GLG News by Alan Albarran

Implications: Article discusses the woes facing TV broadcasters in India, including both terrestrial companies and pay-TV companies.

Analysis: It is interesting to read this short article to gain an understanding of the key economic issues facing TV broadcasters in India.  As the article states, there is an oversupply of services in the Indian market, and with growing inflation there is less advertising to support the services.  In addition, domestic regulations limit advertising to just 10 minutes per hour.

I've never been to India, so will claim no expertise in the country, but it is interesting to contrast what is happening in what most would call one of the leading emerging economies to the situation in the U. S.

In the U. S. stations are not bound by commercial limits.  Stations must be careful about how many minutes to exploit each hour, but there are no regulatory limits which would certainly hurt revenues.

Second, with the transition to digital looming, many TV broadcasters are hoping their digital sub-channels will bring new revenue streams.

Third, another growing revenue stream for US TV operators is through their web sites and affiliate brands.  While this is mostly advertising income, it is still a growing revenue stream.

Fourth, many TV stations and groups are aggressively going after money via retransmission consent with cable operators.  In its early years retransmission consent garnered few dollars for television operators; that situation is also changing in the U. S.

This is not to say the US TV economic model is superior, but it certainly offers more potential than the situation in India.

Implications: AdWeek article details advertising spending across Spanish Language media for 2007; the data shows most categories having positive gain.

Analysis: English language media, aka the "general market" had a rough year in 2007 in terms of advertising.  Many categories of media either bled very badly (e.g., newspapers), suffered losses (radio) or at best was flat.  Now AdWeek details how Hispanic advertising or Spanish language media fared for 2007, which was a positive uptick of around 3%.  While that may not sound too enticing, most general market media would love to have been able to show 3% growth last year.

Total advertising in this segment reached $5.78 billion in 2007.  Among the sectors achieving strong growth rates was cable television (up 76% from 2006), national magazines (up 11%), and network TV (up 2%).  Spanish language newspapers were flat, while spot radio was down from 2006.

The article points out the two largest categories for ad spending was automotive followed by wireless telecommunications services.  The article also points out some of the changes among advertisers targeting this ethnic group from 2006-2007 in terms of spending.

No doubt the economic downturn in the US driven by the housing crisis, rising oil prices, and inflation are affecting SL media as well, but it is faring better than the general market.  The Hispanic market will continue to be attractive to advertisers due to the size, rapid growth, and increasing awareness of the Spanish language market.

Implications: NBC Universal, the only bidder left in the hunt for the Weather Channel, will acquire the service along with two private equity firms.  NBCU claims the Weather Channel will function separately from NBC Weather Plus.  Don't bet on this happening too long.

Analysis: NBCU was the lone bidder for the Weather Channel and weather.com (the real prize in this acquisition) after Time Warner dropped out when the price reached $3.5 billion.  It's a smart move for NBCU, which is already making the claim of being #1 in weather information as well as news and business news.

The article states that NBCU will continue to operate NBC Weather Plus as a separate service.  Don't see this happening for too long.  Why offer two competing services?  This is not like ESPN and ESPN2.  The Weather Channel is a much more recognizable brand when it comes to weather information than NBC Weather Plus.

But as I stated in an earlier announcement when Landmark put TWC for sale, the real prize here is weather.com.  The website always shows up in the top 10 most visited web sites, and NBCU can capitalize with a lot of brand extension for its other channels and content.

This acquisition places NBCU in a stronger content position, especially if, and this is a big "if," General Electric decides at some point to sell off the media unit.  Rumors continue to buzz that GE will sell off NBCU at some point, but that speculation has been going on for years. 

Implications: Article offers some one-sided view of the AT&T move to Dallas.  There are many more reasons for this move than what is expressed in this article.

Analysis: AT&T is moving to Dallas for many reasons not clarified in this article.  Among them:

Access to DFW International Airport.  Much bigger than San Antonio will ever be, with many more domestic and international routes of service.  Much easier for clients to visit, even with anticipated flight reductions and lower capacity.

