THE PERFECT STORM
Broadcasters face a gloomy economic outlook
by Deborah Potter

For most news directors, budget season isn’t much fun. After all, who really likes crunching numbers? But this year, it’s going to be downright painful.

“For the last three or four years, we’ve said 2009 is the perfect storm,” says Jerry Gumbert, president and CEO of the broadcast consulting firm AR&D.

Why such a gloomy prediction? Things weren’t looking that bad last year, with more than half the TV news directors surveyed by the Project for Excellence in Journalism saying their budgets were increasing. Many of them were even hiring new staff for the web. But local news ratings dropped in 2007 for the second year in a row, according to [the RTNDA/Hofstra University Annual Survey, as quoted by] PEJ, and the competition for advertising dollars continued to intensify.

Now, in a slumping economy, the perfect storm is taking shape. National sales revenue is down sharply, more advertising is moving to the Internet every day, and by next year, any short-term bump from political ads and the Olympics will be a distant memory. That’s the climate in which news directors are sitting down to block out their 2009 budgets.

“The majority of news directors are paralyzed by this,” Gumbert says. “They don’t understand it at the level they probably should because they’ve never had to.”

Now, they absolutely have to. Only news managers who know the business side can make wise decisions that allow them to keep doing good journalism in troubled economic times.

Economic Factors on the Horizon
“ I’ve always said that news people are somewhat disconnected from the reality of the station as a business,” says WHAM-TV general manager Chuck Samuels, a former news director, who admits it’s not entirely their fault for being uninformed. “Some stations guard financial information like it’s Fort Knox.”

This year, Samuels made an unusual presentation for the entire staff of his Rochester, NY, station. He shared market data showing that overall TV ad revenue in 2007 was the lowest it’s been in 14 years and explained that things are not looking up.

“I asked them, ‘How many of you want to make less money this year than last?’ When no one raised their hand, I said, ‘Neither does the company.’”

The companies still make plenty, of course, but not as much as they once did. For publicly-traded businesses accustomed to a 40 percent profit margin, 20 percent profit seems paltry—especially to Wall Street.

At one time, being part of a larger company might have insulated a station from economic shocks. Today, big media stocks are in free fall. CBS lost 19 percent of its value in the first quarter of 2008. The News Corp. stock was down 10 percent. Stations owned by groups that also own newspapers are especially pinched, because so much of the classified advertising they’ve depended on for years has moved online. Nationally, more ad money is now spent online than on radio commercials. And most of the online spending goes to “pure play” Internet sites, which last year hauled in five times as much as broadcast TV sites, according the research and consulting firm Borrell Associates.

Then there’s the slump in car sales. In some markets, up to 40 percent of local TV ad revenue comes from car dealers, so when the auto industry gets a cold, TV newsrooms sneeze. This year, Detroit has pneumonia. J.D. Power forecasts U.S. new car sales will hit a 13 year low—bad news not just for dealerships but for television and radio stations across the country.

Another factor for some stations is the crushing corporate debt taken on by ownership groups. Citadel Broadcasting, which made a $2.7 billion deal in 2006 to acquire 24 radio stations from ABC, reported a net loss of $848 million in the fourth quarter of 2007 compared to just over $1 million a year earlier.

The Law of Large Numbers
So when the people upstairs tell news managers they have to shrink the budget, it shouldn’t come as a surprise. The question is, where and how will you do it?

“Hysterics are uncalled for,” says Walter McDowell, associate professor at the University of Miami and editor of Understanding Broadcast and Cable Finance: A Handbook for the Non-Financial Manager. “If you can cut from a story when it’s too long, it’s just a matter of discipline—in journalism and business practices.”

Of course it’s going to hurt, McDowell says, but news managers who get the “cut” sign need to know where to look. “I call it the law of large numbers. Look at the big ones first. You can’t make budget by saving on paper clips.”

The big numbers in any TV or radio station are salaries, and cutting them usually means not filling open jobs, reducing salaries or letting people go.

Those moves may come as a shock in some newsrooms, says Sandra Connell, president of the recruiting firm Talent Dynamics, because news staff have been in denial for years.

The era of the “unreasonable paycheck” for big name anchors is over, she says. “Talent need to get real about it all,” Connell says. “People need to understand the pressure people they work for are under, step back and appreciate the opportunity they have.”

That message is coming through loud and clear as stations have already started retrenching, some more publicly than others. In March, Citadel axed well-known radio journalists in Atlanta, Washington and Chicago, including WLS-AM news director Jennifer Keiper. In April, CBS-owned stations from Los Angeles to Boston made headlines when they laid off scores of high-profile, highly-paid staffers all in the same week.

News director Scott Libin of CBS owned WCCO-TV in Minneapolis wouldn’t discuss the specific cutbacks at his station, but he said managing in tough economic times is always a balancing act.

“On one hand, a big part of my job is to create an environment in which people can do their best work,” Libin says. “On the other hand, I think it’s irresponsible to foster blissful ignorance in which people have no real concept of market realities. A false sense of security can mean that staffers are really floored when they find that all is not well.”

Smart Leadership During Financial Duress
Libin says he tries to be honest about the business climate in one-on-ones and group meetings so people don’t feel blindsided.

Keeping people informed is just one of the critical steps newsroom leaders need to take in the current economy.

“Especially in an unsteady economy, managers must grapple with their employees’ anxiety [and] offer more verbal support,” write co-authors W. Stanley Beecham and Michael M. Grant of the Leadership Resource Center in Atlanta.

Leading an organization effectively through tough times requires a set of skills that aren’t always widely valued, according to a survey by the Center for Creative Leadership.

“The greater the stress an organization is facing, the more important the ‘soft’ side of leadership becomes,” the survey says. This includes the ability to establish a climate of trust and empathy.

The survey found that leaders who were best at helping their organizations manage change “listened well, demonstrated sensitivity and were willing to articulate clearly the rationale and necessity for change despite the pain those changes might inflict.”

The pain may not be evenly distributed in broadcast stations, of course. Personal contracts and union rules often dictate what managers can do to cut costs. But WHAM’s Chuck Samuels says that if you have any flexibility, don’t just look at dollars and cents. “Look at the overall operation and figure out how you can manage with fewer resources,” he says. “Just because you have less doesn’t mean you’re not as good.”

In fact, he says, you might even be able to improve your news organization by getting rid of “under-performers.”

But even if the person leaving was the least productive member of the news team, Samuels says, it’s important to recognize that others will feel a sense of loss. “Show compassion and empathy,” Samuels says. “It’s not unlike grief counseling.”

At WISN-TV in Milwaukee, news director Lori Waldon involves her staff in the effort to manage costs such as overtime and travel. When the University of Wisconsin Badgers made the NCAA basketball tournament in March, for example, sports reporter Andy Kendeigh found ways to economize.

“He did his homework and put together his own budget, and pointed out where we could save a few dollars on inexpensive hotels and transportation,” Waldon says. “Since we didn’t send our satellite truck, Andy worked with our assignment editors to find the most cost-efficient way to get our live shots. It made a huge difference.”

That said, Waldon tells her staff that she never wants them to hesitate to jump on the big stories or breaking news, even if it means overtime. “Their job is to cover the news aggressively and excellently,” she says. “My job is to manage the costs.”