Wednesday, April 9, 2008

CBS layoffs signal a financial squeeze on TV stations

The economic slowdown and migration of the audience to the Internet are taking their toll on staffing at the local level.
By Matea Gold and Meg James, Los Angeles Times Staff Writers
April 9, 2008
When veteran Los Angeles news anchors Harold Greene and Ann Martin were felled by a round of jobs cuts last week, they were in good company.

At least 160 employees at CBS Corp.-owned television stations in 13 cities were let go, including such seasoned broadcasters as prominent Chicago anchor Diann Burns, renowned Boston sportscaster Bob Lobel and longtime Minneapolis meteorologist Paul Douglas.

The jettisoning of such experienced on-air talent exposed the weakening of the once-robust local station business, which historically has enjoyed some of the fattest profit margins in the media industry. It marked a dramatic shift from the days when television stations paid top dollar to attract big-name anchors such as Greene and Martin, who have been TV mainstays in Los Angeles for three decades.

Today, stations are feeling the same financial squeeze as their newspaper and network news brethren. An economic slowdown, combined with changes in news consumption patterns and the migration of advertisers to the Internet, have contributed to a lean start to a year that was supposed to benefit from a gush of political advertising.

"What is happening is that 2008, on the local level, is not as strong as people had expected," said Michael Nathanson, media analyst for Bernstein Research.

CBS insists that the quality of its news won't suffer because of the cuts, which hit three-quarters of the company's 27 stations.

"We still have plenty of seasoned reporters and anchors," said Tom Kane, chief executive of the CBS Television Stations group. "We have a lot of very strong talent."

Even so, critics contend that news coverage could be further diminished because of the latest layoffs. They were particularly concerned that experienced reporters were also sacrificed.

"The message being sent is, if you succeed in your job, you succeed in your craft, look out! You're too expensive," said Tom Petner, a former local broadcasting executive who edits's ShopTalk, a daily industry newsletter. "I think it's shameful, because in the end the viewer loses out."

In a report released in July, the Writers Guild of America, East, reported that CBS and ABC news writers said recent workforce cutbacks had led to fewer investigative stories, less fact checking and an increased use of promotional video news releases at their news outlets.

"You can't lose people with that experience and contacts without suffering a price," Hofstra University TV analyst Robert Papper said. "You notice that no one is cutting back on newscasts -- only the people to do them."

Kane said the layoffs were not only a result of the economic downturn. Investments in new technology -- including $500 million spent company wide over four years for new facilities, high-definition broadcast equipment and digital editing tools -- enable the stations to operate with fewer workers.

"Change is never easy for a business," Kane said. "But this was an opportunity that we have been moving toward. . . . We think this will help us compete better in the long term and manage our costs."

Still, there's no question the bottom line is hurting. Television stations typically take in at least 25% of their ad revenue from local car dealerships and dealer associations, which have dramatically cut their advertising budgets amid a slowdown in sales.

The top advertiser to local stations -- General Motors Corp. Dealer Assn. -- reduced its ad spending by 20.7% in the fourth quarter compared with the same 2006 period, according to TNS Media Intelligence data released by the Television Bureau of Advertising.

Consolidation in the retail and telecommunication sectors, which have shifted more of their advertising to national efforts, has lowered local revenue. AT&T Inc. cut its fourth-quarter ad spending to local stations by 15.9%, while the outlay for McDonald's Corp. was down 24.2%, according to the TNS survey.

On top of that, this year's presidential campaign hasn't yet produced the kind of advertising bonanza that many stations expected, largely because of the compressed primary schedule.

TV stations in major markets such as New York and Florida did not experience windfalls as big as stations in states with more competitive contests, such as Texas and Pennsylvania.

"Political money is fickle. Candidates are spending money in places where there are tight races," said Jon Swallen, lead research analyst at TNS Media Intelligence, which tracks ad spending. "It won't be until the general election that spending will pick up."

Ratings for local evening and late-night newscasts have declined for the last two years, according to a report released in 2008 by the Project for Excellence in Journalism.

In Los Angeles, the company's flagship station, KCBS-TV Channel 2, was slammed by the writers strike this year. The CBS network heavily relied on reruns in prime time and millions of viewers turned the channel.

Locally, the audience for KCBS' 11 p.m. newscast plummeted 40% in February compared with the same month last year, according to Nielsen Media Research. But with the strike resolved, CBS expects to regain ground now that it has returned to original episodes.

The local station business is still relatively healthy.

"It's true that profit margins have plummeted into the 20s, but most industries would kill for a profit margin like that," said Hofstra's Papper, a journalism professor who oversees an annual survey cataloging the state of local television and radio. "I think the CBS stations are paying for the network's pain."

CBS has been hurt by a 23% decline in prime-time ratings in the key adult demographic this season. Shares of CBS, which is heavily dependent on ad revenue, are down nearly 18% this year, in part because of weakness at the broadcast network and its other key divisions, including radio.

The network news division has been undergoing its own cost cutting. Last week, CBS News laid off a little more than 1% of its 1,500-person staff. Executives have also been seeking to lower expenses at the network's Baghdad bureau, which costs the news division $7 million a year.

In recent weeks, CBS News executives had been in negotiations with CNN to license the cable news channel's coverage from Iraq when CBS News chief foreign correspondent Lara Logan was not there. The deal fell apart over the issue of international rights, according to an executive familiar with the discussions.

Although the number of CBS station employees laid off in the last few weeks is a fraction of the 25,000 people employed in the local television news industry, the fact that high-ranking veterans in cities such as San Francisco, New York and the Dallas-Fort Worth area felt the ax triggered alarm.

March 31 was dubbed "Black Monday" at KCBS and KCAL-TV Channel 9. In addition to the two anchors, the two stations laid off four reporters, including veterans Jaime Garza and Jennifer Sabih. In all, more than a dozen people were shown the door, and station executives are looking to cut more staff through buyouts, according to people familiar with the company's plans.

TV journalists lamented the trend.

"Like everyone else, I'm concerned and worried," said KTLA-TV reporter Eric Spillman, who wrote about the layoffs on his . "Some people believe you can do this with young people paid less. I think that's misguided. When we have another disaster here, whether it's a big quake or another big fire, they're going to be sorry those people aren't around, because that kind of experience is just invaluable."

Gold reported from New York and James from Los Angeles.

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