DFW is the home of over 1,000 different telecommunications companies.  AT&T will be the biggest in the area, but there are many other players here for strategic partnerships, co-ventures, etc.

Dallas Mayor Tom Leppert has worked most of his first year in office to make this transition possible.

Rumor has it that the new Cowboys Stadium will be named by AT&T.  That's not the reason for the move, but why brand a stadium in the Dallas-area if you are not based there?

It's a good move for AT&T  and a great acquisition for the City of Dallas.   And Dallas has much more to offer than just shopping and more five-star restaurants.

Implications: The recording industry is lobbying to create a performance royalty on the terrestrial radio industry to provide royalties to artists.  The radio industry is opposing any such action.

Analysis: The recording industry has been putting together a coalition for months to lobby Congress to create a performance royalty on AM & FM stations that would go directly to the artists.  The radio industry vehemently opposes such action.  A few facts:

There have been several attempts over the history of the radio and recording industry to establish a performance royalty.  Congress has denied such a decision, citing the interdepented relationship that exists between the two industries.  Radio industy plays music from the recordng industry which promotes artists and purchases by consumers.

Radio has for decades paid royalties to ASCAP, BMI and SESAC which are music licensing firms that collect fees and distribute them to authors (writers), composers, etc.  The artists receive a portion of these fees if the artist wrote the song.  Otherwise, the performers are paid based on their individual contract with the record label.

The recoridng industry has suffered declining revenues since Napster debuted back in the late 1990s.  Peer-to-peer file exchanges forever changed the way music is distributed and disrupted the business model.  One bright note is iTunes, which shows that a legitimate distribution system that is low cost and legal can be successful.  The recording industry would like a performance royalty to help buffer some of its lost revenues.

The radio industry has not had a good year since 2000.  Since then, radio listening and revenues have declined.  Adding a performance royalty would be a challenge for many radio stations.  Most radio groups are losing money.  Look at the stocks of the big radio players:  Cumulus, Citadel, Entravision, Saga, etc.  Most are in horrible shape due to loss of audience and advertisers.

Many other countries have a performance royalty for artists, but the US has never adopted one in the nearly 80+ years that radio has existed.

XM and Sirius do pay a artist performance royalty, but this was based on the Digital Millenium Copyright Act, and the fact that both are subscription services.

It's a complicated mess.

The issue may be moot as the lobbying efforts of the broadcasters through the NAB are close to having enough votes in the House to block a measure.  The Senate effort is just underway.  But this situation underscores the need for the two industries to try to figure out how to work together to benefit each other, rather than trying to devastate one another. 

Implications: E. W. Scripps now has final regulatory approvals to split operations in to two pubic companies, similar to what Belo Corp. did a few months ago.  Will Scripps fare better in their efforts?

Analysis: It will be interesting to watch how Wall Street and other companies react to the split of the E. W. Scripps company in to two separate companies.  We've seen one newspaper/broadcast entity (Belo) split already, with the new stock in both companies down, but then, so are most media stocks.

Scripps is splitting itself differently however.  Unlike Belo, Scripps is keeping their broadcast and newspaper operations under the same roof as E. W. Scripps Company, while the cable networks and online shopping websites operate under the heading of Scripps Interactive.  One rationale for the split is to free up the interactive or new media part of the company from the weight of the traditional media.

So while we can't compare apples to apples in the case of Belo and Scripps, it will be interesting to see how the companies fare in the new environment.  Belo's split has not yet added any value to their two companies.  When Viacom split in to "new" Viacom and CBS in 2006, that was supposed to unlock the MTV/new media side from the stodgy old CBS TV network.  But that outcome has been reversed, with CBS growing at a faster pace than new Viacom.

Let's keep an eye on Scripps, post-breakup, and see what if anything new we can learn from the most recent effort to create more enterprise value for owners/shareholders.

Implications: Latest annual "Investing in Radio" study by BIA Financial indicates large markets will continue to experience slow to negative growth for next few years while some turnaround is evidenced in smaller and medium markets. What are small and medium markets doing right that the big markets are not doing?

