Everyone expected a rebound in 2010 for the network upfront selling season. With a recovering economy and a strong political advertising marketplace for the second half of 2010, the networks were expecting a strong, active selling period. What was not expected was the speed in which this network upfront selling season would be completed.

Fox, with its strong lineup of programs and the fewest number of hours among the four major networks, completed its sales first. Moreover, it has been reported that the Fox network also sold 80 percent of its inventory in the upcoming Super Bowl, a level usually reached much closer to the actual airing of the game. It appears that marketers, spooked by the economy of the past year, were strongly motivated to buy into an event that gathers more eyeballs than any other during the year. Fox’s rates for the Super Bowl also seemed in line with recent pricing of that event on other networks. The CW network, with fewer hit shows but demos that advertisers covet, was next to finish and showed a nice increase largely on its strategy of bundling on-air and digital elements for its advertisers.

While there was some concern among network executives that Fox had not lived up to CPM increase expectations by going first, CBS appeared to have been able to use its top positioning to gather a 10 percent increase in CPMs over 2009. Some ad buyers had scoffed at the thought of paying that much of an increase. However, NBC seems to have bundled its broadcast and cable assets to the tune of about $4 billion in upfront commitments.

The totals for this year’s upfront, according to AdAge, are estimated to be between $8.1 billion and $8.7 billion. That figure represents a strong increase over 2009’s total. While the broadcast business continues to face increased competition for audiences from other platforms, it appears as though marketers and their agencies still believe network advertising’s ability to deliver large audiences still justifies a significant presence in ad budgets. Also of interest is that some of last year’s more challenged categories like autos and the movie studios seem to have restored spending in this year’s upfront market.

While the overall numbers are up a healthy percentage, the totals for this year will not get the broadcast networks back to where the market was just a few years ago. The networks had to sell a lot more inventory in 2010 to achieve the figures just referenced. A result of having fewer rating points to go around will mitigate those CPM increases.

On a competitive note, it also appears that the cable upfront should be healthy as marketers see the benefit of upping the amount of cable network inventory to their media plans. Indeed, Turner took a lot of the air out of the room this year with the double developments of having both NCAA Men’s Basketball tournament coverage and Conan O’Brien on its schedule for the upcoming season. Turner even had the audacity to ask media buyers for the same rates they’d been paying for O’Brien’s content on “The Tonight Show” on NBC. Cable was also able to get the same increases in CPMs that the broadcast networks received. Further evidence that the divide between cable and broadcast buying metrics continues to shrink.

The potential reasons for this rapid upfront selling season probably are varied. First, it could be that many large advertisers, having been limited players last year, did not want to get shut out of the opportunities from the networks, especially in the most popular shows. Indications that many national advertising categories and specific national advertisers were going to come back into the marketplace might have motivated more advertisers to make bigger commitments. Furthermore, these advertisers might have been worried that the scatter market pricing in the next season was going to be substantially higher than the upfront market, much like the past few months. Better to buy early and back out later.

Faced with this increased interest in purchasing advertising time by national advertisers, why would the networks have so quickly sold their inventory? Of course, some of this quickly sold inventory was sold at higher prices, but the reported price increases (5 percent to 10 percent) do not appear to be enough to warrant that decision. Were the networks just being risk adverse — the old “bird in the hand” attitude? Did the networks have concerns that the economic recovery is not as strong as some have hoped? Could that lead to a possible contraction later in the year for advertising demand? Any of these reasons might have prompted the networks to agree quickly to these deals. And, if they are wrong and the economy does continue to grow and advertisers are still spending, then they can sell their remaining inventory in the scatter market at higher prices.

For whatever reasons this upfront market has cleared, it is an encouraging sign. The demise of this annual ritual between the networks and the agency community has been rumored for years and continues to confound the experts with its ability to survive. Major brand advertisers continue to express a strong interest in including broadcast network inventory as an important part of their overall advertising mix. While there is an ongoing and increased level of competition from within the wider television industry and the overall advertising marketplace, the mass audiences that some network programming provides is still very important for advertisers to exploit.

Are we in for the fourth golden age of radio? John believes we are.

There have been three golden ages thus far. The first, 1935-55 was highlighted by the explosive growth in the early days of radio as most local stations were merely conduits of major networks. The second age, 1960-75, came after the introduction of television forcing radio to reinvent itself. This was the era of the monster jock and Top 40 AM radio leading to the mass adoption of FM radio. The third age, 1980-99 featured the growth of music on the FM dial and AM’s migration to Talk Radio. The end of the third Golden Era was a feature of listener fatigue coming from tighter playlists, a lack of innovation in music formats and a saturation of commercials.

