Broadcast TV’s Fork In The Road: Sports, Streaming And The Fight For Relevance

On the latest episode of In the Vicinity, local media veteran Tim Hanlon goes solo to unpack what the latest broadcast earnings reports reveal about the future of local TV. From sports rights and retransmission fees to ATSC 3.0 and streaming strategy, Hanlon breaks down how major station groups like E. W. Scripps Company, Gray Media, Sinclair, Inc. and Nexstar Media Group are taking sharply different paths into an increasingly digital future.

As the RSN model collapses and political advertising becomes both a lifeline and a risk, broadcasters are being forced to rethink what “local television” even means in a streaming-first world. Hanlon explores which companies are focused on maximizing the old model — and which are betting on reinvention before the clock runs out.

Listen to the full In the Vicinity podcast above or get it on Apple Podcasts and Spotify.

My name is Tim Hanlon. This is In the Vicinity. Welcome. It's our little weekly sojourn into all things local media, usually in partnership with my pal Jim Wilson, the CEO of Madhive, and board director at places like Audacy and GSTV. Jim's got the week off this week, and it'll be yours truly solo this week.

Hopefully we don't bore you to tears. But we're gonna kinda just roll through a couple of pieces of information and things that we've seen in the last couple of weeks that caught our eye, and in particular, the latest round of broadcast television analyst reports are out. And I kinda thought we'd kinda just dance around some of these.

And in particular, these are the most exposed publicly traded entities in the broadcast television space. And in particular, I'm talking about four companies. That's E.W. Scripps, Gray Media, Sinclair, and Nexstar, the on-again, off-again owner, we think, we don't know, probably not, perhaps, maybe, I don't know, of TEGNA as well.

For the moment they are. But it's interesting to go through these reports, and obviously these are done on a quarterly basis to Wall Street and other investors, on where the relative health of the local broadcast television business is going.

And it's striking to see how both similar and dissimilar their narratives are, and their strategic positioning is versus one another. So I'm just gonna pick out a couple of different themes that we've seen here. And you can go online and read the transcripts and see the analyst reports and stuff.

But one thing that's unmistakable is that each of these four companies, Scripps, Gray, Sinclair, and Nexstar, and others like them, might be separately held. There are a number of other independent groups out there, like Hearst, which is part of a mostly privately held entity. There's Allen Media, which still owns a bunch of stations and others out there.

The entire industry seems to be not so quietly anymore pivoting towards sports. Sports is the first and foremost thing that you're hearing these days in the broadcast up-fronts or the television upfronts. Let's call 'em maybe the video upfronts these days, right? Whether you're a streamer or a broadcast network heritaged media entity.

And the local side of things is no different. They're each going about it a bit differently. I think Scripps is probably the most hard pivoted towards sports. It's in many respects becoming a core identity of the company, Scripps Sports, Brian Lawlor and team, literally as we record this just announced the Detroit Pistons are gonna bring the bulk of their local games to the Scripps station or stations depending on how the schedules play out, for over-the-air broadcast for next NBA season.

As we've talked about in previous episodes, that is itself a response to the decline of the regional sports network world out there. And Scripps has been very aggressive in building sports. A lot of women's sports, too NWSL, NWHL, the WNBA, of course, on the ION network side of things, but also on the local front as well, with a number of teams out there, both in NHL and elsewhere.

And I think you're gonna see a lot more of that. Gray, I would argue, is a solid number two with a bullet in that space. They're a little bit more of a traditional broadcaster in the sense that, I don't think they're thinking as aggressively into s- into streaming with regards to sports, at least in the near term.

But Gray is probably the most aggressive in terms of regionally playing out these over-the-air broadcast entities. There's a piece I did a couple of months back on TVREV that literally u- outlines an entire map of the country, where Gray basically is taking a handful of stations in particular regions, in the New Orleans area or in the Pacific Northwest or elsewhere, and literally creating, if you will, mini regional networks comprised of mostly Gray's TV stations their diginets, and turning on and off these things called Gray Sports Media different brand names and stuff for them.