Analysis: Radio has had litle good news of late.  Revenues are down, HD radio is slow to develop, XM and Sirius are one step away from a merger, and the Internet and iPods continue to create more audience fragmentation.

The latest BIA Financial Investing in Radio Study indicates the doldrums will continue in the large markets, while smaller and medium markets will show some rebound--if you call single digit growth projections of less than five percent a rebound.

A few quick observations:

Small and medium markets are much more local in their orientation than large market stations clusters built on formula radio where every station in every large market sounds the same.  The big market players just don't get it that by eliminating virtually all localism they are eroding their own audiences.

The markets cited for growth in this article:  McAllen-Brownsville, El Paso and Madison--without seeing the actual breakdown much of this growth in the two Texas markets are without doubt due to Spanish language radio, which is growing at an even faster pace than general market stations.

The article suggests that digital assets will help radio stations grow their revenues, but no real evidence is presented.  For many radio stations, leveraging their digital assets is going to be a slow process. 

Implications: A study by Senovate examines ethnic and gender differences regarding social networks, online banking, and visiting YouTube with some interesting findings.

Analysis: This is an interesting study reported in Radio Ink that examines Hispanic and African American consumers (as well as general market or Anglos) in regards to online activity and behaviors.  There has not been much data available on this topic, so this study should be of interest especially to advertisers and people in the banking industry.

The key findings as I interpret them are the tremendous upside of the Hispanic audience.  We know this is the fastest growing ethnic segment in the US population, and this study shows the market has a lot of room for growth.

Key points:

There are a lot of gender differences among Hispanics in all areas of the study.  Males are more likely to engage in online activity than females such as visiting a social networking site or visiting YouTube.  These gender differences were not found with African Americans or the General Market.  With Hispanic women critical in making household purchases, this information should help advertisers in targeting this group.  Traditional media may be more helpful in targeting Hispanic women than digital/online media.

In terms of online banking, only 24% reported paying bills online, far below the other groups.  Regarding Internet access at home, which is key to all of this data, 55% of the Hispanics had access at home, much lower than both General market and African Americans estimated at 80%.  Obvioulsy there is a lot of upside potential for Hispanics to add PCs to their homes, along with Internet access.  This is happening, and this segment will continue to grown, but clearly there is a lot of upside potential here.

This is very interesting research and we need more studies like this to help understand the rapidly growing Hispanic market.

Implications: This article discusses new research indicating rapid growth in viewing online video, and the need for pay TV providers to have a clear strategy.

Analysis: New study from ABI Research indicates strong growth predicted for consumers viewing online video, fueled by broadband expansion at a global level.

The article explains that content providers, Internet portals and user-generated sites are in best position to expoit this growing market, but cautions that Pay-TV providers (think distributors such as cable, satellite and telcos) face challenges.  This point is well taken, particularly in markets outside the US where pay TV distribution is more limited.

The research is just another indicator of shifting consumption to digitally based platforms.  It also validates many advertisers who are increasingly moving money to an online environment away from traditional media.

Implications: With the acquisition of CNET, CBS will become one of the lworld's 10 argest Internet companies reaching massive audiences both domestically and globally.

Analysis: When Viacom split in to two companies at the beginning of 2006, "new" Viacom with its collection of satellite networks led by MTV was expected to reach bigger heights when unbundled from CBS, the stodgily-perceived "traditional" media company.  Instead, CBS continues making most of the news and their presence as a company grows stronger.

CBS CEO Les Moonves, long respected as a television executive, can certainly add Internet executive to his resume with the latest acquisition of CNET.  Once completed, the combined CBS-CNET websites and brands will make CBS one of the world's 10 top Internet companies, but most importantly, will be positioned to capture more advertising dollars as shifts continue from old media to online/digital media.

In addition to CNET, the acquired company has a number of highly regarded web sites under its umbrella, and as this article states, a key position in China.