John believes that Internet radio is now filling FM’s void by going small and featuring niche formats and artists that can’t survive in terrestrial radio. Radio’s Fourth Golden Age’s real advantage is that it places the listener in control. This personalization is being driven by four primary players: Last.Fm, Slacker, AccuRadio and Pandora (the largest player in this space owning about a 25% share of the online radio audience).

It’s also about a wider variety with more genres and channels. The lower cost structure of internet radio gives it the opportunity to go small and look for the long tail. That lower cost structure also means that these Internet radio players can survive on a diet of fewer spots. The lower spot loads are cited as the #3 reason why listeners prefer Internet radio.

One other feature of the fourth golden era? Ubiquity. These online players continue to grow their presence across devices and now into our cars.

The internet listening audience is around 43 million. However, the explosion of mobile is likely to accelerate the growth of internet radio. Pandora estimates its average quarter hour audience total will grow from about 250,000 to 340,000 by the end of this year. Pandora generates about 4 cents per listener hour vs. the commercial radio average of 10 cents. Gehron admits that the internet radio actors will need to raise their rates beyond their current $5 CPM if they’re ever going to catch up with commercial radio.

Gehron believes Internet radio is offering the consumer exactly what they want: variety and control. He’s wondering when the commercial radio world is going to join in and do the same?

Good question!

For broadcasters, it is an article of faith that “localism” is a point of differentiation that adds value to their operations. Localism tends to mean local news, sports, weather, traffic, local events, coverage of local government and other promotional and volunteer involvement in the community. There’s a lot of chatter about what it takes to succeed with true “localism.” This past year has seen some notable localism failures. Other efforts are in a nascent stage

One case in point is Allbritton Communications, based in the Washington DC-area. Its television stations are affiliated with ABC, with the largest property being WJLA-TV, the ABC affiliate in the Washington, DC market.

Our primary interest was the fall 2009 announcement of Allbritton’s plans to launch a Washington, DC focused news site that will combine with the WJLA and NewsChannel8 television and web operations. To launch this new local news site, Allbritton hired Jim Brady, the former editor of Washingtonpost.com, The site is set to launch in Spring 2010 and will have about 50 more news staffers on hand.

We recently talked with Allbritton’s SVP of Legal and Strategic Affairs Jerry Fritz, who supports Robert Allbritton (the family-owned company’s Chairman and visionary) and Fred Ryan. These three executives are the key architects of this strategy. Fritz has a long history with the company that spans more than twenty years.

While the timing seems very fortuitous, Jerry Fritz tells us it’s really the culmination of a plan that was devised back in the late 1980s, when Allbritton (who used to own The Washington Star) saw an opportunity to build a strong local franchise to compete with the newsgathering prowess of the Washington Post.

The first effort under the plan was the launch of NewsChannel 8 distributed over local cable systems. NewsChannel 8 was, at first, a separate operation from the local broadcast television station. A truly, locally focused news operation; NewsChannel 8 broke down its news for the area’s three separate and distinct geographies with a mix of local, lifestyle and political programs. It was a pioneer and in its early days, NewsChannel was a tough sell for audiences and advertisers. Its programming and appeal have grown as the product has matured and its mix of local news and lifestyle shows (Political talk to local golf) now attract larger audiences plus a mix of larger and smaller advertisers. NewsChannel 8 also has benefited from the growth in the news product on WJLA. WJLA has completely rebuilt its local news operations following a downsizing many years ago.

From its base in local television, Allbritton leveraged its core assets across media platforms to exploit some of the unique attributes of the DC market

That included developing an online newspaper to address the market opportunity of providing news, commentary and an advertising vehicle to government contractors, lobbyists, trade associations and others seeking to influence the nation’s seat of government.

Politico.com, designed to be the ESPN of politics, was Allbritton’s initial online effort under the new strategy. While Politico was designed around the Web, readers and advertisers clamored for a print counterpart. Allbritton responded with a three times-a-week print product that was quickly ramped to five days.

Since then, Politico has created a national network of newspapers and websites that share Politico stories in exchange for web ad avails, which Politico sells to national advertisers. It is a classic win-win.

In fact, Politico’s timing has been perfect. Many newspapers have closed their DC news bureaus, and local newspapers are struggling to fill the news gap. Recent filings with the SEC have detailed just how successful the operation of Politico has become in a relatively short time as revenue has topped the $20m mark and cash flows have reached seven figures.

