TV Stations' Online Bet Should Be All In

Gordon Borrell keeps a close watch on the local Internet marketplace, tabulating total revenue in the various markets and how it is being split among newspapers, TV stations, radio stations and the myriad non-traditional media companies, or what he calls "pure plays," that operate locally oriented Web sites.

In the lastest report from his firm, Borrell Associates Inc., he pegs 2007 local Web revenue at $8.7 billion. Of that, TV stations account for 6.9 percent, while newspaper take 24.6 percent and pure plays like Google and Craig's List grab 57.3 percent.

Borrell's perspective has led him to form some strong opinions about how TV stations ought to be exploiting the Internet and they run counter to how most TV stations are now trying to do it.

In this interview with TVNewsday Editor Harry A. Jessell, Borrell contends that TV stations' Web sites must be more than mere online extensions of their current brand and service. They must be freshly branded platforms that aim to be the No. 1 sources of all local information, including news, sports and weather as well as classifieds and directory listings, he says.

TV stations' carefully nurtured on-air brands are "baggage" on the Internet, he says.

Borrell also warns that as more homes get broadband connections and the ability to more easily watch video online, the Web will morph from being a take-it-or-leave it opportunity for TV stations to a serious competitive threat.

An edited transcript:

If you were advising a TV station group on what to do, what's the first thing you would tell them?

The first think I'd say is they need a very broad vision statement of what the Internet means to their business. They need a very clear picture of what they want to achieve. Frankly, what we see is a lot of tactical implementation and excitement over the next new shiny thing. Yet, the top executives at the company have not established the company's point of view.

And what should that vision be?

Each individual company has to set it. But if I were the head of that company, I would want the vision to be that we want the No. 1 Web site in the community where people come when they want any bit of information.

That includes the phone number of the local florist?

If I want to find out a local florist's phone number, if I want to find out why there's a traffic jam on the freeway, if I want to find out if there are any bikes for sale because I am concerned about the price of gas within my ZIP code, if I want to find out what happened at the school board meeting last night, if I want to find out if there are any CPA jobs available because this one really sucks... . It's the Boston.com approach to the market.

That's the Boston Globe Web site?

Yes. It's also important that the site not be branded as a television station. So it would be digphilly.com, which is WCAU's play in Philadelphia. It doesn't mean that you don't have a site for your television station, but I think a lot of TV companies are looking at this through such a narrow focus and missing the bigger opportunity.

Now hold on. You just said you like the idea of one site that does it all, provides you the news of what's happening along with the classifieds and the directory listings. Now you seem to be saying that TV stations ought to think about two sites—one for news, the other for other kinds of information.

I'm saying that the No. 1 site that people go to probably shouldn't be branded to the television station because that's a TV station site. People would expect TV stuff off of it. The No. 1 portal site would probably have a tab for the television station.

But isn't creating a portal site like Boston.com or digphilly.com throwing about 50 years of brand building and brand awareness around calls letters and channel numbers?

No, your brand is baggage on the Internet because the brand that you have developed is specific to the television medium. People will think they're coming to a television station site. Is the brand going to carry over so that people go to WOOD-TV for classified adds? No, it's not. I'm going to go to WOOD-TV to find news, weather and sports. Why bring that the baggage over to the Internet? Why not create a completely new brand?

If just the brand itself were so darn strong, then how come when we go to search something, we don't go to Britannica.com? Britannica was the biggest, baddest name in looking up information 15 years ago.

All Britannica.com did was use the Internet to protect and extend the brand. It forgot that this is about searching a billion other things that they couldn't control and sanitize and edit and put pictures up against. This is a different thing.

So it automatically handcuffs you if you're just thinking of this as just a television extension. I think you should do the TV site. Having the best, hands-down television station Web site you can is job one. But if that's all you do, you're missing out on 90 percent of the opportunity.

Some broadcast groups like Hearst-Argyle and Belo branched out into certain niches like high schools sports, but I don't see many of them working. Those sites don't look very lively to me.

No, they don't. But you can't fault them so much. If I were in the same position, with the same knowledge base, I'd be doing the same thing. It's a natural evolution mass media. People think: I know what people want, they want local more news, they want high school sports. This is a great way to extend that reach and to use the staff that winds up on the cutting room floor.

The Holy Grail is repurposing stuff that you're not using to its fullest extent—your sales people or your newsroom people. But that's a myth. It's never worked in the past.

The Internet is not a medium. It's a launching platform for other media. So, one of the opportunities for television stations is to launch a television station Web site. Well, there you go. There's one platform launched, but what they don't see is that it's also a platform for launching an interactive Yellow Pages directory. So that's the way stations ought to be looking at the Internet. How do we use the Internet as a launching platform to attack other media? How do we use it to attack newspapers, how do we use it to attack Yellow Pages, how do we use it to attack the radio guys, direct mail?

So give me an example of a television guy who seems to be doing it right.

I can't say that anybody is really doing it right, but there are quite a few that have a significant number of pieces to the puzzle. They've got the framework of the puzzle and are trying to fill it in and are directionally correct. I think Nexstar is directionally correct.

[CEO] Perry Sook's strategy is spot on. They're going to create Web sites about their local communities that do not carry the brand of the television station at all. That is a great strategy. They're going to leapfrog the other stations in the marketplace and potentially jump over the top of the newspaper sites. Look at the revenue build they've had. It's really, really good.

