THE BIG-TIME CHALLENGES OF SMALL MARKETS

Bill Duhamel owns and operates just one TV station, KOTA Rapid City, S.D.

But with the help of three full-power satellite stations, the ABC affiliate covers a lot of ground, reaching 150,000 homes in two sprawling TV markets, Rapid City and Cheyenne, Wyo.-Scottsbluff, Neb. It’s equivalent to the area from Washington, D.C., to Boston and Buffalo.

Over the years, Duhamel has covered even more ground though his work on various industry boards, including those of the NAB, the Association for Maximum Service Television, the ABC affiliates, the CBS Radio affiliates and the Rocky Mountain Broadcasters Association.

In addition to KOTA and its three satellites—KHSD, KDGW and KDUH—Duhamel also owns a small cluster of radio stations in the area.

In this interview with TVNEWSDAY Editor Harry A. Jessell, he says he is struggling with the same business issues as his larger-market broadcasting brethren (declining revenue, increasing competition).

And he makes clear his Republican belief in minimal regulation, even though his wife is working for Hillary Clinton in the upcoming South Dakota primary and his former neighbor and family friend is at the forefront of FCC efforts to administer another heavy dose of broadcast rules.

An edited transcript:

So how’s business in DMA 175 and DMA 196?

It’s fairly tough. The local business is holding up, but the national business is switching almost into a commodity, which is a shame.

How much of your revenue comes from national?     

At one time it used to be about a third, but now it’s down to probably about 20 percent.       

So I guess you would anticipate that getting even smaller in the years ahead?    

Yes. I suspect so because a lot of times the agencies don’t really seem to be interested in the best interests of their clients. The buyers have got a little formula that they’re going to use and they don’t pay any attention to reasoning anymore. It’s just kind of: this is it, take it or leave it.                    

But you say local is holding up?

It’s holding up very well. The economy hasn’t really dipped that much out here. On the other hand, it didn’t really boom either. It’s pretty stable. If there are any subprime mortgages, they’re well hidden because I’ve never heard of anything. The biggest problem locally that we’d be concerned about is all the negative press about how bad the economy is. It may cause consumers to stop buying, and that affects everybody.

SouthDakota has a Democratic primary coming up on June 3. Do you expect any money out of that?

We’re getting a little Obama money. Clinton, I think, would like to spend some money, but I think they are strapped. We rarely get much presidential money any year. SouthDakota has three electoral votes and you can almost count on them going Republican. Everybody knows that.

So the Obama money is a bonus.

We’re not talking about big money. We’re talking about a few thousand dollars. It might buy my groceries this week, but it’s not going to do a lot more.

What about state or local political money?

So far there hasn’t been much. In Wyoming, there’s a fellow running for an open seat in Congress and he’s spent a little money with us. He’s about the only local money that we’ve seen so far. There might be some local races, but again it’s not significant money—not enough to pay the overhead, I’ll tell you that.

You bought some radio stations within your market over the last decade or two. Why no TV?

Because of the FCC rules. There are four [commercial] stations here and you can’t do duopolies with the top four stations.

If it relaxed that rule, do you think you would buy?

Yes. There would probably only be two owners in the market because it makes more sense, but there’s an FCC rule and it would take 10 years to get a waiver through at the speed at which the FCC moves.

Well, you can talk to Commissioner [Jonathan] Adelstein about that. I understand that your families are close?

Yes. His dad lives just across the street from me. He’s a good friend of mine. He always has been. In fact, Jonathan, when he was probably in high school, used to come over to the house occasionally and eat dinner with my kids. He ended up at Stanford because my children were there.

I also understand that your wife, Judy, is the chairwoman of the Democratic party in the state?

She was for eight years. She decided last year not to run again. 2006 was her eighth year. My wife is really very big on the Hillary campaign right now. She’s very involved in that.

Are you also a Democrat?

Oh, no! I’m far from a Democrat. It’s an interesting discussion we have. I’m not a great fan of McCain, but, by default, that’s who I’ll vote for.

I know that you were a member of the Gore Commission 10 years ago, which looked at what public interest obligations broadcasters owe the public. What’s your philosophy? Would you like to shed such regulations?

Oh yes. I mean I would say that the market itself is doing a pretty good job. It looks to me like the commission is now trying to bring back every bad idea of the last 50 years and reinstate them. I don’t think there’s any justification other than we can do it.

Well, those are initiatives come from the Democrats. What’s Jonathan tell you?