Now, both WJLA-TV and NewsChannel 8 share facilities and some staff members as they gather, collect and present local news and information to the DC market. Adding Politico, the Allbritton operation finds itself as one of the country’s leaders in the gathering and dissemination of political news. That has positive rub off impacts on both WJLA and NewsChannel 8. Washington is still very much a company town.

So, it’s in the same vein that we look at this soon to be launched local news oriented website. Adding fifty journalists to an operation that already includes a prominent local television station and its cable news spinoff plus the acclaimed Politico gives Allbritton’s operation one of the largest news gathering operations in the market. As the company focuses on enabling its journalists to file news across any platform, it’s easy to see the combined Allbritton portfolio giving some heartache to the Washington Post (and few know that property better than Jim Brady). The company just recently brought a senior sales executive to lead the advertising sales effort for the new metro new site.

Allbritton already has a deal in place with the market’s leading news/talk radio station as well to share content and to provide weather reporting from its team of meteorologists. While it doesn’t seem that Allbritton wants to get itself imbedded into the longer view stories that the Post covers, it does seem that there’s a probable audience for hurried Washington audience members who want to get the news in an easy, connected and time saving way.

The Allbritton mission is to produce and serve unique content which has appeal beyond the Washington market. The plan is to capitalize not only on local ad spend across broadcast, cable, print and online platforms but also to get access to content syndication and barter ad inventory nationwide. Allbritton understands that it can be profitable to serve not only local audiences and advertisers well with smart execution but that this entire operation can be leveraged to grow out of market revenues. Could this example serve as a possible model for other broadcasters looking for a digital strategy that actually makes money!

So, the good news.

2009 is over. Thank God.

We head into the New Year severely chastened by the historic revenue declines of the current one. The numbers for 2009 don’t bear repeating. They were several shades of awful.

There are signs of a modest ad economy recovery as we enter January 2010. The broadcast networks are reporting an active scatter market. This makes the network execs that decided to hold back inventory at the upfront look like good market callers. Some of the larger radio groups are reporting a decent December assuming that flat is the new up! Online ad activity is regaining its health as well after a down year on the display side.

The American consumer seems to have provided the retail community some good news in the recently concluded holiday shopping season. The longer term outlook on consumer spending seems a little mixed but let’s take the good news for what it is.

We’re also coming up against weakened 2009 comps but that’s a mix of good and bad news. So, upward pacing cheers will be balanced by the knowledge that these positive pacings are for revenues more reminiscent of the late 1990’s. Depressed ad rates could be bolstered by some advance in demand but how much remains a mystery. Advertisers are still wary of the economy as unemployment will remain high for a while, and that will likely mean any advertising rate increases are going to be the result of some intense negotiation. That won’t be a change from 2009!

A lot of businesses large and small decided to cut back and/or sit out advertising in 2009 but it seems that more positive psychological changes are present in this community. Business owners know that they need to re-invite consumers through advertising campaigns into their showrooms in order to generate sales. The survivors of the Great Recession need to let consumers know they’re still around. There’s still business to be had but it will need to be seduced in no small part by solid and effective advertising. Can your current sales operation make that happen?

There’s some optimism for 2010 revenues as the nation prepares for its first mid-term election during the Obama presidency. Given the tenor of recent legislative battles in the halls of Congress, increased citizen advocacy, some historically poor poll numbers for this particular Congress plus an economy that is still in turmoil, this coming mid-term election is red hot and looking very competitive nearly everywhere across the country. With all 435 House seats, more than a third of the Senate and Gubernatorial races in states like California, Texas, Florida, New York, Illinois, Pennsylvania and Ohio, it’s a big, big year. This has generated the usual estimates of billions of political dollars in play spread out over several early year primaries and the November election. This is great news to parts of the media business that have seen more than its share of suffering this year. If true, these projections can put a big 2010 Band Aid on a business that needed a tourniquet in 2009.

But what about 2011 when all that political money disappears and we’re back to the normal advertising marketplace? It would seem that the additional revenue in 2010 is a perfect opportunity for traditional media companies to address their shortcomings on the sales side of the industry with both the traditional and digital sides. If you’re not happy with the ups and downs of the odd-even year symphony that’s become our business, perhaps 2010 is the convenient time to address that. The best time to fix the roof is when the sun is shining!