Just really interesting stuff. And Sinclair, obviously a big sports player with their ownership in Tennis Channel and stuff and Nexstar with The CW, right? These are probably, along with Gray, a bit more traditional broadcast-centric in that sports is essentially helping prop up the traditional broadcast business.

But Scripps, I think, is being a little bit more innovative by trying to branch out beyond just that. And that's what I think is maybe the second point I'll bring out, is this idea of retransmission consent. Now, we know retransmission consent has been essentially the saving grace for the broadcast television space.

And as television station groups have gotten bigger over the last decade or so, right? The leverage that these broadcast groups have in this sort of never-ending battle with cable/satellite now, and now even streamers, entities like Fubo and YouTube TV and the like, in terms of how much those entities need to pay for the carriage of these local broadcast stations, right?

As advertising has gone flat, shall we say. The retransmission consent fees that network operators have had to pay these broadcast groups has only gone up, and it's ironic considering that there's been a lot of decline, shall we say, in the network operator space. People subscribing to cable has gone way down, continues to go down, albeit maybe in a slower, at a slower pace, and the advertising does not go as far in terms of its reach and scale, yet the retransmission fees have gone up.

So it's a very interesting dynamic that's playing out. But retrans, the... I think it's, there's no escaping if you read these analyst reports from this last quarter, that I think there's clearly an understanding that retrans alone, while durable over the last decade plus, is starting to maybe near its natural end.

Nexstar is in the let's squeeze out as much as we can monetization role for retrans, and we're just gonna try to get as big as we can to keep playing that game as long as we can. I think Sinclair is very much in that vibe, too. They've got a bunch of cable assets and stuff.

And Gray is certainly a pretty big player and purveyor of that, too, in their local expertise. But I think you're gonna see from Scripps a little bit more embrace of streaming. You see it now with the Scripps Sports Network play, which is now a streaming fast channel in addition to being the brand that supports a lot of their sports efforts over the air on television as well.

Ion obviously is and has been available as a simulcast as a free streamer in addition to broadcast television, and I think you're gonna see streaming become more of a part of what Scripps does on the local sports front, too. So that's interesting to see. I think everybody in the broadcast space is touts, of course, we've seen this in the analyst reports, political advertising.

It's becoming more important by the cycle, but it's also becoming, I guess you could say, a bit more dangerous, I think, because broadcasters, obviously every two years in particular are increasingly dependent on a very volatile, he says. Sorry. It's been a long day. Biennial kind of windfall, right?

Every two years. It's, every third and every first sorry, second and fourth years or the every in between year, too, has a little bit of a spike too once in a while. But what that basically is masking, and we've talked about this for many cycles here, is that while that may increase every two years, the core linear audiences that watch television news in particular, continue to age and fragment, and in many respects, the core advertising dollars coming from whatever other than political ads, whether that be retail or auto or those kinds of things, tend to be more wobbly less sustainable, and actually decreasing.

So it's really becoming a challenge to hang on, if you will, in between these buoyant political advertising cycles. There is that to continue to watch and arguably you're seeing that reflected in the reporting that of course, this is gonna be a bumper crop again this fall.

But then again, it's gonna get quiet very shortly thereafter and how does a broadcaster survive with advertisers other than political going past all that? I think it's also unmistakable that the collapse of the regional sports networks, and we've talked about this too on a number of occasions, in many respects is almost rewiring what local television is, the local television industry.

All these rights, obviously, are now up for grabs. There's a lot more consternation as to whether or how these local rights will get to consumers, what the revenue streams might look like. I think the days of RSN being the big fatted calf that essentially drives local revenues for these teams and then their and their talent and that kind of stuff is at least in the short term, pretty much over with, right?

And replacing it with local scale on broadcast is a nice solution and a good consumer/fan thing to do. It essentially alleviates people from having to scramble to figure out other ways to watch these games, but it's certainly not nearly as remunerative, right? Advertising in a broadcast landscape, especially one that is over the air and is not IP-enhanced or targetable, only goes so far, right?

