How Much is a TV Station worth today?
How much is a TV Station worth today? How about a radio station? For that matter, how about a newspaper?
Not as much as they were a year ago. And certainly not as much as 5 or 6 years ago. And not anywhere near what they were worth at the end of the 20th century. What’s changed?
The elimination of scarcity.
Radio, TV and Newspapers were cash cows for years. Their revenue streams were like those of real estate developers on steroids.  Local broadcasters made huge amounts of money selling ads (developers make money charging rent) while their properties increased in value exponentially.
Values went up because, like land to a real estate developer, there were only a finite number of “sticks” (frequencies and broadcast licenses) available.
Those who invest in broadcasting properties refer to their properties as “sticks” in reference to their transmission towers.
The cost of those sticks is now in free fall. Some major broadcasters are in, or about to go into bankruptcy. Today there’s more programming than ever. More consumer choices than ever – and that’s the problem. Scarcity has been eliminated.
Who needs a “stick” anyway? The networks used to. They relied on local affiliates to beam their national programming into local homes. They PAID affiliates to broadcast their programming. It was a good system and it worked for years. But over the last decade that system has been unravelling.
Viewers defected to the many “other” channels provided by cable and satellite. Some quit watching TV and dove into the DVD collection at their nearby Blockbuster, then abandoning Blockbuster for Netflix and now to Netflix online video streaming. Radio listeners defected to their iPods, online “radio”, and even satellite radio, though to a much lesser extent.
The networks started placing their programming online; on their own websites and on other online properties. Netflix online streams many network shows that (in the good old days; a few years ago) would have generated a lot more money for their producers through syndication than they did on their network airings.
How has this lack of distribution scarcity changed the balance of power between the networks and the local stations?
According to TV NewsCheck , CBS will begin charging its affiliates money for carrying CBS programming. Now that’s a switch. Why would stations pay?
Because they have to!
Though network and local station audiences may be dwindling, they aren’t gone yet, and they know that their best bet for keeping audiences coming back to their local station is good network programming.
And in an article posted on Macworld.com, according to the New York Times and the Financial Times, Apple will begin selling some CBS shows through the iTunes Store for 99 cents each.
When that takes place you’ll be able to view CBS programming online at CBS.com, Hulu.com, Joost.com, through the iTunes store and I’m sure eventually (sooner than later) through Amazon and other online content aggregators.
Local broadcasting stations are losing their exclusive deals with their networks. And the networks are loosening their dependency on scarce local broadcasters for distribution.
So what’s a TV Station worth today? It’s worth a lot to the right buyer. A buyer with pockets deep enough to weather this tumultuous  “@#$S%$”-storm, and with guts enough to try something dramatically different.
What’s a TV Station worth to Wall Street? Not so much.
The following interview with Bill Gates took place on January 29, 2007 on NBC’s Today Show. In it, Mr. Gates talks with TODAY host Meredith Vieira about the Vista operating system and the future of Television. While Vista turned out to be not such a great bet for Microsoft, I think his predictions about the internet and Television were right on the money. Let me know what you think!
You can watch the full interview on the Today Show website below.
Steve,
We used to talk about the business of radio station values when I worked for a broadcast consulting firm here in Seattle about 12-14 years ago. We’d talk about how the landscape would change if/when XM & Sirius became a reality. After that came the discussion about how internet radio would impact broadcast radio when WiFi became seamless coast to coast.
Whatta ya know? It’s all here now.
Thanks,
Mike Forrester
(an old radio dog)
Hi Mike,
Thanks for the comment! It’s all here now and more. TV is facing great challenges, but I think they also have amazing opportunites to thrive in this new environment IF they can forget the past and start focusing on the future.
I just blogged about ABC News cutting 300-400 jobs and why that’s good news. Companies, especially public companies, need to stop worrying about quarterly profits and invest in people who get it. They need to invest in things that will probably fail, because out of those failures will come success!
Yesterday, while writing the post about TV Station values, I was interrupted by a knock on the door. It was a soliciation from a milk delivery person. There’s no scarcity in milk distribution. We can buy milk at nearly every intersection. If the milkman can create a business model that works in this environment, then I know the TV Stations can do the same.
Thanks again for reading the blog and for your comments!!
Steve