Navigating the storm: The disruption of local television (Part 1)

As viewers and advertising dollars migrate to digital platforms, the revenue models for local TV are under pressure. Digital platforms offer targeted advertising and measurable engagement, which are more appealing to advertisers. This shift challenges the traditional value of local TV advertising. Despite these challenges, local content still has value.”

Guy Tasaka, founder and managing partner of Tasaka Digital

The local television industry is experiencing profound changes that will reshape its future. Having been deeply involved in local media dynamics, I have seen the evolution and the emerging challenges firsthand. The push from networks to move their top shows to streaming platforms like Peacock and Hulu is just the beginning.

In the next two articles, I’ll explore local television’s challenges and the opportunities for local news outlets. When I joined this industry 12 years ago, everything was new to me — the key players, the technology, the ways money was made. Now, we are in a period of significant change, and as the old saying goes, with great disruption comes great opportunity.

How big is local TV?

Despite the disruption, local television remains a strong and profitable sector, depending on your location and market position. A 2022 report by Pew Research found that local TV’s over-the-air advertising revenue was $20.5 billion. Drilling down, 842 English-language news-producing stations brought in $16.9 billion, according to BIA Advisory Services, a leading firm that tracks the local TV industry. These numbers might seem small compared to the over 6,000 local newspapers often mentioned.

There are 210 Nielsen DMAs or television markets. On average, there are about four news-producing stations in each market — typically an ABC, NBC, CBS and FOX affiliate. Each station earns about $20 million per year, with many well-managed stations still seeing 30-40% profit margins.

Retransmission revenue

Local broadcasters increasingly rely on retransmission fees from cable companies or MVPDs (Multichannel Video Programming Distributors). These fees are what MVPDs pay local broadcasters for the rights to redistribute their content, and they are now threatened by the shrinking cable audience. It’s usually a per-subscriber, per-month fee that ends up on your cable bill — often labeled as a “broadcast” or local TV fee. In 2022, retransmission revenue was $14.5 billion, nearly half of the total revenue for local broadcasters.

Audience declines

According to Nielsen, streaming now accounts for 36% of the total TV consumption, with broadcast content accounting for 23%. This shift from cable to streaming isn’t just a trend; it’s a fundamental change in how people watch TV, accelerated by the COVID-19 pandemic. This shift affects local broadcasters in two ways: it reduces the retransmission fees crucial for their finances and increases the pressure to produce varied content. Local news, which used to be a mainstay, is now just one of many news options available around the clock online.

The relationship between local broadcasters and networks is also changing. Historically, networks paid local stations to air their content. Now, local stations often pay networks for the right to broadcast their programs. This change is significant, especially as high-profile shows and sports events move to network-owned streaming platforms.

The rise of free ad-supported streaming TV (FAST)

Platforms like PlutoTV, LocalNow, Tubi and Samsung TV+ complicate the scene. They offer various viewing options without a subscription fee, drawing viewers away from cable and local television.

As viewers and advertising dollars migrate to digital platforms, the revenue models for local TV are under pressure. Digital platforms offer targeted advertising and measurable engagement, which are more appealing to advertisers. This shift challenges the traditional value of local TV advertising.

Despite these challenges, local content still has value. The current environment presents an opportunity to redefine what local content means and how it’s delivered. Local broadcasters are at a crossroads, and adapting to these changes is essential for survival.

By leveraging their trusted brands, local knowledge and unique content, local broadcasters can engage with their communities in new ways, pivot their business models, and find new revenue streams.

In the next article, I’ll discuss specific strategies that local newspaper publishers and television executives can use to thrive in this digital transformation era.

Guy Tasaka is a seasoned media professional with a 35-year track record of leading change in the industry. He has collaborated with renowned organizations such as Macworld Magazine, Ziff-Davis and The New York Times, where he honed his expertise in research, strategy, marketing and product management. As the former chief digital officer at Calkins Media, Guy was acknowledged as the Local Media Association's Innovator of the Year for his work in advancing OTT and digital video platforms for local news organizations. He is also the founder and managing partner of Tasaka Digital, specializing in helping media and technology companies navigate business transformations using his extensive experience and forward-thinking approach. Guy can be reached at guy@tasakadigital.com.