So it's not gonna be a one-for-one replacement. But it does push the issue about I think philosophically, where these broadcast stations are going, right? The, there's, the hold to the traditional broadcast model, we reach all entities as widely as possible in a particular market. That's the hallmark of broadcasting, has been forever.

But as the world becomes more streaming first or streaming only, there's a glaring absence that these broadcasters are starting to recognize, that they are not really players in streaming. They're still treating these streaming offshoots as that, offshoots. As an add-on, as an addition, as a separation, a distraction, if you will, to quote-unquote, "mainline, predictable revenue stream of a broadcast." But the reality is that we're seeing some diversions of thought, and these really came out clearly in these analyst reports over the last couple of weeks. I would argue there are a couple of camps. I think camp number one is those who are all about optimizing the existing model, and I think Nexstar is at the head of that class.

Gray probably number two with a bullet in that class. Hinted at it earlier. Collectively, Gray and Nexstar are in the camp of they believe that retrans is still a big deal, scale still matters, aver- political advertising is still a powerful revenue generator and supremely important.

And a belief historically and, it's hard to argue, that local stations traditionally possess some kind of relevance economically in their particular markets. And thus, the strategy is consolidation, championing M&A, reducing costs, maximizing cash flow, squeezing out as much revenue from that traditional retrans plus advertising, in that order, business and doing their best to extend the lifespan of that existing ecosystem.

And those are folks, and I guess maybe you could put Sinclair partially in that category as well. These are the entities that really are pushing for continued consolidation and using those sort of scaled economics to, at least for another cycle, how many years that cycle would last, TBD, and to be discussed, to be debated, but the idea is to extend while the future figures itself out.

Now, I would argue you put maybe the other half of Sinclair, and certainly Scripps, into perhaps another camp. And I would say that they're-- this is more of a group that... And I don't know where Hearst would sit in all of this. I don't know where Graham Media stations would sit in all this and all the others, the Morgan Murphys of the world.

But I would definitely give Scripps some props on this, and I would categorize this as more of a, an admission of a need for evolution. Not saying that those other t- groups don't n- see the need to evolve, but I think Scripps, and partially Sinclair in a very different manner, don't see themselves strategically as much as being broadcasters as much as, say, being, if you will, local media companies or something evolved from being a local broadcaster in linear form.

What do I mean by that? The traditional affiliate retrans model is a little bit more suspect in these places. The expansion of sports and their strategic investments in and relationships with pro sports and college sports and amateur sports and stuff seems to be more aggressive. There seems to be more of an embrace, certainly at Scripps, with streaming And hybridizing, if you will, those kinds of things.

Let's look at ION, look at Scripps Sports, and I think frankly, just more of a consideration towards operational rethinking and redesign. Now, Scripps, I would argue, is probably doing that within the constructs of broadcasting and local. I think Sinclair probably would be given more credit for thinking even more broadly beyond that as sort of infrastructure when you look at them being, Sinclair the biggest booster of the ATSC 3.0 digital spectrum play, right?

Which is its own can of worms, but th- there's-- make no mistake that if you think even the longest term, Sinclair is supremely positioned very well by, by all their investment and activity and bankrolling of the thought process behind what the broadcast signal can be- can become, which is, the ultimate perhaps exit strategy for broadcasting when you think about it, and that's this blending of this technology of broadcast and IP to create a much better and more robust, I wouldn't even call it television anymore, but video ecosystem.

And we've also talked about, and you've heard me lament on numerous occasions that, of course, that spectrum could also be used for other purposes too, beyond broadcasting. I'm a little less sanguine about that. I certainly see the economic opportunities. My sense is that it should be about broadcasting and its evolution first.

That's what the spectrum is for. And I guess I would say that, e- essentially all-- that's what broadcasting essentially is headed to a much more robust, I don't know intriguing future that hopefully will include a robust amount of new formed video business to it that's more television, more streaming, and all that kind of stuff.

