• by David Goetzl , November 9, 2007

The continued ratings slide at NBC has caused a trickle-down effect that's hurting at least two local station groups--both with 10 affiliates each, executives said this week.

"The halo effect of (prime-time performance) on our late news is very significant, and some of our big NBC markets are frustrated," Hearst-Argyle CEO David Barrett said Thursday, though he did not provide specifics.

But the company's CFO Harry Hawks said the network's "uncertain outlook" in prime time could hurt revenues for the year. Hearst-Argyle has NBC stations in markets such as Baltimore, Cincinnati and Orlando.

At Gray Television, which operates in smaller markets, President-COO Bob Prather said Wednesday that NBC's performance continues to be an issue for its stations in markets such as Omaha, Madison and South Bend. (NBC has long targeted more of an urban audience than the areas Gray serves.)

"The NBC markets are really suffering," Prather said. "NBC was on top for so long, and now they probably have the worst prime-time schedule of the Big 4 ... and they continue to struggle, and it's hurt us on the revenue side."

Local stations look for networks to perform well in the 10 p.m. hour to deliver audiences to their newscasts.

"Normally the ratings don't affect us that much, but I guess when you go from a strong number-one to a poor number-four, it does have some effect on prime time and probably our lead-in on some of our late news," Prather said. "Hopefully, they'll get better."

The executives all made their comments on conference calls to discuss earnings in the recently completed quarter.

Unlike the network level, where commercial ratings are now part of the currency, local stations continue to use "live" program ratings as the basis for pricing.

And so far this season with the "live" ratings, NBC continues in fourth place--with further ratings declines over last season. In households, the network is averaging a 5.1--down from a 6.5 at the same point a year ago, and 12% behind third-place Fox. In the key 18-to-49 demo, NBC is posting a 3.0, down from a 3.6 last year--although only .1 behind CBS for fourth place.

For the quarter, H-A's revenue dropped 3% to $177 million, although it also suffered from a loss of political dollars with no federal elections this year. Gray said net revenue dropped 9% in the quarter compared to a year ago (to $73.6 million), mostly due to the decrease in political advertising.

Of course, executives did say that other issues in addition to NBC's struggles are having a negative effect--such as a continued slowdown in the key auto category and housing market. But they are optimistic that NBC's Beijing Olympics next summer and the 2008 Presidential campaign will be a boon.

NBC could affect stations' revenues even more if the "Hollywood" writers' strike is a prolonged one. But executives said that whatever happens, they would continue to focus on driving revenues via their local product.

"It's still too early to tell what the effect of the writers' strike will be, but our sellers will be re-emphasizing the value of our local news inventory for those national spot advertisers who might be weighing alternatives," Barrett said.

"We're going to keep putting on our local news live and keep doing the right things locally and kind of ride that out," Prather said. "I don't see it having a big effect on individual stations."

At Gray, another trouble spot was the company's 16 MyNetworkTV stations, which have considerably less reach than the NBC crop. MNTV is still trying to find a programming mix that will make it competitive. Nonetheless, like many executives at station groups with MNTV affiliates, Prather was optimistic that the News Corp.-owned Fox group would ultimately find a path to success.

"I think they will," Prather said. "Fox has proven they know how to program television--I think it's just a matter of time until they hit the right formula there."