Local TV’s Year Of Living Dangerously

LocalProximity
Written By Tim Hanlon

As local broadcast TV stations revel in the final weeks of the lucrative 2024 election cycle, an unspoken reality looms just beyond the horizon: 2025 will bring a reckoning. The cyclical nature of political advertising, long a financial lifeline for stations, will dissipate post-election, leaving local broadcasters to face a much more perilous business environment. The conclusion of 2024’s political advertising boom will reveal significant structural challenges for the industry that could threaten the long-term sustainability of local TV stations, at least as currently structured.

The 2024 Election Cycle: A Brief Respite

No one denies the significant revenue boost that political advertising brings to local TV stations every two years, and especially quadrennially. In 2024, campaigns at all levels — presidential, congressional, and local — are expected to pour billions into advertising, with local TV as a primary beneficiary. This influx of this ad revenue has become a predictable lifeline in election years. But this cyclical bonanza cannot obscure the deeper, longer-term issues confronting the industry.

For broadcasters, political advertising has become more of an income stopgap than an operational savior. Unlike other businesses that strategically plan for reliable organic growth, local broadcasters are increasingly dependent on this unpredictable and wildly fluctuating revenue source. What happens when the political ad dollars disappear — both in non-election years like 2025 and progressively over time — and what, if anything, can stations do to make up the difference?

Cord-Cutting: A Growing Threat

The erosion of classic pay television audiences due to cord-cutting continues unabated. Streaming platforms are pulling viewers away from linear broadcasts, especially younger audiences who increasingly never “subscribe to TV” at all. This trend is not new, but its acceleration means the core audience for local TV stations — including its once-deemed-essential new programming — is both aging and shrinking, with little to no replacement audience in sight.

Advertisers, too, are beginning to adjust to this new reality. Digital advertising allows for precise targeting, immediate feedback, and more programmatic flexibility. As this trend deepens, 2025 will likely see more advertisers shifting their plans away from traditional TV components towards digital platforms, drawn by the promise of reaching younger, more engaged audiences. This will compound the financial strain on local broadcasters who are already losing eyeballs to streaming.

The Local News Dilemma

Local news has long been the bread and butter differentiator for broadcast TV stations, offering a competitive edge over national networks and streaming platforms. But even this once-unassailable asset is showing signs of weakening, as news consumption habits radically veer towards the immediacy and ubiquity of digital and social media platforms.

Stations that once thrived on their ability to deliver timely, relevant “appointment” local news programs now face fierce competition from mobile apps, social media, and digital-only news sites — especially younger viewers who have grown up accustomed to getting their information on demand and from sources more tailored to their interests. This shift means that local TV’s primary product —news — no longer has the monopoly it once enjoyed.

Declining Retransmission Revenue

One of the major financial pillars supporting local TV has been retransmission consent fees — payments from cable and satellite companies for the right to carry their broadcast signals. But even this once-reliable source of income is under threat. As more consumers cut the proverbial cord, the pool of subscribers paying for pay TV is shrinking; while MVPDs have increased prices to make up for these lost viewers, the aggregate decline in these fees is nigh. Operators are more aggressively pushing back against rising content carriage costs for linear channels, and passing the burden onto their subscribers is now leading to even more cord-cutting — a vicious cycle that will soon exacerbate the financial strain on local TV stations.

Cost-Cutting & Consolidation

The smart money already knows that broadcast TV has entered secular decline and is no longer anything close to resembling a growth business any more. Both publicly-traded and PE-backed group owners (or those that want to be) are forcing local stations to aggressively rethink their operational models, with significant cost-cutting and resource centralizing already under way even before the 2024 books close. Another wave of station group consolidation could certainly help extend the life of the industry in the short term, but the FCC’s oft-circumvented 39% national ownership cap remains a persistent roadblock. Without a recalibration, sector M&A will remain largely dormant, adding further strain on station and group P&Ls.

What Lies Ahead?

The challenges ahead for local broadcasters in 2025 are multifaceted. The political ad revenue bump of 2024 will provide temporary relief, but it’s no cure for the underlying issues. Cord-cutting will continue to erode traditional TV audiences, while digital platforms siphon away advertising dollars. Local news, once the backbone of the industry, is losing its dominance to online sources, and retransmission fees — once a reliable income stream — are shrinking as cable continues its downward spiral.

The industry needs to rethink its business model now, or risk becoming a relic of the past. Will it?

Tim Hanlon

Tim Hanlon is the Founder & CEO of the Chicago-based Vertere Group, LLC – a boutique strategic consulting and advisory firm focused on helping today’s most forward-leaning media companies, brands, entrepreneurs, and investors benefit from rapidly changing technological advances in marketing, media and consumer communications.

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