Local TV stations look for new income streams online.
The final episode of CBS' hit show Survivor attracted more than 50 million viewers this past August. But that's not the only reason network executives were doing the victory dance. Even more impressive: The show's season finale attracted 1.1 million unique visitors to the CBS Web site (www.CBS.com), a 45 percent increase in just one night.
The term "Interactive TV" is taking on a whole new meaning these days. More viewers are watching their favorite programs while plugging in to the Internet for behind-the-scenes details. A full 40 percent of Web surfers who visited the CBS site the night of the Survivor finale were in search of news about the show, according to Nielsen//NetRatings. Yet, as this trend toward watching-while-surfing grows, local TV stations have been slow to capitalize on it. Dataquest, the research unit of Stamford, Connecticut-based Gartner Group, estimates there are 44 million Americans today who watch TV while using the Internet, a group it has coined "telewebbers." By spring, Dataquest projects there will be 52 million telewebbers, which is up from 27 million in 1999.
However, despite such compelling evidence of the Web's power, local broadcasters have been far slower to embrace the Internet than their counterparts in the newspaper business. A recent study conducted by Frank N. Magid Associates for WorldNow, which provides Internet technology services to local broadcasters, found that for many TV stations, the Internet was an afterthought, while newspapers viewed the Web as a new market space. "Newspapers are spending about twice - if not three times - as much [on Web development] in the same-size market," says Mark Zagorski, executive vice president at New York City-based WorldNow. In addition to unloading their print content online, newspapers have developed everything from databases of restaurant reviews to online job search facilities as well as loyalty-building services, such as free e-mail, he says.
The reason for print's embrace of cyberspace is hardly surprising. Since the Internet has so far been largely text-based, the transition from newsprint to HTML was relatively easy. And the prospect that the Web might divert a core revenue source - classified advertising - compelled publishers into early action. Randy Bennett, a vice president at the Newspaper Association of America, estimates that income from online advertising represents about 5 percent of newspapers' total advertising revenue today. "If you can aggregate the eyeballs, the advertisers will follow," he says.
For now, at least, those eyeballs are turning more frequently to newspaper Web sites than those sponsored by TV stations. While TV sites generate 606,000 page views monthly, newspaper sites rack up close to 4 million, according to WorldNow. That's because until now, local broadcasters have had little reason to invest in the Web. After all, running a local television station has been an extremely healthy business. Local affiliates are paid to carry network programs - and earn a sizeable chunk of their revenues from newscasts, which only constitute a small part of the daily broadcast. "Local stations have done well," says WorldNow's Zagorski. "Forty percent to 50 percent of their revenue comes from their newscast, which generally takes up an hour and a half of broadcasting in total."
But the time for complacency appears to be over. TV stations showing a profit from news broadcasts dropped to 57 percent in 1998, from 63 percent the previous year, according to the Radio-Television News Directors Association's 1999 survey. Jimmy Schaeffler, chairman and CEO of the Carmel Group, the Monterey, California-based research company, believes time is running out for broadcasters. "They're not developing [Internet services] fast enough," he says. "Competitors are nipping at their heels rather aggressively and starting to take a good deal of the average viewer share away from them."
Certainly, many stations have yet to tap into e-commerce. Elissa Myers, president of the Electronic Retailing Association envisages a scenario in which, for instance, a station's Web site might link to a consumer portal where viewers could buy the sweater worn by a local soap star on that evening's show. "The banner is a common model for broadcasters' ads on the Web, but this is missing a merchandising opportunity," she says. "You need to exploit interactive involvement. Simply replicating local content under-uses the potential of the Web."
One reason for the reluctance of some stations to take up the online challenges could be the investment required. Launching a Web site - excluding ongoing expenditures, such as staff salaries - can cost up to $400,000. As a result, many broadcasters are joining organizations such as WorldNow and Internet Broadcasting Systems (which forms joint ventures with broadcast TV companies to develop their Web channels). But those aren't the only resources broadcasters can leverage. Bill Bauman, general manager of WESH-TV, Orlando's NBC affiliate, reckons his station has the right tools with which to add value through its Web site, www.NewsChannel2000.com. "We've got three things other dot-coms don't have," he says. "We've got content - 120 people are out there gathering news every day. We've got brand recognition - we've been on the air for 45 years. And we have a promotional platform that people are paying a fortune for."
Other stations are putting similar resources to work on the Net. When KUSA-TV, the Denver-based NBC affiliate, launched its Web site www.9news.com in 1995, it consisted of a few pages featuring pictures of news anchors and some basic information. Today, six full-time staff manage the site, and every six months another employee joins the team. The station has identified what it calls a new "prime time," between 11 a.m. and 3 p.m., when 9news.com experiences its largest audience, as people at work log on. To capitalize on this traffic, the station created a "Netcast," providing breaking news, weather forecasts, and local traffic information. With growing traffic providing an attractive audience for advertisers, Roger Ogden, president and general manager of KUSA-TV, expects that within the next year, the site will generate an annual income of $1 million.
On the Web, different viewers visit different areas of the site, and this means opportunities to target specific audiences. While the advertiser gets to market its products more effectively, the station pulls in advertisers whose budgets were never able to stretch to TV. On an "Optimum Wellness" section of KUSA-TV's Web site, for instance, several local companies advertise, around content provided by a doctor. "All of a sudden, you have 10 people who would never be your customer individually, but who collectively are a very big customer," says Ogden.
Local broadcasters, to whom people turn for their diet of sport, weather, and traffic information, are also well positioned to tap into the growing demand for hometown information - a trend that could prove a gold mine for those who establish these areas on the Web. Local advertising, which currently constitutes 14 percent of online ad spending, will account for 25 percent by 2003, according to projections by Jupiter Research. In this respect, local stations have another winning card in their hand. "They have incredibly strong relationships with advertisers that are less vendor and more partnership arrangements," says WorldNow's Zagorski. "And the Web lends itself to incredible partnership arrangements."
As savvy broadcasters build up online audiences, deals in which the same fee, or a slightly higher one, buys an ad presence both on air and online, will become more attractive to advertisers. "It's getting really interesting," says Scott Friedland, a senior vice-president at Dallas-based Rare Medium, the Internet enabler. Consumer portals, he explains, can pay for a link with a station's Web site and receive airtime to promote that portal. "Stations have inventory they can play with. And that is very valuable in managing the online part of the business."
WESH-TV's strategy has been to integrate editorial and sales staff with those of its NewsChannel2000 Web site. The station is experimenting with fresh ways to generate revenue. In partnership with hotjobs.com, for instance, its site is attracting other advertisers to its online "Career Center," while Lowe's, the home improvement retailer, is sponsoring the site's weather channel. The station's goal is to generate 10 percent of revenues from "convergence projects." For WESH-TV's Bauman, the benefits of going online are clear. "This year has been revolutionary for broadcasters in terms of seeing the potential," he says. "But then it takes a little success before you realize what you're sitting on top of."