This is both a timely and smart acquisition by Moonves.  Much like Rupert Murdoch's acquisition of MySpace, CBS is one of the key companies recognizing the growing economic value of the Internet as opposed to traditional broadcasting.

Implications: The results of a study by the Convergence Group indicating the impact of online viewing on traditional outlets of television via cable, broadband, IPTV is presented in the article.  But replacement is not the issue.

Analysis: This study offers some new data on viewing behaviors in households comparing watching online versus traditional TV consumption.  The data is interesting, but seems to minimize the growth of online viewing in comparison to other studies that exist, which shows higher levels of online viewing than that found in this study.  There is also some interesting tidbits about the growing impact of the DVR on viewing, and the many utility functions this technology provides households.

To me the title of this article is a bit misleading.  Its not an either-or system, in that consumers must choose between online and traditional TV.  Across all demographics, many studies have found that online viewing is prevalent, but moreso for younger audiences.  Younger viewers (12-34) are not as wrapped up in big screen TVs or HDTV.  They are used to watching online, find it more convenient and flexible, and very natural.  Older demos are the opposite.

The fact is online viewing is growing, as evidenced in this study, and it will continue to grow.  This is why advertisers are shifting more dollars to digital platforms.

Example:  General Motors recently said that over the next three years they will move half of their annual $3 billion ad budget to digital platforms and one-to-one marketing.  One Advertising Age exec commented that "as GM goes, so goes the automotive industry."  Automotive is the largest category of television advertising.  Clearly, they are going after the online audience, at least in part of their strategy.

Implications: NBC Universal owned and operated WNBC-TV (New York) will launch a local 24 hour news channel on one of its digital channels as part of its multicasting strategy.

Analysis: Local TV stations, including the major market stations like WNBC, are making plans for how to use their additional digital channels available under the digital TV transition set for next February.  WNBC is investing in a local news channel to serve the greater NYC area.

News is a viable strategic option for any local station with a strong commitment to news, especially if they already broadcast several local hours of news on their main channel.  The economies of scale already exist to add more news content to one of the digital sub-channels.

The challenge with any multicasting strategyis how to monetize the digital spectrum and gain audience and ultimately advertisers.  Distribution is not guaranteed from cable, satellite and telco providers, so stations must engage in partnerships and negotiations to make this happen.  There are also concerns about the sub-channels siphoning off audience from the "main" channel.  Still, the digital channels represent a lot of upscale opportunities for local TV broadcasters to generate new revenue streams and build audiences.  Adding a local news channel where a strong news operation is already in place is a good idea--even better if you have the resources of NBC news available.

Implications: Five companies are expected to bid in a second round for The Weather Channel, including both CBS and NBC.

Analysis: With the second round of bids due on May 8 from at least five different suitors, we now know that both CBS and NBC are two of the bidders.  The Weather Channel would make a nice complement to either operation if their bid is successful.

CBS probably has more to gain because NBC already has a strong presence with its NBC Weather Plus, regularly seen on its local owned and operated stations, the NBC Nightly News, MSNBC and CNBC.  But NBC could easily fold their operation in to the Weather Channel, which has the better brand.

CBS, on the other hand, could also use this gem to give them a strong weather presence on cable.  Let's remember that the real prize here is not so much the actual channel, but weather.com which ranks as one of the top 10 web sites visited by consumers.  Both CBS and NBC have a number of valuable web properties, so weather.com would be a great addition to either team.

Regardless, either a CBS deal or an NBC deal would pose lots of interesting strategic options for the winner.  What will be interesting is to see how high the bidders go given the current economic climate.

Implications: The latest six month survey by the Audit Bureau of Circulation show continuing declines among newspaper publishers.

Analysis: Virtually all of the major newspaper publishers saw sharp declines in circulation according to the latest report by the Audit Bureau of Circulation.  From the New York Times to the Chicago Tribune to the Dallas Morning News to the Atlanta Journal-Constitution the numbers were awful.  Publishers reported declines among the top 25 papers from -2% to as much as -10%. 