We disagree on this substantially. I would say basically that his thing is, OK, let’s make a deal. What will you give us if you want this? That tends to be Jonathan’s approach. You want something? What are you going to give to get it?

Well, what about that? You get the spectrum. What does the public get in exchange?

We’ve been providing a service here for over 50 years and we provide darn good local service, but the thing is it’s not local service as they might define local service. They want local service that most people do not want and do not watch. Their idea is, let’s have a public affairs discussion with five people sitting around a coffee table. You can hear the sets turning off.

You’re talking about this new localism proceeding that the FCC has initiated.

It gets back to the old quota system. When we had to get our license renewed, we had to promise a certain percentage of news, a certain percentage of public affairs, a certain number of PSAs each week and everything else. It got to be nonsense.

I suppose you have no sympathy for the new enhanced disclosure rules either.

Right. We’ve estimated that it would take probably three-quarters of a person a week to fill that out—not a month, a week. Now, maybe you would learn some efficiencies over time, but the point is, we don’t have that kind of manpower. We’re in the process now, with the national business getting tougher, of trimming costs every place we can.

So all that means is that we’ve got a record keeper wasting time when he could be doing something productive. That’s a nonproductive bill. And the FCC hasn’t justified what it's going to do with all the data.

Any thought of HD news or HD production at the station?

Not immediately because so far we’ve invested $8.5 million dollars into the four stations for DTV and so far we have yet to sell any separate digital commercials. Jonathan told one of our managers that broadcasters are making millions and millions of dollars off of high definition in the digital spectrum. I got so mad I called him up and I said, ask your Dad to investigate whether a $1 million with a zero return is a good investment.

ABC has sort of led the charge in moving primetime programming on to the Internet. How do you feel about that?

Not very happy at all. Basically, it once again fractionalizes our audience. It probably helps them, but not us. The whole reason people tuned in was for the uniqueness of the programming. Now, they know if they wait till tomorrow, they can see Desperate Housewives or Grey’s Anatomy on the Internet.

But there’s nothing much you can do about all, is there?

No, unfortunately, there isn’t. I wish there were. If all the affiliates got together, that’s a violation of the antitrust law because we’re so big and powerful against little Disney-ABC.

Before we started this interview, you said you had something on your mind. What’s that?

Do you remember back in January—the F word on Good Morning America with Diane Keaton? We got copies of four letters of complaint filed with the FCC. They came out of, I think, Miami Fla., and they had more detail than I could have filled out about our stations. But each one had a return address and a person from one of the four cities of license of our stations, all complaining that they had seen this at 8:20 in the morning on Good Morning, America and were deeply offended.

OK, there are about five things wrong with it. First of all, that happened live on Good Morning, America and ABC delayed it to the rest of the country so it never appeared outside the Eastern time zone. Secondly, it happened at 8:20 Eastern time, but since we carry Good Morning, America from 6 to 8, it’s impossible that anybody here could have seen it at that time. So it never happened on our stations.

We checked the local names and addresses on the complaints. Every address was a church. We talked to the pastor in each of the four churches and none had ever heard of these individuals. We could never found them in the phone book. We couldn’t find them in the city directory. So this was a complete bogus attack not only on us, but on every broadcaster outside of the Eastern time zone.

Now, to me, that is completely unethical and yet there is no penalty at all for a group to do this. Yet if we had done this we probably would lose our license.

Do you have any idea where they came from?

I have an idea, but I can’t prove it so I can’t say.

What about the Parents Television Council? That’s the group ginning up indecency complaints around the country.

If I were a betting person I would suspect them, but they did not put that on the return address.

So what’s the upshot of this thing?

I’ve sent the affidavits to our FCC attorney, Dick Zaragoza, and he’ll just put all of it into the commission record.

You can then head off the notice of apparent liability.

I think probably nothing’s going to happen at this point.

We had another deal with the DTV awareness rules. We had to file a form by April 10 for the previous quarter, even though the rules didn’t go into effect until March 31. We sent it in the way the FCC told us to, electronically, and yet we got a notice of admonishment because we hadn’t filed it. After playing phone tag back and forth for several days, I finally got a letter saying that indeed they’d had received it.

That’s a bunch of nonsense. It takes a lot of our time to do this and we’re sitting here trying to do a better job of operating. This is the kind of nonsense that’s going on in Washington. I don’t know if they have enough people there to enforce it. Maybe they figure that if they put more rules in, Congress will give them more money to get more people. I don’t know.

I think it’s time to have Jonathan over for dinner again.

Well, Jonathan’s always very cordial, but he’s not very responsive.