There is an opportunity in local media markets for someone to unlock the mysteries of the new advertising universe to businesses in pursuit of customers. With all the new advertising opportunities available in the market today, advertisers are confused on how these can help their businesses grow. A number of advertisers were confused about the traditional media choices, too. As to this new mission, no one is quite there yet. Those who get there first and show meaningful and sustained results will be the winners of a large share of local ad dollars. The question for media companies is: are you going to be the first or let a competitor get there before you? With self serve advertising options now becoming more commonplace, it will be up to local sales staffs to add value and results to ad campaigns. Otherwise, local merchants will have the ability to do the work for themselves! Not a pleasing prospect.

A recent study from the ANA and b2b Magazine shows that 2/3rds of marketers have added social media (Facebook, LinkedIn, Twitter, etc.) to their overall media mix. Where is the budget from that coming: traditional media budgets. Only 26% of marketers indicated that they’d established a separate social media budget that didn’t come from the traditional media side of the ledger. How long before your clients do the same? The word of the day for marketers is flexibility. “As more media platforms become available, it is imperative that all marketers continue to assess their capabilities and select the platforms that are best suited to help them meet their brand’s goals and objectives,” said Bob Liodice, president and CEO of the ANA. “With this proliferation of media, marketers must work harder, survey the entire landscape available to them and create their brand’s most optimal media mix.” Hard to argue with that but can anyone explain this to local marketers? It’s time for local media sellers to step into that gap.

While we’ve all had our share of advertising agency adventures over the years, the simple fact is that your sales staffs are going to have to take more of that platform agnostic mentality to effectively service direct local clients. The days of a single platform sale will become less common as we move into the digital age. Our local sellers are going to have to be able to construct ad campaigns that make multiple platforms work effectively in some synchronicity.

Have you given your sellers the proper training to ask the right questions so they get critical data from clients and prospects to make that happen? Do you have the resources necessary to help the seller navigate the creative elements of an ad campaign that makes the difference between an effective campaign and one that isn’t? If you can’t answer either question in the affirmative, the time to act maybe right in front of you. If you can’t, then now will be the time to reinvest in that sales training. It’s not easy to commit significant resources coming off a year full of down revenues and massive layoffs but what’s the price of not making the investment?

Best wishes for a successful 2010 and beyond!

Now that the show will no longer be available, how will these stations fare? First, the show will continue into 2011. Syndicators and local stations will have a substantial amount of time to plan and test alternatives. It may be one of the programs presently airing or some local programming yet to be developed. The time slot that Oprah has been occupying for many stations is one that is quite attractive, so investing in a new program is justified. Besides it’s own time period dominance, The Oprah Winfrey Show has added importance as it often leads into the stations’ local news programming. That’s helped to justify the fees charged to stations by CBS’ Syndication arm.

The considerable amounts that local stations have been spending for airing Oprah could easily be spent on alternative syndicated programming, or instead, on developing local programming. Profitability of this time slot might actually increase with these substitute programs.

Finally, while the size of the audiences that Oprah attracts are still very large, the ratings have been decreasing. The Oprah brand name on local stations is still very important and she’s helped launch other well known personalities such as Dr. Phil and Rachael Ray. For stations that carry Oprah, having this announcement happen in the middle of the all-important November sweeps might be a temporary boost to the ratings. However, given that the show won’t officially end until September 2011, those increases are likely to be temporary. The decrease in audiences may level off or continue downward over the remaining period of the show. Nevertheless, the impact in lost audiences is not as significant as it would have been several years ago. But, there’s no doubt that a badly battered industry certainly can’t relish the loss of one of its most widely popular personalities especially if it turns out that part of this exit is being driven by her desire to play a larger role in the development of her cable project (OWN) in partnership with Discovery.

The full economic impact of the Oprah show ending will not be known for a few years. Syndicators and local television stations will have an opportunity to be creative in the quest to find some programming that will distinguish itself in an ever increasing competitive marketplace. Let’s see what they create!

Though posted under Mark Fratrik, both Steve Passwaiter and Neal Polachek contributed to this post.

WZMY-TV or “MyTV New England,” is a local broadcast television station that covers the Boston, MA marketplace from its perch in Derry, NH. It has been evolving its own hyper local format since ShootingStar Broadcasting bought it in 2004. CEO/President Diane Sutter says the goal has been, “to combine the reach of TV with the personalization of radio and the interactivity of the Internet.” WZMY provides a mix of syndicated, My Network TV and station produced programs typically featuring vignettes sponsored by local merchants. In short, she refers to this strategy as “radio with pictures.”

We spoke with Diane Sutter last week to learn about her accomplishments with MyTV New England over the past five years, and get a sense of where she’s seeing future opportunities.

