Local Marketing Agreements and duopolies exist in TV and radio as a way for station owners to increase revenue by controlling the marketing, sales, programming and management of more than one station in a market.
The advantages to broadcasters are many, but the advantages to advertisers seem questionable. As media buying specialists, we must stick together to keep TV and radio owners on their toes. We need to establish the proper checks and balances to ensure that negotiating competitive pricing remains securely within the buyer's domain.
TV LMAs currently exist when two or more separately owned stations operate as partners in specific management, programming and/or sales functions. In most cases, the LMA stations are housed in the same facility, use the same management and sales force, and share equipment. LMAs can also share programming, which happens when one station uses another's news anchors or airs the same newscast on the second station.
Some type of LMA agreements exist in more than 20 of the 50 top TV markets, with approximately 80 LMAs nationwide. In almost all markets, the stations are represented by the same national sales organizations.
Existing regulations bar TV duopolies, in which two stations in the same market would be licensed to the same owner. The loophole is the license.
In a recent ruling, Sinclair Broadcasting was able to get the U.S. Justice Department to allow it to control two TV network affiliates in Columbus, Ohio. Sinclair owns Fox affiliate WTTE-TV and, under the agreement, would manage ABC affiliate WSYX-TV. It was the first direct ruling by the Justice Department on a proposal to create an LMA under which two TV stations in the same market would be run by a single company.
Broadcasters see these LMAs as beneficial to advertisers because they provide more programming options, more viable stations in the market and increased inventory with more opportunities to package and price.
Radio duopolies are not illegal, and the number of stations involved is staggering.
The Telecommunications Act of 1996 divided local radio markets into four tiers, which in turn define the number of stations in which a single owner may have an interest. For example, in a market with 45 stations, a single owner may have an interest in as many as eight radio stations (no more than five in the AM or FM bands).
Currently, there are duopolies in 165 of 263 rated radio markets throughout the country.
In 70 of these markets, there is only one station group, and in 34 markets only two station groups. In those cases, we should change the name from duopoly to polyopoly.
Station groups forming LMAs or duopolies certainly have made a case for how they believe the advertising industry benefits from these alliances. But there are two sides to every story.
As local broadcast buyers, it is our job to make sure we are securing quality programming with strategic marketing and promotional tie-ins while reaching our target audience at the lowest possible price. What is happening and will continue to happen is that we risk losing control and negotiating leverage as more and more stations pool their resources.
COMPETITION WITHIN DUOPOLIES
Intuitively, I believe we are all somewhat uncomfortable with this. In many instances, the very stations that are part of an LMA or a duopoly are in competition with one another. And as buyers, we must stay alert.
As a group, our buyers are currently monitoring all situations in which a forced buying environment is presented to them or when pricing seems out of whack.
As agency representatives, we must go one step further and track pricing over time to ensure increases stay in line with industry projections. We must be proactive if we are to protect our clients' advertising investments and we must stick together to keep our radio and TV partners on their toes.
Ms. Bratman is a senior VP-director of local broadcast at Creative Media, New York, a unit of Omnicom Group.