Internet is TV’s Focus for Revenue Growth in 2007
Nurturing online revenue is a priority at TV companies for the rest of 2006 and for 2007, executives at TV stations and cable networks told investors last week. Though the percentage of total sales that online revenue represents today is still small at traditional TV companies, in some cases immeasurably so, executives said they expect to see more money coming from online efforts next year. “Digital revenue is somewhere between 1 and 2% of our total revenue,” LIN TV CEO Vincent Sadusky said: “Our goal over the next 2 yearss is to get that number up significantly.” LIN TV shares rose 4% Thurs. after the company said Q3 revenue increased 27% from a year earlier $115.8 million on some station acquisitions, and profit rose 1.7% to $3.8 million.
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Executives at Gray TV and Nexstar made similar pledges to their investors. Gray hopes to double online revenue next year (CD Nov 9 p17). Nexstar brought in “virtually no new- media revenue in Q3” but expects online efforts to kick in before the end of the year and “contribute in a major way in 2007,” CEO Perry Sook said. Nexstar tested its new web strategy in Hagerstown, Md. and liked the results, Sook said: “Over the next year, we'll continue to establish and further deploy our new media platform… as a legitimate revenue source for us.” The rollout is a bit behind schedule because of technical issues, but Nexstar is committed to retooling its stations’ websites the next 6 months, COO Duane Lammers told us: “We're taking our time and the development is complex. To build your own streaming platform is just not an easy task.”
One reason broadcasters touted their new media plans is to appease investors eager to see revenue growth potential, said Wachovia analyst Bishop Cheen: “There’s nothing wrong with playing to your base. You're not giving them smoke and mirrors; you're trying to give them something real.” Broadcasters want to shake the image of a being “sleepy old media” and show investors and advertisers they can compete online, he said: “It doesn’t hurt to have the cool factor. It’s cool to have digital new media.”
That’s true at cable networks too. Viacom plans in coming weeks to release a slew of online properties aimed at expanding its demographic reach beyond young adults and teens, CEO Philippe Dauman said: “One of our most creative executives [is] working on that notion and has created several compelling ideas for digital networks with very interesting concepts that aren’t out there yet that will serve this adult demographic.” Dauman also pointed to Viacom’s Nickelodeon brand as a “case study of how we can grow in a multi-platform environment.” There the focus has been on Internet games, getting parents involved and giving viewers some control over video content on sites like TurboNick 2.0, he said: “I see this model as one we can apply in one form or another to a variety of our brands in order to accelerate and expand their growth.” Viacom’s Q3 sales rose 7.3% to $2.66 billion but profit slipped 15.7% on higher interest expenses.
Cable networks plan a steady stream of product announcements and content deals for 2007, said Broadband Directions Pres. Will Richmond, who surveyed 75 cable networks about their broadband video plans for the next year. Cable networks want to make it clear that “they're serious about broadband, that they're not going to allow themselves to be overrun by the YouTubes and Googles out there,” he said.