Do you have a theory on why the local television business is collapsing?  A look at the basics might clarify things. For the longest time, if a person or a business entity (no, businesses are NOT people, thanks) wanted to own and operate a station, they were required to hold it  for no less than 7 years.  Because entities were able to use public airwaves (folks, we own the airwaves) they were required to provide services that bettered the public, such as PSAs, community service programming, and events meant to improve their market. The survey of market needs was a major undertaking, and the licenses were based on how well a station addressed the market problems. The 7-year rule ensured that stations become part of the community…leaders…the first choice when information was needed. Trading the airwaves like commodities, which is happening today,  was never a goal.

What does a TV station cost? It’s easy…it costs 8-10 times net or 2-3 times gross. Sure, new equipment or real estate can bump the price up a bit, but any major deviation from that formula spells trouble. Since all TV deals are leveraged buyouts, opening the books and relying on long term sales projections is critical. Despite the work and knowledge involved in making sales projections, the ‘science’ is basically a guess.

Moving ahead with the sale requires that the purchaser put up 29% of the cost at or before closing. Write a check. The remaining 31% is what will be paid from operating the station over the next 10 years. But wait – there’s more. A purchaser needs to prove they have at least one-year operating capital available. Preferable more. Thus, stations which are for sale cut expenses like mad before a sale to give the impression their operating costs are lower than they might actually be.

Station ownership was meant to be far more than a revenue stream. The lending entities now own the airwaves. The focus is shifted from providing information and entertainment to dollars in the door. And because the knife has been put to the product of TV…the information and entertainment…the model is collapsing.

Job Alert – Creative Services Producer WLBT Jackson MS

Think About This: “The object of life is not to be on the side of the majority but to escape finding oneself in the ranks of the insane,”  ~  Marcus Aurelius