THE BLOCK HYPOTHESIS: RECESSION-PROOF TV

Last November, privately-owned Block Communications Inc. bought out the one-third interest of LIN Television in WAND Decatur, Ill. (DMA 84), for $6.75 million and took over the management of the NBC affiliate.

At the same time, Block gave Bill Lamb, the general manager of its WDRB-WMYO Louisville, Ky. (Fox-MNT, DMA 84), the added responsibility of overseeing WAND and the two other stations in the small group, KTRV Boise , Idaho (Fox, DMA 113) and WLIO (NBC, DMA 185).

In addition to the stations, Toledo, Ohio-based Block also owns newspapers in Toledo (The Blade) and Pittsburgh (the Post-Gazette) and cable systems in Toledo and Sandusky (Buckeye CableSystem).

In this interview with TVNEWSDAY Editor Harry A. Jessell, Lamb talks about his pro-active approach to small-market broadcasting, offering his theory that slumps in the traditional spot business can be offset by exclusive sponsored events.

“You have to put yourself in a position to take more than the market is willing to give,” he says.

Lamb also discusses the health of his markets, why he likes to stir things up with on-air editorials and the need for stations to stay focused on their communities.

And, like other broadcasters, Lamb says he expects to tap the new revenue streams, although he concedes he may be late in exploiting the Web and laying plans for DTV.

An edited transcript:

Louisville looks like a tough market. You’re up against Hearst-Argyle, Belo, Raycom. How are you doing there?

We [WDRB] were the only station in the market [in the May book] where every newscast increased audience. We’re the only station among the four major stations where late news increased. We're flourishing because we have a very talented and committed group of department heads. Considering how good our competitors are, and how ultra competitive this market is, their accomplishments are even more noteworthy.

Is Louisville a healthy market?

From a revenue standpoint, the market is a little bit down and yet our stations are up quite a bit revenue-wise.

We have good competitors. They fight clean, they fight fair, they’re very competent, they are well armed. It’s a very, very competitive news market. In my opinion, no one is doing a poor job in this town. Everyone has their niche.

What’s yours?

When we started looking at all of our strengths and all of our assets, we knew we did not want to be the breaking news station. We don’t really believe in that. That’s really more of a marketing gimmick than it is an actual benefit to the viewer.

Our news team is very experienced. We have some excellent storytellers and naturally curious people. So, we just decided that what we were going to focus on is longer-form stories. We’re going to go deeper into the stories than our competitors because of their more limited time constraints.

Now that certainly doesn’t mean the other stations don’t have good journalists because they do. We just seem to have a whole bunch of them here and that is a real strength for us.

I was watching some of your editorials online. Are the other GMs in your market doing anything like that?

You know, no one had done editorials in this market for—some would say 10 years and some would say 20 years. But we started doing them about six years ago when I arrived.

How come?

I believe that a television station has an obligation to do more than just entertain and inform, I think that you have to reflect and in some cases shape the values of the community. This community is all we have. If the community struggles, if the community falls apart, then our television stations aren’t worth much.

With the number of people that we reach, we have an obligation to give them a voice. So we started doing editorials about six years ago and then about two years ago, Steve Langford at WAVE [Raycom’s NBC affiliate] started doing them, too. I think he does a real good job.

We have an extremely liberal newspaper here in town [Gannett’s Courier-Journal] and we knew that we would be a very good conservative balance to the newspaper. Steve Langford is even more conservative than I am. Together, we do offer some balance to the hyper-left extremism of the newspaper.

It’s been my impression that the GM editorial is a dying institution.

Well, there are several reasons for that. Some stations—some companies—are afraid that if they take a stand on something, they could get sued. I’ve been doing this for 11 years and we have never had even the threat of a lawsuit.

And stations may shy away from them because they don’t want to upset or alienate viewers, right?

Some would say so. I wouldn’t agree, but I would say that a television station can be much like a friend. It can reflect people’s values and entertain them, make them laugh, make them cry. It does a lot of the things that a friend can do. But you can disagree with your best friend and that doesn’t mean that the friendship’s over. Friends disagree all the time.

I don’t ask by any stretch of the imagination for people to agree with me. I don’t care frankly if they agree or disagree. What I care about is stirring up some passion and some discussion. That’s what we want to do. But I very seldom have anybody say I’m never going to watch your station again. Stations think that, hey, we can’t afford to lose a viewer. My feeling is that you don’t lose them; they respect you more for actually standing up and taking a position on something. That’s the experience we’ve had.