Even though WZMY operates in the large, competitive Boston, Massachusetts television market, its goal is to be local and that means being available (the first person listed on WZMY’s “contacts” page is Diane Sutter) and connected to the community. When the “community” is 10,000 square miles, it’s a challenge to get hyperlocal. WZMY does it by putting local people and businesses on the air in MyTV infomercial programming intermixed with main stream programs like”The Unit,” “Office” and “Law and Order.”

BIA/Kelsey: Diane, you’re trying to develop a “hyper local” strategy with a broadcast television station. How does that work? How can you take a traditional mass medium like television and make it hyperlocal?

Diane Sutter: Localism is hard to achieve in a 10,000 square mile market area let alone hyperlocalism! Local is not just about news and weather, though they’re important topics. At My TV New England, we get hyperlocal by finding a niche not served by other stations and serving it. We identify and focus on common themes and develop relevant programming based on the “MyTV” format of putting local people on the air in our on air ID’s and station promotional spots. We’ve used viewers on our ID’s since day one. We use a mix of people to do these and sprinkle those throughout our broadcast day.

For example, there are lots of moving parts in a wedding. Brides will drive a fairly long distance to get all their planning and shopping done. We produce a local show several times which focuses on the local wedding business. By targeting local merchants with services ranging from attire to venues to catering we can put together episodes that can get pretty hyper local. We have local merchants sponsor each segment and often appear themselves. We produce vignettes running 2, 3 or 5 minutes for example, and sell these segments. We typically sell out a half hour episode with these vignettes. We also have “regular” 15 or 30 second commercials running between the vignettes which makes for sort of a situation where we say, “we now interrupt this local infomercial to bring you a commercial” . . . but it works!

For us, hyper local is putting local merchants on the air to share their solutions to the everyday problems our viewers have. We do this with the MyTV format from weddings (“My Elegant Wedding”) to where to eat (“My Favorite Restaurant”) to taking care of your home (“My Home and Garden”). We even ran a show, “MyINK” featuring some of New England’s leading tattoo parlors. That’s local and personal.

BIA/Kelsey: What’s the competitive environment like for an independent television station trying to go hyperlocal in the Boston market?

Diane Sutter: Well, you could say we’re doing a great job of running the bases but haven’t quite crossed home plate yet. We definitely see ourselves as moving the needle. The challenge is to find an important niche that we can both service and defend. For example, we’re in a market where 1.7 million of 2.4 million homes are on Comcast and unlike broadcast television they can sell regionally by system. They have five times our sales staff. When Comcast’s advertisers get large enough to buy three or more regions, they get promoted to Comcast Spotlight service which is very compelling. We’ve also got 24 hour news and sports channels, some of the country’s leading broadcasters in the market with network programming, news, weather and sports. It’s a tough place for an independent station. As advertisers start moving more of their spending into digital media, that also becomes a growing challenge for us. I’ve seen a big paradigm shift in the market over the past five or six years. A stand alone station like ours used to have it a lot easier!

BIA/Kelsey: What’s your formula for standing out in the market and being successful?

Diane Sutter: I tell you what; it starts with operating on a scale to be profitable. We need to keep our table balanced to succeed. The four legs on our table are (1) the viewers; (2) our advertisers and community leaders; (3) station ownership; and (4) the staff. It’s my job to lead the effort to use our resource to serve these four critical groups. There may be a lot of things we could do, but given limited resources I need to ask how any major initiative advances the ball for these groups and at what cost for any given opportunity. Since we’re a television station we can do production, creative services, news, weather and promotion. But we need to balance our capabilities and resources with our opportunities.

For example, WZMY used to have a news program because we thought that was an important thing to do for the community and to be a broadcast leader. But we stopped doing that show mainly because in a market like this, we simply couldn’t figure out how to be unique in a way that mattered. What we did do was to execute a strategy to help the community in a different way. We have one of the most recognized and talented weather personalities in the Boston market and he’s out in the community at least three to four days a week at various events. That’s a place where we can make a contribution to the market and stand out. In a sense, our strategy here for leveraging station personalities and tying programming into the community is like what some of the Spanish-language television stations do so well.

We also used to do “MyTV Prime” which was a live, interactive talk show. It’s the kind of thing you’d expect to see on radio but we’re doing it with television. It was a very well balanced program with a diversity of viewpoints on important subjects from 3-4 different people. Now, that’s unique and something that was defensible from likely competition. Were it not for the creation of MyNetwork TV, it’s likely we’d still be doing this in prime. We may try to recreate this somewhere else on our programming schedule in the future. We’ve also got “MyTV Club” which again is formatted in a personalized way like you’d see in radio. I guess, generally our formula for success is sort of, “radio with pictures.”

