With Digital Video, Newspaper Companies Could Disrupt Local TV
It’s clear to see why this is happening. As Alan Mutter points out in his two part blog post on the topic: “The long-time newspaper publishers can’t be blamed for being attracted to broadcasting. Television generated a record $49.7 billion in local and national advertising sales in 2012, while newspaper advertising revenues — which have been sliding relentlessly for seven years — ended 2012 at less than half the all-time high of $49.4 billion hit in 2005.”
Mutter goes on to point out, however, that local TV stations might end up suffering the same fate as newspapers did. It’s something I’ve written about before: local TV stations are fat and happy — and ripe for disruption. And the disruption that could come to local TV isn’t even hard to see. Take your pick: Barry Diller’s Aereo, the rumored Apple TV expansion, Google TV, Intel TV, XBox — the list goes on. While none of these have managed to truly disrupt the broadcast market, there is a reason the networks are suing Aereo. They know it’s coming. But do the local TV stations?
Companies like Tribune that are shedding their newspaper business units into separate companies are failing to understand that the solution for local TV stations may be local newspapers. No, I’m not arguing that local TV stations start producing a newspaper, but I do think that the digital divisions of newspapers could end up owning local video.
Here’s what I think will happen. The local newspapers that are smart are already getting serious about creating video content. Some of them are beginning to figure out how to get that content to consumers via set-top boxes (e.g. Roku, Apple TV, etc.). They will be the first to experiment with partnering with companies like Aereo instead of fighting them in court.
Local TV stations may get in that game too, but they will do exactly what newspapers did at first with their websites (and TV stations still do) which is just shovel their existing content onto the new platform. While local newspapers will be experimenting to see what type of local content/programing these so called “cord cutters” users want on their over the top set top boxes, TV stations will be providing clips of their crime and traffic stories that do really well on broadcast.
Newspapers will be able to do this because they are at a point in their business where they are trying to figure out how to extend their brand and content onto every platform. They understand that this is a must for survival. They’ll be able to take advantage of the high CPMs from these videos (higher than broadcast CPMs) and will also be able to take advantage of their existing subscriber/membership base to offer more value to them and therefore increase their membership base.
While this is happening local TV stations will scoff at the poor quality of the newspaper video programming or their lack of understanding of the TV business. It will be a classic example of the “innovator’s dilemma.”
In the end, consumers will make selections based on what products meet their needs. The needs of a “cord cutter” consumer versus a broadcast consumer will be different as will the business model. While local broadcasters will most likely be slow to adopt a business model that relies on a direct relationship with consumers, newspapers will be well-positioned to take advantage of this and disrupt the local TV industry.