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. . .The Story At 11
KNTV is set to become the Bay Area's NBC affiliate--but can it play with the big boys?
By Jeff Kearns
WHEN KNTV (Channel 11) higher-ups sent memos to some staffers this summer directing them to get their acts together, professionally speaking, the communication proved particularly irritating because it took the form of email rather than face-to-face meetings and catalogued nitpicky slip-ups. "It was clear management was documenting everyone's mistakes," one recipient says.
Warnings went to producers, writers and on-air talent, and said, essentially, that if they didn't improve quickly they'd have to walk the plank. Borrowing from industry terminology, they said some employees weren't "Market Five material."
Market Five is the San Francisco-Bay Area television market, designated as such because it's the nation's fifth largest. KNTV joined this market less than a year ago after abandoning its status as the ABC affiliate in the Monterey-Salinas market in 1999.
Now, through an improbable and unprecedented twist of fate, KNTV is days away from replacing KRON (Channel 4) as the Bay Area's NBC affiliate. Throughout the month of December a multimillion dollar ad campaign will saturate Bay Area print, broadcast and billboard outlets with the news.
Is KNTV itself Market Five material? And will it satisfy South Bay viewers who are used to Channel 11's hometown coverage?
No, and not quite. The station doesn't have a news operation on par with competing stations and its broadcast signal doesn't even cover the Bay Area. It lags way behind the other Bay Area stations in ratings for news and other programming.
In any case, as midnight nears on New Year's Eve, homebodies who elect to celebrate in front of the tube will be able to witness a little bit of South Bay history. At 11pm, San Jose's longtime station will adopt its new guise as "NBC3." That's when the station will show its first news programming under the new setup. At 11:30pm, the station will show The Tonight Show with Jay Leno, airing NBC network programming for the first time.
It may not be much of a reason to stay home, but the move is significant for a two reasons. One, it's the first time that a Bay Area network affiliate has broadcast from the South Bay, and two, KNTV will be paying the network to be an affiliate, instead of the other way around--an industry first.
Times are a-changing in the broadcast media world.
Among other things, the South Bay angle will be a hard one for KNTV to figure out how to play: Will it stay true to its heritage as San Jose's hometown station, giving viewers in the rest of the Bay Area a stiff dose of Mayor Ron Gonzales, the Valley Transportation Authority and other South Bay news, or will it force-feed South Bay viewers Jerry Brown, Bay Bridge traffic reports and spot news from Santa Rosa? With most of its operation housed in the station's studio on Park Avenue, how will the assignment desk make the call between a shooting in Mountain View or a refinery fire in Martinez?
It's a treacherous tightrope to walk, though it will give the South Bay one distinct benefit: a higher profile among Bay Area residents (OK, San Franciscans) who view San Jose and its neighbors as more or less a sprawling mini-mall.
But first, the deal has to happen. And right now, things don't look good for KNTV. A deal that was supposed to catapult it to the big leagues now is devolving into a complicated mess that no one wants to talk about and that appears to be in the hands of high level execs in New York. The rub is this: KNTV's parent company, Granite Broadcasting, is in such bad financial shape that industry analysts wonder if it can escape a mountain of debt and scratch together the $37.2 million it needs to pay NBC next year. At the same time, industry insiders believe that NBC could turn runaway bride and abort the deal at the last second to cut one with KNTV's competitor, KRON.
Paying the Peacock
THE BAY AREA'S new tv landscape started to take shape in 1998, but no one knew then what it would mean for the South Bay.
That's when San Francisco's de Young family started selling off the assets of Chronicle Publishing, which included the San Francisco Chronicle, KRON-TV, Chronicle Books and other media properties.
NBC was one of several bidders for KRON. (It's not uncommon for local stations to be owned by networks.) The network, a partner with Microsoft in MSNBC, is owned by the world's fifth largest company, General Electric, which makes everything from light bulbs and washing machines to F-16 engines and detonators for nuclear bombs.
New York-based Young Broadcasting (no relation to the de Young family), however, won the bidding war with an $823 million offer--believed at the time to be the highest price ever paid for a television station.
The peacock wasn't happy about getting the prize snatched out of its claws, and it showed when the network and Young sat down to renegotiate the station's affiliation contract.
