Thursday, April 25, 2013

Post-NAB business idea, 2013 edition

Every year, I return from NAB with a buzz from seeing new products and meeting new people. I get energized with lots of ideas--and then start penciling them out, which usually results in a bad case of reality setting in. Here's my 2013 idea:

A lot of people are repelled by the atrocious state of television news in many markets: A focus on crime and accidents, along with shoving cameras and microphones in the faces of victims' family members. My premise is borne out by the ever-older audiences for broadcast news: People who grew up watching it keep watching, but younger viewers get their news from the Internet. There has to be a market (albeit a small one) for people who want more serious local news, and they're likely to be both better educated and higher income than the population in general--prime targets for upscale advertisers.

The costs of building out a streaming-based (not over-the-air) news-focused television station are a fraction of what it would have cost to build a broadcast station just a few years ago. In fact, you can build eight or ten streaming stations for the cost of a single broadcast station. You don't need transmitters, antennas, studio-to-transmitter links, or any of the overhead required to fulfill FCC requirements. LED lighting and low-powered equipment make it feasible to use former retail space for production and post-production, and there's plenty of retail space available for lease in most major markets.

Start with a streaming station in a single major market to test the concept and identify what works and what doesn't. Then, over time, build out additional stations in other large markets, and create a network the way it was done in the early radio days--one station at a time. At a minimum, each station would produce two daily newscasts; as the network grows, those newscasts and additional stories would be fed to the network to create two national newscasts. In addition, some of the local stations would produce their own programming, such as talk and children's shows. The best of that programming would also run on the network. All programming, both local and network, would be available both live and on demand.

That covers equipment and real estate, but one area where you can't save much money is labor. A streaming station doesn't require as many people as a comparable broadcast station, but if the goal is to provide a superior news alternative to existing stations, you've got to hire experienced journalists. Yes, lots of stations and networks are laying off personnel, as are newspapers, but good people need to be paid appropriately. I'm a strong believer that if you're running a for-profit business, you should pay a living wage to the people who work for you, even if there's some way to get around it with interns and freelancers. People can't eat "exposure."

To staff a seven-day-a-week news operation producing two daily newscasts, by my count it would require 42 people at various salary levels. That's more than $2 million per year in salaries and benefits, even in a fairly small market. Advertising revenues aren't assured until the station can demonstrate that it has a loyal and worthwhile audience.

I believe that this idea has tremendous promise for someone who's willing to invest with the expectation that 1) Break-even may be five years out, and 2) To fully capitalize on the opportunity, the network will have to be built out. I can't fund it, and it's unlikely that I can find someone who will, so it goes into the drawer, likely to be pulled out again after NAB 2014.

Update, 4/26/2012: Google would be the perfect company to launch streaming stations, for several reasons:
  1. It fits very well with YouTube, and adds a live, local news component that YouTube doesn't have.
  2. The local stations can double as production and post-production space for YouTube's "creators," expanding beyond their existing facilities in Los Angeles, New York and London.
  3. Google TV would get the streaming stations onto big-screen TVs.
  4. Other than Netflix, Google is probably the biggest buyer of Internet bandwidth in the world, and it operates its own international fiber network that rivals the major telcos. Its bandwidth costs, a big part of any streaming network, would be the lowest in the industry.
  5. As Google expands Google Fiber, locating streaming stations in Fiber cities would allow Google to compete with cable operators that have their own local channels.
  6. Google already has 12,000 advertising salespeople worldwide, so it's well-equipped to sell advertising for a network of streaming stations.

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