSI November 1980 vs. November 2005

11. Greensboro/Winston Salem6:00 pm News W 25-54 1980 WFMY 16 WGHP 10 WXII 9 Total 35

12. Greensboro/Winston Salem6:00 pm News W 25-54 19802005 WFMY 16 5 WGHP 10 4 WXII 9 6 Total 35 15 NSI November 1980 vs. November 2005

13. Greensboro/Winston Salem6:00 pm News W 25-54 19802005 WFMY 16 5 -69% WGHP 10 4 -60% WXII 9 6-33% Total 35 15 -57% NSI November 1980 vs. November 2005

14. “Cohort Groups do not change.” Hazel Reinhardt Director of Research Media Management Center

15. Who is Your Competitor? Any Activity Which Uses Time

16. Who Determines Your Future Success or Failure?

22. Mass Audiences Growing Smaller Survival Means Serving Fragmented Audiences

23. Current Landscape Media Usage All Time High Cohort Groups Decide Content/Platform Choices Rapidly Expanding International Barriers Less Important New Media Development Accelerating New Media Generally Unregulated Economic Pressure Growing

24. Can Stations Survive?Can Stations Grow?Do Stations have a Future?

25. YES! (But Not All Stations)

26. “If we keep doing the same things the same way, we will get the same results.” Mel Karmazin CEO, Sirius Satellite Radio

27. The Good News Not in the hardware business No longer limited to one platform New Technology is an opportunity Consumers Value Brand Strongest Marketing Machine Video Oriented

28. The Bad News Time is Limited Must act Now!

29. Two Key Opportunities Consolidation Convergence

30. ConsolidationRegulatoryIssues 39% OwnershipCap TV/Radio/NewspaperCross-ownership DualNetworkOwnership Duopolies CableTV/BroadcastStationcross ownership

31. Convergence Issues Brand vs. Platform Brand Extension Brand Advancement Risk Assessment Culture

32. Traditional Television Model Mass Audiences watch programs linearly. Sold as Commodity. Large Advertisers pay for access to Audiences. Stations compete against other stations. Non-television competitors ignored. Success measured by size of audience and revenue as compared to other stations.

33. “There are still only a few ways to reach a lot of people at one shot.” David Burwick Sr. VP & CMO Pepsi Cola NA

34. New Business Model Targets Audience Fragments Non-Linear, On Demand Unlimited Channels Broadband a Key Delivery System Offers New Products/Services Audience Measurement Not Standardized Extends Reach for Large Advertisers Targets Smaller Advertisers now using Newspaper/Radio Opportunity for Direct Consumer Payment

35. “We must invest in digital businesses that make real profit.” Terry Mackin EVP, Hearst-Argyle

36. Key Challenges Research and Development Individual Business Plans (Revenue/Expense/Profit) Products Must Be Hard to Duplicate Brand Extension or Stand Alone Growth Potential Staff Allocation Culture

37. “Culture is the biggest obstacle.” Reid Ashe COO, Media General

38. Will new Digital Businesses take audience from traditional Television? Yes

39. “Someone is going to eat our young. It might as well be us.” John Lavine Dean, Medill Journalism School

40. Which Organization is Best Positioned to Create Future Media Businesses? Traditional Media Company New Media Company

41. Traditional Media Company Platform Dependant Resource Rich Vast Experience Established Culture Adverse to Risk True R&D Rare

42. New Media Company Strategic Vision Vision tied to providing relevant, differentiated stories, messages and experiences that engage the audience and are measured for their results. Welcomes Change Culture Supports Vision and Change Rewards and Metrics

43. Barriers to Success Inside-Out Thinking Adversity to Change Risk Avoidance Ignoring Fragmentation Failure to Extend Established Platforms Failure to Invest in New Media Thinking Platform more important than Strategy Lack of Strategic Planning

44. 21st Century Media Technology Growth Accelerates Consumers Determine Which Technologies Succeed Consumer use of Time Key Determiner New Media does not replace Old Media Established Media Companies in Best Position to Create New Media Strategy More Important than Technology

45. Common Misperceptions Mass Audiences going away #1 Stations will survive News Slogan is Station Brand Our News Product is Unique Viewers Hate Commercials News Viewing Habits change as viewers grow older We have plenty of Time

46. Current Television Station Business Model Not Viable in the future without Change