"When Young outbid NBC," recalls KRON Station Manager Craig Marrs, "that caused NBC to be anxious at a time when the business relationships between stations and networks were changing and evolving. As a result, NBC decided not to deal with Young."
Historically, national networks have paid local affiliates to carry their programming, but in an unprecedented move that will almost certainly not be the last, NBC turned the tables on Young, asking for a different kind of setup: reverse compensation. Instead of paying the station as it had in the past, the network proposed that Young pay them $10 million a year to be an NBC station. NBC also tried to get KRON to stop bumping network shows for local programming. (When affiliates pre-empt network feeds, they don't have to split ad revenue for that time, and networks frown on the practice.)
Talks failed.
That's when Granite Broadcasting CEO Don Cornwell approached NBC and offered $36 million a year to broadcast the network's content out of KNTV from the South Bay.
Under the deal, Granite, a New York-based company that owns nine U.S. stations, was to pay NBC $362 million over 10 years to be the affiliate--an announcement that shook the TV industry because it turns the usual setup on its head.
The deal left broadcasters agape. Network execs were delighted. This turnabout in payment could significantly increase profits when played out on a national level. Affiliate owners groaned collectively.
"It's an indication of what is likely to happen in the future," CBS Corp. CEO Mel Karmazin told a reporter when the deal was announced, adding that it means there's a greater likelihood "that stations will pay their networks than there is that networks will pay their station."
The new arrangement also did not go over well with the hundreds of local broadcasters who were already having a harder time getting along with the networks. Many worried that the Granite deal would embolden networks to start shaking down affiliates when the time came to renegotiate contracts. The Washington Post reported in May that a complaint filed with the FCC by 600 stations cited Granite's reverse-compensation deal as an example of how networks are becoming too powerful.
Granite paid NBC $27.8 million this year, and is scheduled to pay $37.2 million next year.
Let's Make a Deal
THAT IS, if the deal goes through. Despite Granite's bouncing of well-known local newscasters, revamping of the set, elimination of the San Jose tagline and shifting of geographical emphasis, industry rumblings indicate that the much-touted South Bay launch of NBC3 in January 2002 may be reversed.
The industry is buzzing with news that NBC is negotiating separately with both Young and Granite to buy KRON and KNTV, respectively.
A source close to the situation said Monday that NBC continues to talk to both Young and Granite. A deal could be announced any day.
But as of presstime, there was no official word. Young, Granite and NBC all refused comment for this story.
But even if the deal goes through, it may not play out according to Granite's plan. Granite's financial problems could mean trouble. If the company can't make payments, the deal with NBC gives the network a right to acquire KNTV. It also puts a $34 million lien on Granite's other Bay Area station, KBWB (Channel 20).
"There are a lot of people scratching their heads wondering how that's going to work out economically," says KGO (Channel 7) Director of Programming David Metz.
Industry analysts say that, because of Granite's shaky cash flow situation, creditors are keeping it on a short leash. To reduce debt incurred by the KNTV deal, Granite put its Detroit WB affiliate, WDWB, up for sale in October. Granite also had to sell another station, KEYE-TV in Austin, Texas, to reduce debt in 1999.
According to Granite's third quarter report, issued Nov. 14, the company's operating loss went from $6.58 million to $29.7 million in the first nine months of 2001, while its net loss more than doubled to $44 million for the same period. Pre-tax cash flow (EBITDA) plummeted from $21.9 million to negative $3 million. The company says increased costs at KNTV are partly to blame.
It's been a difficult decade for networks and a tough year for TV stations in general. The lack of dotcom, automotive and political ad buys have hit hard--and a recovery isn't likely anytime soon. Competition from cable and new media has taken a toll on network ratings. In 1994, 37 percent of the public reported spending at least one hour a day watching network news, compared to 23 percent today. Some analysts say it's the toughest broadcast economy in decades.
On top of that, KNTV and just about every other station in the country broadcast uninterrupted news coverage for five days straight after Sept. 11. Granite says it lost $1.1 million in ad revenue that week alone.
But although every sector of the broadcast economy took big losses after the attacks, Granite is still on especially shaky ground.
