Turmoil at Local TV Stations Part of Trend
Byline: Robert Davis For The Register-Guard
Reports of recent events at KMTR-TV caught my interest. That is not surprising, because I have a connection to the station. I was part of the team that built KMTR, and I served as its president and general manager for the first 15 years of its operation.
Reading and hearing of the developments following the acquisition of KMTR by Fisher Communications has caused me to think about what led to the current situation. The consolidation of operations with KVAL and the subsequent layoffs of KMTR personnel made big news.
But this story is not really about a new owner trying to maximize profits. There's a bigger story here. It's really about the seismic shift in the economics of the local television broadcasting business.
It all began in the late 1950s and early '60s with the advent of cable television.
At the beginning, the purpose of cable television was to rebroadcast the signals of local TV stations into areas where they couldn't be received over the air. Later on, cable TV operators began to create their own programming services.
At first, it was services such as HBO and Showtime, for which viewers paid a premium in addition to their basic subscription fee. These services began to compete for viewers with local, over-the-air broadcasters. On the other hand, they were commercial-free, so they did not compete for advertising revenue.
That changed when WTBS-TV, the local, over-the-air Turner Broadcasting station in Atlanta, became the first such station to be distributed nationally by satellite. Local cable TV operators began to add WTBS programming to their lineups.
It was a pivotal point in the development of the cable TV business model. WTBS became the first national cable TV service to include advertising. That meant that cable was now in the business of competing with local broadcasters for advertising revenue.
When KMTR began operations in October 1982, it was the third TV station in the Eugene market. Local television advertising revenue was divided among the three.
Fast forward to the present day. There are now six major local TV stations. In addition, the cable TV operator is selling local advertising that is inserted into the programming of dozens of its national cable programming services. (Did you ever wonder why you see local commercials in national cable TV programs such as "Rizolli and Isles" on the TNT network )
The change means that the "inventory" of local TV advertising units has increased exponentially, and that is where the basic law of supply and demand comes into play. When supply increases, demand decreases. As a result, the price advertisers are willing to pay for an individual commercial unit declines. …