The third reason that a lot of stations don’t do editorials is because you have to perform them and some people aren’t good in front of a camera or they’re very uncomfortable or they feel foolish. I respect that. You know, I’m not very good at it either, but I don’t care.

How are your other stations doing?

Decatur’s doing pretty well. We just installed a new general manager and a new general sales manager.

Who are they?

Ron Pulara is the general manager and Sena Mourad is the general sales manager. The station right now has a lot of good momentum and I think that they’re going to accelerate that momentum. [Editor’s note: Pulara replaced Mike Johnston; Mourad, Denise Daniels.]

What about Boise? That’s another Fox affiliate?

Boise is a very well run station. Ricky Joseph is the general manager there. It’s a very lean operation. I applaud him for getting from that station as much as he does. The year started off pretty well for Boise, but the market went into a slump in the second quarter. Everyone in Boise is feeling it.

The challenge is, if the market’s going to have a recession, it doesn’t mean you have to participate. What are you going to do to recession-proof the station? These are the kind of questions that we’re asking.

Lima is in a very similar situation where right now it is just not economically thriving. In the smaller markets, a lot of national business is—I don’t want to say drying up—but it’s not what it used to be.

You may not want to say it’s “drying up,” but it certainly is declining.

So what do you do with that? There are certain things you can control and certain things you can’t. You can’t control Procter & Gamble wanting to cut back in Lima, but what you can control is alternative revenue streams. What we’re looking at in all of our stations is how do you recession-proof yourself?

So, how do you recession-proof yourself ?

If I give you an answer to that, it could sound kind of arrogant and cocky because we haven’t done it in every market and we haven’t done it for long in Louisville. So, it’s sort of a hypothesis.

But here it is: You have to put yourself in a position to take more than the market is willing to give and it takes more than a rah-rah, can-do attitude. It takes serious strategic planning and it takes some imaginative selling.

We’re very big in Louisville on selling special projects. These are things that we create and we go out sell. We get advertisers excited because they build traffic. Last year, we created about $3.7 million of noncompetitive revenue.

When you say noncompetitive revenue, you mean revenue that others were not competing for?

That’s correct. That means that it was a project that only we were selling.

Can you give me a for instance?

For example, we created a motorcycle rally a few years ago, a poker run.

Now, we’re up to about 1,200 bikes and these bikes all pay about $10 per rider to participate in it. That money goes to charity, but a poker run means that the motorcycles have to stop at five or six locations and pick up a poker card. At the end of the run, which is about a hundred miles long, they come back for a party and see who has the best poker hand. That person can win a $1,000 or whatever it is,

Instead of just stopping in a park or at the side of the road to get the card, the bikes will stop at a Dairy Queen or an auto dealership or a boat store or a motorcycle shop. We sell these sponsorships for these locations for five figures. What’s happening is these sponsors are getting 1,200 bikes and more than 2,000 people to stop by their stores. When you bring 2,000 people in, that’s the biggest day of the year for that Dairy Queen.

We also sell sponsorships to the party at the end. All told, we do about $100,000 in revenue that no one else is competing for.

Give me one more example of noncompetitive revenue.

We also do a basketball tournament just across the street, just a street ball, three-on-three tournament. We do a $120,000 worth of revenue on that thing.

We’ve got a dozen of these and the advertisers love them. They’re fun, they get results, the community likes them.

When I talk to other broadcasters and other revenue streams, they talk the Web, DTV and retransmission consent. Have you had much success of the Web to date?

We have been late getting into the Web revenue game and, in Louisville, it’s been by design. When I first arrived here, to be real honest with you, we did not have a very good sales staff. They were very experienced, but they weren’t very productive.

At that point in time, because we weren’t doing a very good job with our share of television revenue, it didn’t make great sense to step over dollars to pick up nickels on the Internet. That would have been foolish.

So we said, look, we’re going to defer the Internet till we’re selling television as well as we can or should be. So we changed about 75 percent of our sales staff in a three month period of time. We got less experienced people who were enthusiastic and high energy and wanted to be here.

They have exceeded even my expectations in terms of how well they could do. So about a year ago we said, OK, now we’re ready to get into the Internet.

I don’t think that if somebody comes in late to the Internet that you’re totally disadvantaged. You can catch up very, very quickly. So we just switched over to WorldNow and it has the best state of the art Web page going, so we think our Web page is pretty good right now. We’ve added a couple of things to it. We’ve got the only Web page in the market that has of all the metro car dealers participating.