Citing the cash-flow problems, Standard and Poors lowered Granite's credit rating in September. And Granite's stock value has fallen, trading around $2, down from $13 a share last year. More accurately, Granite's stock has been in decline since the reverse-compensation deal was announced in late 1999.
Granite's Cornwell, however, spun the deal differently when it was announced, saying it was like picking up a major market affiliate for a great price.
And KNTV does have some bright spots to look forward to if the deal goes through. For one, it will be able to hike up its ad rates when it becomes a network affiliate, selling ads around ratings kingpins like Friends and ER. It will also get a ratings boost at 11pm, when NBC prime time programs lead viewers into the 11 o'clock news. Another ace up the station's sleeve is that NBC will be airing the Winter Olympics in Salt Lake City in February. Granite's earnings report boasts that the KNTV sales department has already hit 80 percent of its revenue goal for selling airtime during the games. But the cloud hanging over the station is if NBC really will seal the deal.
The Inside Story
AT THIS POINT, it sounds like NBC may leave KNTV at the altar--even though the engagement has been on for more than a year.
The network has had its own people at KNTV for several months, advising station management how best to get ready for the big day. However, some KNTV insiders say the NBC folks didn't like what kind of operation they saw when they got into town.
And although, as of presstime, KNTV is still set to become an NBC station--and KRON is planning to become an independent--on Jan. 1, there are lingering doubts that the network will actually consummate the relationship. NBC's contract with Granite contains an escape clause, which means it can bail out even at the last minute--and pay Granite $14.5 million for the inconvenience.
TV industry publications have been buzzing with speculation that NBC will abandon KNTV--or wait until it defaults on payments and acquire it outright.
Though none of the players is talking about what may or may not be going on behind closed doors, word of NBC's negotiations has been leaking out for months, as accounts in broadcasting trade magazines were picked up by daily newspapers and wire stories.
NBC, which has wanted to own its own station in the Bay Area for several years, may have other ideas. For networks, owning and operating stations is a money-saver, and NBC is the only network that doesn't own and operate its own Bay Area station; Viacom/CBS owns its San Francisco station, KPIX (Channel 5), and Disney/ABC owns KGO (Channel 7). (Young owns 12 U.S. stations, including KCAL in Los Angeles, another indie station.)
A source close to NBC's talks with Granite and Young says money is the issue. Young reportedly wants $750 million for KRON. Ironically, that's the same amount as NBC's losing bid, but now NBC won't go that high because it values KRON as an independent.
Most accounts of the negotiations have NBC offering Young $450 million to $600 million.
Promises, Promises
SAN FRANCISCO-BASED TV news consultant Don Fitzpatrick, a former headhunter and longtime industry insider, says the situation could change any minute, and right now it's not looking good for KNTV.
"NBC is extremely nervous, if you read the trade publications," Fitzpatrick says. "NBC has been talking to Young about buying KRON for several months now."
Meanwhile, Fitzpatrick says, the folks at KNTV and Granite are getting frantic at this point because their much-hyped transformation isn't a done deal--and may not have been a good idea to start with.
"They don't have any money, and then they went out on a limb and said, not only do we want the affiliation, we'll also pay you for it," Fitzpatrick says of Granite. "It's just sucking money from a company that doesn't have any.
"They promised a lot of stuff which I'm not sure they can deliver on," Fitzpatrick says. "They promised NBC a brand new, state-of-the-art facility, and that's not going to happen. People are working two, three to a desk there now, and the KNTV facility wasn't that big and great to begin with."
But buzz notwithstanding, KNTV will be showing peacocks on Jan. 1 and through the Winter Games.
In order for the network to use its escape clause, it must first own another station in the Bay Area. It would also have to give KNTV 90 days notice.
"Nothing is going to happen by the end of the year," says KNTV spokeswoman Erika Taylor. "The transition would still go through."
Asked about reports that NBC is shopping around for TV stations, Taylor says "NBC talks to a lot of people, but talking is talking and it doesn't mean a deal is in the works."
Adds Taylor: "I have no reason to believe that after the transition that KNTV will not continue to show NBC programming for the Bay Area into the unforeseeable future. The bottom line is, as long as KNTV is around they're going to be showing NBC programming."
