Local TV's Quiet Marketing Problem

LocalProximity
Written By Tim Hanlon

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Local broadcasters have spent years adapting to cord-cutting, streaming competition and slowing linear audiences. Those challenges remain central to the industry's future. But another structural change has received far less attention: many of the companies that once helped reinforce television viewing are no longer in the business of promoting television itself.

A revealing panel at last week’s NCTC Independent Show underscored that shift among smaller independent cable operators. It asked a straightforward question: what value does traditional television still hold for operators that increasingly define themselves as broadband providers rather than video companies? For many independent operators, the answer is increasingly clear. Video remains an important service, but it is no longer the primary business. Instead, it has become one element of a broader customer relationship centered on broadband.

That evolution is both rational and understandable. Broadband has become the industry's principal growth engine, while the economics of the traditional video business have grown steadily more challenging. Yet the implications extend beyond the operators themselves. They reach into the competitive environment facing local broadcasters.

Cable Once Reinforced TV Viewing

For much of the cable era, broadcasters understandably viewed distributors as pipelines into the home. In practice, they were something more. By marketing cable service, operators also marketed television itself. They promoted expanded channel lineups, premium programming, digital upgrades and new viewing experiences, all of which reinforced television as the default destination for news, sports and entertainment. Local stations benefited from that reinforcement even when they were not the focus of the marketing.

The relationship was hardly free of conflict. Retransmission negotiations often became contentious, and broadcasters and cable operators frequently found themselves on opposite sides of regulatory debates. But both industries shared an underlying commercial interest: television remained more valuable when it occupied a central place in consumers' daily lives.

Today, that alignment has become less pronounced. Organizations representing smaller cable operators increasingly describe video as a mature, economically challenged business while identifying broadband as the industry's long-term opportunity. Their priorities naturally reflect that reality. Television remains an important part of the customer offering, but it is no longer the product around which the business is organized.

That shift changes more than financial priorities. It also changes incentives.

Broadband Changed The Business Logic

A broadband-first provider has little reason to promote one source of video over another. Once a customer purchases an internet connection, the provider's business objective has largely been met whether that household spends the evening watching a local newscast, a streaming service, a gaming platform or social media. From the provider's perspective, the destination matters far less than the connection.

For local broadcasters, that represents a subtle but meaningful change. For decades, they benefited from marketing they did not have to pay for. Every campaign encouraging consumers to upgrade their cable package, every promotion highlighting more channels and every effort to make television central to the home entertainment experience also reinforced the habit of watching television. Local stations were among the beneficiaries of that ecosystem.

Habits rarely develop by accident. They are built through repetition, convenience and reinforcement. For generations, the cable ecosystem supplied all three. Local stations occupied familiar positions in the channel lineup, were easy to discover and remained part of a viewing routine that required very little effort from audiences.

That routine is evolving. Streaming, mobile devices and on-demand viewing have given consumers more choices than ever before, while broadband providers increasingly compete on speed, reliability and connectivity rather than television packages. None of those developments is inherently negative, nor do they diminish the enduring appeal of live local news, weather and sports. They do, however, create a marketplace in which fewer companies have a direct commercial interest in reinforcing television as the default viewing experience.

The audience data suggest that broader viewing habits are already changing. Pew Research Center has found that Americans are relying somewhat less on local television for news than they did several years ago, while the share who say they follow local news very closely has declined more noticeably. Those trends clearly have multiple causes, and no single explanation adequately accounts for them. Still, if one of the institutions that quietly reinforced television viewing for decades is stepping back from that role, it is reasonable to consider whether the industry's habits are changing along with its economics.

None of this is intended as a criticism of independent cable operators. They are responding rationally to a marketplace in which broadband has become the principal driver of enterprise value and video has become more difficult to sustain economically. Rational business decisions, however, can produce broader industry consequences.

At the same time, one of broadcasting's most important financial supports is beginning to mature. S&P Global projects retransmission revenue growth to flatten after years of remarkable expansion. Retransmission consent remains essential to the economics of local broadcasting, but it is increasingly viewed as a business entering a more mature phase rather than one capable of offsetting every other structural challenge facing the industry.

Broadcast Stations Now Need To Do More Of The Work

Taken together, these developments point toward a different way of thinking about local television's future.

For decades, broadcasters operated within an ecosystem in which nearly every major participant benefited when television remained central to American households. Manufacturers sold televisions. Cable operators sold television packages. Programmers sold television networks. Broadcasters sold advertising against television audiences. Each business had its own objectives, but all had a financial interest in reinforcing the medium itself.

That ecosystem is changing. Many of the companies that once helped make television indispensable now compete primarily by selling broadband connections that work equally well for streaming services, gaming platforms, social media and countless other digital experiences. Their business no longer depends on where customers spend their screen time once they are connected.

For local broadcasters, that changes the strategic question. The challenge is no longer simply preserving distribution. Broadcast stations remain widely available through cable systems, virtual MVPDs, over-the-air reception, connected TV platforms and their own digital products. Distribution is still important, but availability alone does not create habitual viewing.

For much of the cable era, distributors delivered more than reach. They also reinforced television as the default way audiences consumed news, sports and entertainment. As their incentives evolve, local broadcasters may increasingly have to cultivate those viewing habits themselves.

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Tim Hanlon

Tim Hanlon is the Founder & CEO of the Chicago-based Vertere Group, LLC – a boutique strategic consulting and advisory firm focused on helping today’s most forward-leaning media companies, brands, entrepreneurs, and investors benefit from rapidly changing technological advances in marketing, media and consumer communications.

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