How are your stations doing in terms of DTV transmission facilities? Will you be ready to go next February?          

All of our stations are broadcasting high -efinition pass-through. None of us is originating our own, although shortly in Louisville we will at least be able to pass on syndicated programming in high definition. We will be the first station in the market to do that.

Do you have any HD news plans for Louisville?

Yes, but I don’t know that I can really talk about that because I can’t pin down the date for you. It won’t be tomorrow.

By the end of 2009?

To be honest with you, I would really rather not put a time frame on it.

You have extra spectrum with DTV. What are you going to do with it? Are you looking at second channels or mobile or what?

That’s another situation where I would say our competitors may be a little bit ahead of us on that. We have not put definitive plans in place except in Lima where we have the CW on a side channel.

One of the things about our company is that we are not very centralized. We tend to give each station a good deal of autonomy and that’s wonderful for the station, for the employees, for the general manager and it’s been good for our company, but the downside to that is we have not done a great deal of overview planning like that.

We haven’t sat down and said, OK, here’s our corporate strategy and plan for the DTV spectrum and so that’s something that is yet to come. Hopefully, in the near future, we’re going to be able to develop that plan.

How is your relationship with MNT? I know they have been revising their inventory deals with all the affiliates. Have you come to terms with them?

Yes, we have. I was very reluctant to participate in that because I feel like the original deal was that they were going to provide programming and create a viable network. Now they’re coming back and saying, well, we need more inventory to create a good, viable network.

On the other hand, it is absolutely in our best interest for that network to continue to grow. We’ve doubled the audience here in Louisville in the last year and they went out and they got the WWE, which I think is going to be very helpful.

I guess you need them.

Yes, but I don’t need them to be a 1-rated network. I really need them to start delivering 3s and 4s and they think they’ve got a plan so we’ve decided to be a good team player and participate.

The other revenue stream that’s talked about is retransmission consent. You should be doubly aware of this since you have the cable interests within your company. Are there any opportunities in Louisville or elsewhere to pick up some retrans money?

I think that this is going to be the year to do that. We have already struck a couple of what I think are very fair retrans deals.

It’s an interesting balance here because, philosophically, [Block Communications Chairman Allan Block], does not believe that television stations should be compensated by the cable companies and, philosophically, I absolutely do.

For him, it’s like taking money out of one pocket and putting it in another.

He’s not the kind of person who would have pushed the cable companies hard for it. I’m the one who’s saying, look, 50 or 60 percent of all your customers’ viewership is with the broadcast stations.

If we were gone, I don’t think cable could hold their interest for very long. We’ve put millions and millions of dollars into programming and we should be compensated if you’re making money from us. We’re bringing you viewers. Allan feels like the cable companies are providing a better, cleaner signal and bringing it to people who perhaps couldn’t get that type of reception. He thinks it’s a good marriage as it is and I respect that.

But he’s allowing you to go ahead and push pretty hard.

Yes he is. I’m telling you he’s rather conflicted. 

With all that’s happening—the networks moving primetime programming to the net, national spot getting smaller and competition getting stronger—do you ever get the feeling that the station business is starting to unravel?

We had these kinds of conversations in 1988, the last time the broadcast industry seemed to be unraveling. It was going to change so much in five years that we wouldn’t even recognize it.

The only thing I know for sure is, broadcast television is still the most powerful form of communication that has ever been devised and there is nothing even close and it is still the reigning heavyweight champion. I don’t think there’s anybody who wouldn’t strive to be where we are right now in terms of revenue, in terms of eyeballs, in terms of persuasive power. That’s still a pretty good place to be.

I can’t tell you what we’re going to be like in five years or 10 years or 15, but I still think that there’s going to be a place for a powerful broadcaster who serves their local community and serves it well.

What if Allan comes to you and asks: Hey, Raycom’s trying to sell a station over in Richmond or NBC is trying to sell a station in Hartford, should we go for it?

I’d still say this is a great business and I would say, yes, let’s go for it. If that particular deal is a sound, solid deal, you bet. But I do say—and I stress this particularly in light of some of the recent FCC rulings—that the future is serving the local community.

If you don’t do that the local community will reject you and then you’ve got a problem. So we don’t really need the FCC to implement more draconian, outdated rules about how we should serve our local communities because we get it. We’re the most highly motivated group of people you’ve ever seen to serve our local communities.