Taylor also points out that NBC crews are building satellite dishes in the parking lot behind the KNTV studios right now, which is a sign they're serious.
And KRON, by the way, recently unveiled a new graphics package, and is already sending out press releases trumpeting its fresh news lineup.
But Taylor also acknowledges a potential NBC takeover of KNTV. "Sure, it's a possibility" she says, "They may have talked about it."
Film at Eleven
KNTV BECAME THE South Bay's first television station in 1955.
Since it became an ABC affiliate in 1960, KNTV has played a strange role in regional broadcasting. It was a Bay Area station, broadcasting out of studios in San Jose, but for official purposes, it was part of the Monterey-Salinas designated market area (DMA), the nation's 119th largest. That meant it was the only station in the country physically located outside of its own market, but it also made it possible for KNTV to show ABC programming at the same time as that network's Bay Area station, KGO. In 1999, however, KGO agreed to pay Granite more than $14 million if it would drop its ABC affiliation. Granite took the money, and KNTV stopped showing ABC programming in July 2000.
As an independent, KNTV filled the network void with WB programming, syndicated shows like reruns and game shows, and some of its own programming. And with extra free time on its hands, the station also doubled the amount of news per day, from four hours to eight.
In September 2000, Nielsen Media Research reclassified KNTV as part of the San Francisco-Oakland-San Jose DMA. In March, the Federal Communications Commission ruled that KNTV was officially part of the DMA after the station fulfilled regulatory requirements by doubling the power of its broadcast signal to cover more of the Bay Area.
Granite's ownership of KNTV proved a stumbling block when it tried to buy former canine showcase (remember how the station ID used to feature dogs panting under the studio lights?) KOFY (Channel 20; now KBWB), until a key regulatory ruling opened the door for a wave of station acquisitions in 1999. That's when the FCC allowed the same company to own two TV (or radio) stations in the same market, called a duopoly. It paved the way for Granite, which bought KNTV in 1990 for $59 million, to complete its $174 million acquisition of KBWB in San Francisco. More acquisitions followed: KTVU owner Cox Broadcasting soon bought KICU (Channel 36) in San Jose.
While KNTV will be bringing the South Bay into living rooms around the rest of the region, the South Bay already lost coverage of its own stories when KNTV started branding itself as a pan-Bay Area station.
Even KNTV employees bemoan the loss of local news. "San Jose is losing a valuable asset," laments one staffer. "The news in San Jose will not be covered as it has been in the past. Our news will be diluted by what's happening in Livermore and Marin. If you think you don't care what's going on in Hercules, just wait. People go on and on about losing a sports franchise, but this is much more important for a community, that it can have its own voice. You can't put a price on that."
At the same time, other local news outlets are shrinking. KICU (Channel 36) dropped its evening news years ago and canceled its last morning news show earlier this year. The station used to rebroadcast KTVU's Ten O'Clock News, but recently dropped that, too. The only original programming it produces now is Silicon Valley Business, High School Sports Focus and Q&A, a public affairs show. Additionally, Cox reportedly plans to move most of the station's operations to KTVU in Oakland.
Now, the only broadcast news outlet wholly dedicated to covering the South Bay is a radio station. KLIV-FM (1590), a locally owned and operated station, broadcasts the audio portion of CNN's Headline News most of the time, but its reporters doggedly devote themselves to South Bay news.
Remote Control
IN THE LAST couple years, KNTV has lost its three well-known anchors who had spent years at the station: Maggie Scura, Mary Babbitt and Doug Moore. What happened to the three of them depends on who you talk to, but the fact remains: they're gone.
But while South Bay viewers don't have their own familiar faces reading the news, KNTV did score a big name with Terilyn Joe.
Joe had a reputation for being domineering and critical when she worked at the KGO studios, which may be part of the reason that station didn't renew her contract in December 1999. After cutting Joe loose, the station put out a statement saying that it offered her a sweet deal that wasn't good enough. The San Francisco Examiner reported in 1997 that Joe was pulling down $445,000 that year.