The problem is the [Nexstar] sites are just plain ugly. The pages look like a graveyard for logos. Design is one of the key issues I have with them.

It's going to be extremely difficult for them because they're a public company and it requires investment and Wall Street typically doesn't reward investment. They reward growth and this might be a long slow buildout for them.

Anybody else worth noting?

NBC Local Media. John Wallace took over that company last summer, renamed it NBC Local Media and is very interested in launching verticals. The first phase is Digphilly.com. He didn't start it; he inherited it, but he supports it and is enhancing it.

If you go to digphilly.com, you'll not find a lick of promotion for WCAU, but I can guarantee you that that particular site will have more and more cachet within the local Philadelphia community if they promote it appropriately because it plays to the unique capabilities of the Internet as opposed to trying to serve the goals of the television station.

TV stations have sat there and watched the Internet gut newspapers and gut the Yellow Pages, but they haven't really lost much business to the Internet. Do you see that coming?

They ought to really see the Internet more as a threat as it becomes more video oriented and as the networks put more programming on that bypasses the local TV station.

The first dozen years of the Internet were really about newspapers. It was much more text and pictures. That's why you see the television station sites designed like the front page of a newspaper.

In a few years, the majority of all households will have broadband access and at that point video becomes much more viable.

People will shift their terminology from saying, I was reading on the Internet last night, to saying, I was watching on the Internet last night. They're already doing that with things like YouTube and that watching is what's going to be of increasing concern to television.

Broadcasters will feel threatened by this increased usage of the Internet as a video medium and that's going to cause them to move forward. If you're motivated by opportunity, then you take your time; it's optional. If you're motivated by threat, you act very aggressively. So the newspapers have acted very aggressively in the past 10 years because they've been threatened. The television stations have that threat ahead of them and that's when we see all the activity.

Are today's TV broadcasters up for that challenge?

Some of them will transform themselves very nicely into Internet companies that also happen to own television stations, but others are just going to throw up their hands and say, we're just TV stations and we will just have a Web site to support TV stations. We're not going to do all of these other things.

Just like you saw in the late 1940s and '50s when some radio stations said: we're just radio; we are going to succumb to the fact that people aren't listening to radio in primetime anymore and we're just going to find a nice healthy niche here in drive time and just be radio stations. We're not going to try to fiddle around with this new thing called television.

For TV stations that want to go beyond news, sports and weather, what other businesses have potential?

The classified categories do. I also tend to think interactive Yellow Pages, in a way. Let's start with the classifieds. If the television industry got in its head that the Craig's List model was the way to go, where all the classifieds are free, and then put a concerted effort behind promoting that, it could kick the newspaper's butt in any market. It could create the biggest, baddest classifieds site where everything was free. Now how do they make money off of that? Well, they would make money the same way that Craig's List does—that is, by cherry picking the categories that it wants to actually charge for.

What about the Yellow Pages? That's potentially billions of dollars isn't it?

$13 billion, and that's going to fall by a little more than a third over the next four years. So there is $5 billion coming out of that industry flowing right to the Internet. In any market, it's probably a million or two that's going to shift so there's a significant amount of money. The problem is TV stations are not set up to go after small and medium businesses. The compensation structure for sales people isn't such that they're going to take a 15 percent commission on a $1,000 contract.

But TV stations are talking about drilling deeper for local dollars because the national dollars are shrinking.

If they try to do it with their existing broadcast staff, they take their eyes off the mark and their broadcast revenues will go down. It just doesn't make economic sense that they use these high-powered sales people to go after these small dollars. They need to add sales staff to it.

But here's the thing: I've got to tell you the cable guys and the Yellow Pages guys are already doing it. They are going after these small and medium businesses, almost every one of which is dying to do commercials, but heretofore has never been able to afford a broadcast schedule.

Have you ever seen a real estate agent that didn't have a color picture of themselves on their business cards? These people love themselves. They have egos. They just love to be out there in the marketplace with their pictures because they're marketing themselves. They're not trying to sell homes; they're trying to market themselves.

Create a directory of real estate agents, send a big TV camera out and say we're going to film a two-minute commercial of you standing in front of a sold sign talking about how great a real estate agent you are. They'll put on their best red pants suit and they'll show up early because they're going to be on TV. You shoot a two minute video of them, you put it down on the Web, you charge them $1,000 for the production, $3,000 for an annual listing and another $1,000 if they want the video to put on their own Web site. That is the exact price point that some of the Yellow Pages guys are using for a video listing. So how many $5,000 packages could they sell to real estate agents or for that matter, to plumbers, to pet stores, etc., etc. Well, all the cable guys are doing this and all the Yellow Pages guys are doing it. Why not broadcast TV?

A lot of broadcasters have gone on the Web through these national Web developers—Internet Broadcasting, WorldNow, Inergize. Is that really a good idea or should these guys be taking full control of their Web operations?

It's been a good thing from an educational standpoint and it's been a good thing in that you don't want to handle all the technology in-house. Why not farm this stuff out and have these people who are working with Web sites across the country help you understand what's going on?

Those companies are also a way of tapping into national ad dollars. They've developed their own national advertising delivery platform. That makes a hell of a lot of sense because the Internet is a network of networks and certainly the national advertising capabilities that it offers are huge.

Unless you participate with one of these guys, you're just never going to be able to participate in that. We've seen quite a few TV sites that are getting more than $1 million in national ad revenues. But we see quite a few stations that are even bigger getting nothing. So there's $1 million left on the table because they don't participate in these networks.