Radio’s a great personal medium and we see extensions into independent television that make great sense. Our goal is to have a conversation with our viewers. I take this seriously. If you go to the MyTV New England web page and click on “contacts” you’ll see me listed first. I get and answer emails from viewers every day. We make every effort to answer all viewer emails within 24 hours.

BIA/Kelsey: How about your sales strategies. Where do you hire from and how do you train? What kind of accountability are advertisers demanding?

Diane Sutter: We’ve got to think differently. It’s not just thinking out of the box, the box is gone! We need to have new approaches in sales. Hiring someone who’s worked for an affiliate doesn’t really work for us. The selling of this station is just too different for them.

We’ve got some traditional sales folks who are well schooled in selling television time. But for all their strengths in selling airtime packages, some of our other inventory can be a bit daunting. It doesn’t make sense to set people up to fail. Put them where they’re strong and hire around them. That’s our approach. They do have some familiarity with the interactive side but they can ask for the assistance of our other sales resources that are more comfortable in the selling of our digital assets. Some of these items are a bit technical and we don’t expect them to know everything about them. We look at our sales talent pool and bring new blood on board in way that complements and extends what we have, particularly on the digital platforms – mobile and web. We are getting ready to announce our new multicast partner shortly and that might cause us to shift how we sell a bit. We’re also looking into the possibility of hiring a digital only sales team but we’re not there yet.

Essentially, we’ve got two kinds of sellers – transactional and developmental. The transactional sellers are the traditional sales people who can harvest existing relationships and opportunities. They’re great at that. The developmental sellers are the hunters who can prospect, qualify and bring home new accounts and business. They need to carry more of the mindset of an ad agency resource who can piece together various elements into a coordinated campaign for the advertiser.

Now on accountability and performance metrics, we don’t subscribe to Nielsen and haven’t for years. I inherited that contract when we bought the station. As everyone knows Nielsen is a large expense in a market like Boston. However, I think we’ve only lost one account due to our stance. Our Nielsen numbers are relatively small so we can’t play the numbers game. We sell results; we have to. Our plan is working but it’s a very different philosophy from traditional network affiliates. This is a little different for television sales folks. But with more and more media platforms and increasing advertising inventory available, it gets down to results and accountability pretty quickly. We need to be on different platforms.

One way we’re doing this is with our permission marketing and lead management. We don’t just sell air time, we’ve got the ability to offer mobile SMS text ads, we’ve done promos with radio and newspapers, and we’re creating web sites independent of the MyTV brand. We focus on the service not the brand we provide our advertisers.

As an example, we’re working to get car dealers back in the advertising market. We’re creating vertical web sites without the station or dealers brands as integral to the sites with the idea of promoting a single web site for an aggregate audience. Once we drive them to the site, we will manage leads by zip code. Car dealers will buy their zip codes and that’s how we’ll route customer queries. It’s a fair and transparent process that advertisers will understand and value. We’ll get paid on a cost per lead as the power of our television station really drives web traffic.

LIN TV Corporation (TVL/NYSE) is a public company with 27 television stations in 17 markets, reaching about 11.5 million households each week. This makes LIN one of the largest television group owners in the country. LIN’s stations typically rank first or second in the Nielsen ratings, both overall and in their news time slots. In addition to its owned and operated television properties, LIN has a growing digital business, more than 50 television station and niche web sites, as well as mobile offerings, including two very popular iPhone and BlackBerry applications recently released. We spoke with LIN’s President/CEO Vince Sadusky to get his thoughts about the firm’s adaptive digital strategy and what he believes are growth platforms for LIN going forward.

BIA/Kelsey: Vince, you just purchased Red McCombs Media, an online media and services company. How does this fit in with your television stations, web sites and mobile initiatives?

Vince Sadusky: It’s kind of funny; we weren’t actively looking to buy. We just saw a good opportunity in RM Media to bring in some excellent sales and marketing expertise to help us get where we want to go. We’ve had a partnership with them and found it to be incredibly helpful. Plus, they have an outstanding customer service culture that we really liked. This fits very nicely with our strategic plan. And you know, the company had a fair amount of revenue on a standalone basis with positive cash flow!
Generally, we hold ourselves out there as folks willing to do partnerships and deals. I make regular trips to the West Coast to keep the discussions going. We’re open and interested in talking. I have to say that sometimes we’re dealing with young folks and new companies that don’t know what “on air” means but they do understand audience reach so that’s a part of the television business that’s impressive to them.