Originally from Vancouver, B.C., Joe first took to the airwaves in Toronto and worked for Canadian stations before coming to KGO in 1992. KNTV grabbed her after KGO and started her in October 2000. Insiders say her paycheck is probably somewhere in the 300s now.
Since then, Joe, who anchors the 6pm and 11pm newscasts, has been making a different kind of reputation for herself. Staffers say she's not so tough to work with and that she also plays a big role in newsroom decision-making--something her higher-ups don't have a problem accommodating. "She should probably have the title 'managing editor,'" cracks one newsie, "because people are definitely dancing to her tune."
Joe, who won an Emmy for her reporting on the 1997 Hong Kong handover, is one of the station's major assets at this point because she's one of the most recognized Bay Area anchors.
Joe's co-anchor, Allen Denton, is also a new face. KNTV signed him at the same time as Joe, picking him up from WCNC-TV, an NBC affiliate in Charlotte, N.C. (Side note: Denton shows up in Local News, a recent five-part PBS documentary that spends a year following WCNC's news team as it struggles to improve ratings and provide quality coverage.)
News You Can Lose
WHEN KNTV and NBC announced their accord, staffers at the San Jose station cheered their good fortune for scoring a ticket to the big leagues. However, some of those staffers who were around when the deal was around were thinned out and replaced. Not only did that anger longtime employees who were shown the door, it also changed KNTV's product, which was suddenly missing its most familiar faces.
The station also brought on a new VP of News, Scott Diener. But while Diener was a highly regarded Emmy and Peabody Award-winning TV journalist when he came in from CBS affiliate WCPO-TV in Cincinnati, some newsies didn't dig his style, especially when he started to shake things up. One staffer reported this summer that many employees were putting together "escape tapes," or video résumés to send around to other prospective employers.
"It's hell," one employee said. Employees complained that they were being treated like dirt after years of service and that pay increases which had been promised along with the jump to Market Five hadn't been forthcoming.
Though KNTV is increasing the size of its news staff, a lot of old-timers have gone out the door. A few got the boot after their "not Market Five material" warnings, which some disgruntled staffers believe were only sent to create a paper trail before the ax fell. Adding to the disgruntlement with Diener is the fact that the memos came from him.
This summer, when the memos went out, Metro didn't have to snoop around to get station staffers to talk about what was happening behind the studio doors. Employees called and emailed Metro to gripe about the situation. Staffers say the notes are still going out and employees are still being let go. At the same time, the station is still auditioning anchors, which may suggest more changes to come for the lineup.
To keep the herd from getting spooked amid talk that the NBC agreement isn't a done deal, station management sent out a memo to staff last week acknowledging the rumors and assuring that the transition would still go through as planned.
Some newsroom staffers are cheering the deal, while others are doing their best to be, in news parlance, cautiously optimistic.
"There are people who are so disgusted with the way things have been handled they almost don't want it to go through," said one newsroom employee. "Some are worried, some are excited."
Employees say they're chafing under the management style--and would take delight if some of the top dogs are sacked by network suits if NBC buys the station.
At KRON, looming independence also has some staffers updating their résumés. Veteran anchor Pete Wilson bailed out in October and will start at KGO in January. Also, star sports guy Gary Radnich is also rumored to be moving on.
When it loses its network affiliation, KRON plans to focus heavily on news, filling nine hours a day with its own newscasts: four during the morning, one at noon, and four during the evening.
Station Manager Marrs says the extra time will mean more and longer news stories.
The rest of the air time will be filled with syndicated programming and reruns of its own shows, like Bay Area Backroads and Bay Cafe.
It has already announced a morning news show to replace the Today show, plus plans for an hourlong newscast at 9pm. Because the station will lose NBC Nightly News, it will compete against the other national broadcasts with a half-hour newscast dedicated to national and international news at the same time.
But for KRON, losing its popular NBC programming to an upstart rival will also mean taking hits in the ratings and revenue department. "We do expect some negative impact," Marrs says. "But it's still too early to tell how much."
Smoke Signals
THERE'S ANOTHER WRINKLE in the deal for KNTV: a lot of people in the Bay Area can't see it.
