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Thursday, February 16, 2017

The Hollowing Out of Conventional Media

A few years ago, my wife and I decided to take a day trip to a city a few hours away. It had once been an industrial powerhouse and was the second largest city in its state. The population had declined and I noticed that it was on lists of the cheapest places to buy a home in the United States. It was a low priority on our “bucket list” but it was a pleasant Saturday morning so we thought, why not?

When we arrived, it was a pretty depressing place. From the highway that cuts through it, I had noticed over the years that the whole city looked as if it needed a coat of paint. Close up, it was really hurting. Many storefronts were boarded up, and there was very little action in the downtown area. We stopped in a shop where a nice lady told us that the locals who owned the last substantial manufacturing plant had sold out to a very well known global company. Very soon thereafter, the plant was transferred overseas.

This process is known as “hollowing out.” As the manufacturing sector deteriorates in any economy a plant or entire company is sold and the new owners go offshore for low cost production. The company name may stay the same, dividends are still paid, but the company has been “hollowed out” for domestic purposes. Some of you may consider this a stretch but I see the same thing happening for many conventional or, as I call them, legacy media properties.

Talk to someone whom you know in the newspaper business. With readership and subscriptions declining, newsroom are relatively vacant these days. Some papers that were considered major players years ago may have only a few sportswriters left and they use wire service and syndicated writers to provide national news and much of their editorial commentary.

In radio, things have really become difficult. A sales rep may now represent several stations in a market and billing may tend to be skewed toward online or promotional versus good old 60 second commercials.

TV may be effected very dramatically but you do not notice it as much as they still provide local news across the day. Look closer and you observe advertisers on regularly that the management would have scoffed at 20 years ago. News crews doing remotes are much smaller than they were years ago thanks to technology. Long time anchors often have not had a pay raise in years while others have had substantial pay cuts recently (where does a 58 year old anchor go? He or she has no bargaining clout).

A retired TV salesman whom I know sent me this revealing e-mail re “hollowing out.”

“Don, my former administrative assistant was retiring after 25 years at the station. I was invited to the farewell luncheon and was flattered. The meal was nice enough and was at an old watering hole for us sales guys back in our salad days. There were 20 people there including the general manager. At 72, I was the oldest by far at the table. When I arrived someone asked me for $5 to put toward the gift card that they were giving her. I laughed and gave her a 20 which made her eyes pop. Near the end of the lunch, the general manager stood up and said that he had to go to a conference call. He put $15 down on the table and said everyone should kick in that amount. A few people were clearly upset. I waited for the GM to leave and then went and grabbed the check and gave the waitress my credit card. As the group broke up, a young woman whom I had never met before hugged me and said softly, ‘I did not want to come today as I really could not afford it but I did not want to be rude to my best friend at the station.’ I told her that it was no big deal as she had my back for 18 years and it was the least that I could do. Was the GM a monster? I don’t think so. It is just that every nickel has to be accounted for at headquarters. Times have really changed.”

Clearly, this may have been an extreme example but not many TV stations have the 40-50% profit margins that once had. Local stations have been hollowed out. They still have a news product although clear headed observers would admit that it is weaker than in the past. Tech has helped them with costs and some are making decent money with their websites. The future, however, does not look bright as Netflix and other commercial free video options continue to steal away the upscale and younger demographics from over the air stations.

The times, they are changing. As we shift toward more digital and online/mobile options, the hollowing out of legacy media properties will only accelerate.

If you would like to contact Don Cole directly, you may reach him at doncolemedia@gmail.com

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