BIA/Kelsey: Tell us more about your strategic plan?

Vince Sadusky:Well, we had a new management team come on board a couple of years ago. We really wanted to reshape LIN TV into a digital media company. Our goals were to grow and diversify our revenue base; become a significant player in the digital media market; develop a national footprint and get into the performance-based marketing game. We focused initially on our web properties and grew that revenue contribution from 1-2% to 12% of overall revenues by the second quarter of this year. We sold the value of the web sites independently of our television properties to maximize value and revenues. We found that advertisers were willing to pay premiums for our station branded web sites but didn’t want to put all their digital money into just one web site. So that was fine and it provided good growth, and will continue to, but would also limit our future revenue growth potential.

The second issue was coverage for national online advertisers. While we’re in 17 markets with our stations, that’s only 9% of the country. This actually limits our attractiveness to national advertisers. No matter how good one of our television stations web sites are, at the end of the day, it’s only one market. Unlike our TV stations, our web sites can go national with their geography. However, the only significant access we had to the national ad market was through ad networks. Our experience is that ad networks make for an unstructured platform that we can’t really control. For example, we’re news leaders in our market and that reputation is important to us. With Google’s contextual advertising, there was a story about a woman’s murder and her husband was the prime suspect. The story identified him as a dentist and Google served up a dentist ad in the right column. We’ve also had FOX ads appear on our CBS station’s site. In the television business we’ve got procedures to prevent this kind of thing.

To get more control over context and presentation of content and get access to significant growth we targeted national spending. Clearly, we felt we needed to go outside the ad networks to get there in a way that we could be comfortable with the environments we were creating and the value we were receiving.
That’s when we started working with RM Media and had a terrific outcome. We very much enjoyed their creative minds, execution and experience. Their backend solution was great for verifying ad campaigns and really opened up the “black box” to clients. They could follow campaign performance on a daily basis and loved it. RMM offered money back performance guarantees based on click-through rates or some other relevant metrics. RM Media can target by demo, geography, context, behavior or psychographics. And they continually monitor CPM, CPC and CPA metrics so campaigns are effectively tracked and fine-tuned to achieve campaign and ROI goals.

BIA/Kelsey: Your acquisition of RM Media clearly supports your goal to develop a national footprint and have more control over your digital inventory. How about in your local markets, any benefits there from this acquisition?

Vince Sadusky: Definitely! Say for example you’re selling a local car dealership or a fast food franchise for their specific geographies down to zip codes. We could always provide banners and video pre-rolls but now with RM Media we can provide an ad network catering to their demos and provide a full, interactive ad campaign with ROI accountability built-in.

There are local advertisers we couldn’t touch with our television stations. For example, in Providence, Rhode Island there may be a local sporting goods store guy who sells to the junior high and high school teams. He can’t afford TV but he can afford a geo-targeted digital campaign. We give him video pre-roll and he looks like a pro and loves it. We can do a whole interactive ad campaign for him based on IP addresses in his part of the market. This kind of robust and accountable ad campaign is a terrific thing for local advertisers. They can play with the big boys now. This takes a lot of time on our part to provide the education to these small businesses but it’s a significant growth area for us.

BIA/Kelsey: Well, let’s talk about that education effort and generally your approach to sales, sales training and sales management. There are a lot of approaches being championed? What’s your secret sauce?

Vince Sadusky: We have a two-pronged approach to sales. Our history is in the television business and that requires a certain skill set for a successful sales person. It’s different with digital media. We trained our existing folks as best we could to transition into digital media as well as television. It worked in some cases but not in others. We have great sales people on the television side and we didn’t want to lose them. So we set them up to succeed where they’re strong instead of trying to force fit them into digital media sales. It doesn’t make sense to try to have everyone selling everything.

The thing is that with performance sales it’s a whole different language than it is selling ratings. It requires accountability value propositions, metrics and guarantees that just aren’t first nature to our traditional sales teams. We’ve hired interactive sellers who are really pros. We will have the traditional AEs partner with the interactive AEs where it makes sense. The on-air sales team often makes introductions for our digital sales team and that works well. The television salespeople feel comfortable talking about numbers and video pre-rolls with their existing books of business. To develop new business on the digital side, it’s all about the interactive AEs doing what they do best.

BIA/Kelsey: You’ve talked about the value but also the limits of web sites branded around your television stations. How do you grow outside that branding, do you have vertical web site strategy?