When Granite and NBC announced their accord in June 2000, KNTV's signal didn't reach past the midpeninsula. In November 2000, the station inked a deal with cable provider AT&T to have its signal carried on Channel 3--much more desirable real estate on the dial. The deal with AT&T, which provides service to nearly all cable subscribers in the Bay Area, was followed by subsequent increases in carriage. The last increase came this week, but KNTV didn't get everything it wanted--some cable carriers didn't give it the Channel 3 slot.
The final boost brings KNTV to 2.5 million households in the Bay Area, up from just 500,000 in its ABC days. By the switch, Granite says KNTV will air as Channel 3 on all of AT&T's 1.6 million Bay Area households plus another 140,000 homes with satellite TV.
Station spokeswoman Taylor says KNTV's signal now reaches Marin County, and parts of Sonoma and Napa counties--though viewers in San Francisco and Oakland complain they can't get the station clearly.
"They're going to have a lot of challenges, not the least of which is signal availability," says KGO's Metz. "Cable only has 72 percent penetration."
The fact that a lot of Bay Area homes can't get KNTV is also a problem for NBC, which will lose viewers in the region's megamarket.
Taylor says KNTV's transmitter atop Loma Prieta Peak--about 70 miles south of San Francisco--is broadcasting at the maximum allowable strength under FCC regulations, and may be moved north in the future.
Mad as Hell ...
FOR DECADES, Americans have been reading newspapers less and getting more and more of what they know about the world around them from the TV screen. But although it's ratings-driven and sound bite-focused, network news viewership has dropped significantly. It's currently estimated that only 17 percent of those under 30 regularly watch nightly network news.
Although most Americans get their news from television, the quality of that information is continually on the decline.
This summer, after reporting on stem cell research, CBS Anchor Dan Rather raised eyebrows when he told viewers to "read one of the better newspapers tomorrow" for the whole story.
While attention spans continue to shrink, news departments are under pressure to do more with less money while at the same time they face increasing competition--and not just from other TV news outlets but also from cable, the Internet and print. Expensive international coverage has all but stopped, while at the same time network and local news is focusing more and more on magazine-type filler like health, technology and investing that goes over well in focus groups.
The Bay Area, by comparison, is fairly high-minded, and led by the best local news team anywhere. The Project for Excellence in Journalism, a Washington D.C.-based group that studies local news, said in a study last year that KTVU (Channel 2) scored higher than any other news station. And quality sells, apparently, because KTVU is also a ratings leader. KTVU's Ten O'Clock News is an hourlong show that takes a no-nonsense approach to the news that frequently does a far better job of covering local news than other Bay Area stations while at the same time covering national news better than the network newscasts. Part of the reason for its success is that it avoids many of the pitfalls that other local news stations can't seem to avoid: mindless chatter and cutesy segues, excessive crime coverage, lost puppy and news-of-the-weird stories along with cross-promotion of their network's reality shows.
The above-mentioned study by the Project for Excellence in Journalism, which looked at 49 stations in 15 cities, sounded a pessimistic tone for TV news. "Viewers are beginning to abandon the medium, especially to the Internet, much as network news began to lose audience more than a decade ago with the advent of cable. But in response the industry is headed toward making a fateful mistake," the report warned. "A major ongoing study of local television news reveals that the business is cutting back on precisely the elements that attract viewers--including enterprise, localism, breadth, innovation and sourcing. A major reason is that the business is committed to maintaining profit margins it enjoyed in an earlier era."
Local Motion
DAVID L. GREY, Professor Emeritus of Journalism at San Jose State University, says he's doubtful KNTV will be able to meet any expectations of greatness, though the transfer could end up being a good thing for Silicon Valley.
"The South Bay needs something like this, and it's a tremendous opportunity, but I don't know that the resources are going to be there to make sure that it comes to pass. If there was good news, I think we'd be hearing it, but we haven't been hearing anything."
Former CNN anchor turned San Jose State professor Bob Rucker says there will likely be growing pains, but overall he's optimistic about what it brings the South Bay.
"It's time for the South Bay market to evolve to what it should have been years ago, and this will bring notoriety to the South Bay. It's really time that the South Bay was put on the map, and this will be one of the factors that raise the city's profile. This is one of the best things to happen to San Jose."
And, Rucker adds, it doesn't need to be a train wreck.
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