And I guess my point is that Sinclair operationally and maybe s- and Scripps maybe more strategically within the realm of broadcasting, maybe a little bit further along on that curve than the other ones. So I, these are just some thoughts about, where we see these analyst reports leading us to, and I think it remains to be seen over the next, the remainder of the decade what's gonna come from broadcasting, especially as each broadcaster tends to be, I don't know, kinda taking some separate stakes, some separate approaches to how they may play these next number of years.

And again, if you think, five to 10 years out, maybe we're on a new broadcast spectrum with 3.0. We'll have many more channels available, a lot more focused advertising and targeted advertising environments and that kind of stuff. But until then, what happens? I think you'll see Nexstar continue to be the disciplined sort of cash flow optimizer approach We'll see what they do with The CW and that kind of stuff, but and being a big champion of M&A and trying to squeeze out more of the current model as, as long as they can last with it.

I think Sinclair is putting most of their chips towards not only consolidation where they can find it, but certainly towards what 3.0 may portend and bring to the broadcast industry overall. We'll see if others fall in line with that and just how quickly that 3.0 vision can finally come into the market.

I think you will see Gray continue to be very operationally focused in their local markets of specificity. I think they're more of a versus, say, a Nexstar, which tries to be all things to all across the country. I think Gray is trying to double down to be all things local in their markets that they're respectively in, and not caring about the ones that they're not in.

And I think Scripps perhaps singularly is the one kind of to watch in terms of the innovation front. I think they are doing the most with the least, shall we say, in terms of scale and whatnot and certainly leading the way when it comes to sports-driven innovation. And we'll see both on the network and the local station level, how far that gets them.

I think and again, to give them kudos probably they're more aggressive in terms of at least simulcasting streams and trying to figure out what that sort of unified audience might look like across a station, across over-the-air, across digital, and across a stream. God forbid you could collectively measure and aggregate that audience across those different places, say, when you're watching the newscast, and sell an advertiser to that aggregated audience.

I think Scripps is probably gonna solve that sooner rather than later. But all that said, I think it's unmistakable to not call out the fact that the broadcast television landscape and the broadcast television industry continues to be supremely challenged, and maybe the last of the media realm to get with the IP internet/digital sort of a protocol of things.

And I think we're clearly moving towards, we see it with broadcast television now, the upfronts have shown this as he wraps up his commentary here this week. These upfronts aren't even about broadcast anymore. They're not even about television anymore. They're about video. It's... and the streamers talk about broadcast reach for certain programs and sports and stuff, and those formerly known as broadcasters are talking about their streaming relevance.

They're both trying to emulate each other, and at the end of the day they're all essentially video companies. And it's just very interesting to see how broadcast television stations are the last major media to come to that conclusion. And I think now you're gonna see in the next couple of years, broadcast stations really trying to figure out, "How can we stay relevant as streaming and digital infrastructure becomes the manner by which the future of local will get to people going forward.

And I think that's gonna be harder for some and easier for others. And that's why I'm fascinated by how each of these different broadcast groups and others are strategically positioning themselves and telling Wall Street how they're gonna try to get there. All right, so that's enough of me yapping this week.

Thank you for listening thus far. We are likely to have Jim back for some more conversations in the weeks ahead. We actually may be bringing in some other guests too. We've had this sort of on the roadmap for a lo- the, since the infancy of this show. Stay tuned because it won't just be me and/or just me and Jim, but we're gonna try to have a variety of voices where we kinda j- grapple with the various issues that we love to obsess about here on the show, talking about all things local media.

So my sincere thanks to the team at TVREV this week. That's Melissa Hourigan and Jason Damata, especially this week. Our friends and pals at Madhive, including Jim Wilson, and the team, Stephanie Nerby, and and all the others there. And of course our great pal, Jerry Payne, for his audio excellence this week.

We can't do this show without him either. And thanks for listening. More to come. And thanks for joining us this week In the Vicinity. See ya.