Vince Sadusky: We haven’t been interested in purchasing sites. I’ll tell you why. We’ve seen lots of traditional media investment go into verticals. Here pricing and valuation is based on traffic, not profitability. At LIN, we’re keeping our eye on the bottom line and we’re not sure what these vertical web sites are worth in terms of profitability. We know we can get some great content to our web sites where business models such as revenue sharing and syndication are in play and we’re comfortable there. We have developed vertical sites where we think it makes sense. We’ve got micro sites around some of our shows. In Green Bay, Wisconsin one of our local shows, “Living With Amy” at 10am generated so much traffic, we split her off into a separate site. We haven’t tried to do this on a larger basis with national content though.

BIA/Kelsey: Speaking of content, how does user generated content and social media fit into your plans?

Vince Sadusky: What we do really well is deliver professionally-produced news and entertainment. Our focus is to extend how people can consume this content across platforms. We don’t want to do just a couple of newscasts. We want to offer that content across platforms – on-air, mobile and web. We do need to be smarter on the interactive side. We look at social media and see the buzz but wonder how effective it really is for advertising. We’re not necessarily interested in being the first in or even early followers, we look for sustainable, profitable business models. We’re still new to the digital game, we are still figuring out what works.

We have released iPhone and Blackberry mobile applications that have been enormously popular. Our Mobile, Alabama television station released an iPhone app that was one of the top 10 iPhone apps! We view mobile as about the state of advancement of the web five years ago. It’s early days from an advertising business perspective. People do love their cell phones and they’re in the game for the latest and greatest upgrades and smart phones. We also know that people value their local news and weather. We want to be there for them.

BIA/Kelsey: There’s a lot of energy around television suddenly discussing it’s a wireless medium that can offer mobile video on cell phones. Is this an important growth area to LIN?

Vince Sadusky: We view mobile video like we do Web 2.0. We got started behind the 8-ball on the web side. But now, we’re in the video game. That is what we do. So we’re much better off in the mobile video game from day one. We have good, relevant content. People can get their national information, shopping and so on from a variety of sources. But for substance and relevance, they’ll want their local news. That goes to our strength in story telling with television using moving pictures, sound and our narrative power. We are cautious about the ad load with mobile. We don’t want to turn people off. We need to figure out the right balance.

BIA/Kelsey: Any final words, Vince?

Vince Sadusky: Well, like I say, we know what our strengths are and we also know where we have to learn. We set some new goals for ourselves in building out a digital media business while leveraging our strengths in local television. It’s working but we still have a lot to figure out.

BIA Commentary:
First off, we want to thank Vince for taking the time to talk with us. We saw the item on the RM acquisition and thought it an interesting move particularly since investment capital is rather short these days.
The acquisition of RM makes LIN a more effective interactive player as they now have a full service digital agency behind them. Further, the ability to come to the realization that just being able to offer one local website (your own) to advertisers might not be enough to coordinate a successful digital ad effort is a big moment for a historic TV company. TV operators have never ever worried about not being able to offer enough reach. The acquisition of RM and the ad network it has under contract gives LIN’s digital sales teams the ability to look more like problem solvers to local businesses who are struggling to understand how to successfully implement digital media into their existing ad spending. LIN now offers solutions not exclusively tied to their own properties. We believe this is a good space to occupy and helps position LIN as a solution provider that is agnostic to any one specific solution. As broadcast companies take on more platforms, we believe this “ad agency” mentality is a philosophy that is destined to work for local media sellers.

There are some trends and research data here that should provide perspective to anyone with a interest in the health and vitality of our industry. BIA/Kelsey very much believes that radio will continue to play a critical role moving merchandise and services in local markets in the future from a new digitally enhanced perch. We also think that there are unparalleled opportunities to gain market share in the next few years given the ongoing movement to digital media.

Radio’s megaphone is a distinct advantage in moving consumers to action across multiple platforms and that has recently been demonstrated in a number of markets around the country. The pure play web companies doing business in your markets covet that microphone.
There is some real innovation taking place across markets and groups of all sizes. We hope you find the information in our presentation useful. Please click the following link to access the presentation, along with other resource materials you may find helpful: http://www.bia.com/BIA-NAB-Session/

If you have any questions pertaining to our presentation or services, please feel free to contact me directly at 703-802-2973 or at spasswaiter@bia.com. We look forward to creating the future with all of you in the days to come. Stay tuned for some announcements from us in the coming weeks.

Steve Passwaiter is a Vice President at BIA/Kelsey