Some of the erosion is self-inflected by publishers restricting the size of their market (think of outlying or rural areas) to cut costs; the rest is blamed on the Internet.  Whatever the reason, the numbers are only going to continue to decline.  We are experiencing the demise of the newsprint newspaper in the United States.

If publishers every needed a comprehensive digital strategy the time is past due.  Internet advertising among newspapers is growing, but not at a fast enough pace to offset the circulation loss.  Coupled with a recessionary economy where the newspapers' biggest advertiser (auto dealerships) are losing money as well, there are no bright spots on this horizon, with the exception of USA Today and The Wall Street Journal, which reported gains of less than a half-percent.

Most publishers have cut expenses to the bone and downsized personnel.  Publishers must adopt as many digital platforms as possible, including mobile phone distribution, if they intend to stay in the game. 

Implications: CBS and Katie Couric are in discussions to bring an end to her two-year tenure as managing editor and anchor of CBS News. 

Analysis: Amid declining ratings and a weak prime-time lineup, it appears CBS and Katie Couric are about to call it quits--at least according to this Wall Street Journal report.  CBS aggressively pursued Ms. Couric when her Today show contract was up at NBC, and made her an offer she could not refuse.  But regretfully, the audience never followed suit.

The network television news industry is dealing with rising costs, lower audience ratings, and reluctant advertisers.  Television remains stuck in a mindset that the audience gathers around the TV before or during dinner to watch a network newscast, even though there are lots of options with 24 hour television news and of course, the Internet.

Perhaps the Couric experiment will bring reality to today's television marketplace.  You can get better, but you can't pay more.  It truly makes no sense to have three networks vying for the same audience in 2008 at the same time in this highly fragmented viewing environment.  With MSNBC, CNBC, CNN and Fox News available to most households, it is no wonder that network newscasts combined reach at most about 24 million TV households out of a universe of 113 million (according to Nielsen) in 2007, a decline of 5% from 2006.

The timing is particularly interesting as CBS and CNN are according to some--having discussions about possibly combining news operations.  Perhaps the next anchor of CBS news might be someone like Anderson Cooper, whose popularity has soared at CNN.  Ms. Couric will still be around some network--she is too talented and too young to retire.  This article speculates she may end up replacing Larry King on CNN when his contract expires in 2009.

Implications: After a year of beta testing, MySpace Latino launches in the US to reach the rapidly growing  Latino population.

Analysis: MySpace Latino is a smart, strategic move by parent News Corp. to reach the burgeoning Latino population in the United States.  Social networking has emerged as a huge phenomenon for sharing text, video and music, especially for younger audiences. 

MySpace Latino will tap in to the fast-growing Hispanic population in the US, with support from several partners, most notably Spanish Broadcasting System (SBS).

With the Latino population expected to reach as much as 25% of the US population by 2050, companies recognize this market is powerful, not only in size, but in terms of growing economic clout.

Implications: The Department of Justice has approved the XM-Sirius merger of the two satellite radio providers. Approval from the Federal Communications Commission is the only remaining obstacle. What does this mean for radio?

Analysis: The DOJ has spoken, and after a year of scrutiny, XM and Sirius are one step away from their long-desired merger.  The FCC must approve, and the current Commission with a Republican majority will approve the merger.

The merger went through a roller coaster ride, with some predicting the long time frame meant it would never happen, while others speaking the opposite.  It is going to happen, and now we know why the DOJ said ok.

The DOJ did not treat satellite radio as a separate market, but placed the service in the market for radio and audio services.  Citing the expected explosion in broadband wireless Internet services, the DOJ felt there would be no negative impact on consumers or competition by allowing the merger.

This is a blow to the radio industry, which spent millions in legal fees to try and block the merger.  This will be tough pill for NAB CEO David Rehr to swallow.  Many radio groups fought the merger as well.  How the DOJ defined the market is without doubt the biggest implication for this merger.  The radio industry will likely use this to argue for further relaxation of local radio ownership requirements.

The consumer advocates will be angry over this merger as well, citing this as another example of governmental disregard for consumers.  That's a tough argument over subscription-based services.

But exactly how consumers will be affected remains to be seen.  We will go from two services down to one, and how that affects channel lineups and popular programs like Howard Stern on Sirius and Oprah on XM must be sorted out.  For the record, I am an XM subscriber.  I just had a student, who is a Sirius subscriber, ask me "what does this mean for our service?"  I told her it was simply too early to tell.

Implications: A new study released by Arbitron and Edison Media Research indicates Internet Radio audiences are growing, but with some interesting twists.

Analysis: A new research report indicates that Internet radio audiences are up 2% from last year to an estimated 33 million people, but perhaps the most interesting finding is that these listeners are one and a half times more likely to have a page on a social networking site like MySpace or Linkedin.  Some implications of this study--

According to a separate RADAR audience study released by Arbitron this week, AM/FM radio reaches an estimated 235 million listeners a week.  That's almost eight times the size of Internet radio, but we know the audience is shifting, especially among younger listeners.

Second, we can infer that a large portion of the Internet radio audience is made up of younger audiences who spend considerable time with their social networking pages.  The study recognizes them as "power users" who log on their sites several times a day.  As a college professor, I see this routinely in the hallways and before/after classes.

Third, this study illustrates again why the radio industry needs a comprehensive digital strategy for every station.  Stations should be reaching out to these audiences via Internet radio advertising and developing their own social networking sites, such as sites for key personalities and station promotions.

Radio has to figure out how to embrace the digital world to enhance its core listener base in order to grow audiences and revenues.

Implications: The transition to a DTV environment is examined from the aspect of multicasting, the ability of a local television channel to broadcast several channels of "standard" definition TV.  Multicasting is critical to developing new audiences and revenue streams for terrestrial broadcasters.

Analysis: With the majority of the nation's 1760 TV stations already converted to digital, many stations are executing a multicast strategy, where the new digital environment allows stations to broadcast more than one channel of information.

This article summarizes the options that many stations are considering, whether from airing syndicated/rerun programming to local content to services offered by a network like NBC Weather Plus or ABC News Now.  It is a very timely and interesting discussion, and shows the many possibilities for broadcasters to become multicasters. 

Of course, there are some drawbacks.  These new channels are for the most part not required (unless negotiated) to be carried on cable or satellite systems, which means that the only people seeing these channels--at least initially--are those who have invested in a digital antennae.

Further, there is no guarantee that advertisers will follow, especially given what will be low initial audiences.  Which begs the question will these services make any money?  And how long will it take?

TV Broadcasters have a tremendous opportunity in the digital environment to develop new content (see my other posting about mobile DTV development) and monetize the new digital spectrum.  Companies should already be planning--if not committed to-- a strategy for implementation.

Implications: Disney Media Networks/ABC President Anne Sweeney shares some interesting data regarding Millenials and their use of digital content.

Analysis: Speaking at the recent four-As (American Association of Advertising Agencies) convention, Disney Networks/ABC President Anne Sweeney shared some interesting insights regarding the Millennial generation and their use of digital content.

Among the key findings: 

Millennials watch a lot of content online.  Last year 140 million ad-supported programs were watched on ABC.com; through the first 18 weeks of the current season 124 million programs have been viewed, an increase of nearly 200%.  Same pattern holds for other Disney-owned channels.  This point has broad implications for the entire network-affiliate relationship, and even cable/satellite subscriptions.  As this article states in a postscript, Millennials may only need an Internet connection instead of a cable or satellite bill.

Data indicates that online viewing increases viewing of broadcast television.  This point has been confirmed via other research.

The data Sweeney presented also points out that all demos are willing to accept online commercials in exchange for free programming.

Finally, Sweeney commented that agencies need to focus on the four "Cs":  1) Consumers come first; 2) Content drives everything 3) Creativity is critical; and 4) Commit to change. 

All media companies could benefit strategically from this advice, not just advertisers.