The Budget Game

This is one of the discoveries about managing resources contained in this year’s study of local TV news. We sent detailed questionnaires about policies and pressures to all 59 stations and then compared the results to the content and ratings data to see what kind of management practices yield both quality and ratings success.

Among the findings:

The average profit margin of newsrooms in the study that responded exceeded 40%.
Most stations — nearly three-quarters — have added broadcast hours in the last three years, a demand that has generally matched or overwhelmed any budget increases.
News directors widely agree on what constitutes quality local TV, but say lack of staffing, time, and budget pressures get in the way.
Seventy percent of stations require reporters to produce a story a day, and 30% require more. None require less.

Fully 78% — or 46 stations — returned the mailed survey, offering a good mix of network affiliation and market size. Every city studied is represented in the survey results.
The news directors offered virtually the same definition as the Project’s Design Team about what constituted a good local newscast. Most news directors (56%) thought the foremost task for local newscasts was to reflect the community. “Local, local, local,” a news director wrote. “We know it best, not some consultant.”

News directors also thought newscasts must be relevant, accurate and fair. “Provide relevant and compelling stories that reflect our community,” wrote one news director. “Accuracy, faithfulness, relevance and enterprise,” wrote another.

The news directors overwhelmingly identified “not enough staff” as the chief obstacle to producing these kinds of quality newscasts. A majority, 51%, rated it the No. 1 problem and another 26% rated it No. 2. Altogether almost eight in ten news directors cited staff size as a serious problem. The second most critical difficulty was getting well-trained staff. Money came in third.

The data show that the news directors have it right. In similar-sized markets, the larger the staff, the higher the news quality scores. Perhaps more important, stations that invest their resources in people have the best ratings trends –regardless of market size or how long the news director has been at the station. In other words, hiring more people not only improves quality, it improves ratings.

If money isn’t going toward people where is it going instead? Many stations spend a good deal of their budgets on equipment and other production resources. More than half of all the stations responding used one or more helicopters, and more so in larger markets.

Even so, we found no significant relationship between use of helicopters and either quality scores or audience ratings, even controlling for market size. Importantly, those stations that had proportionately large equipment budgets pressed their staffs harder than stations that spent less on equipment. Taking into account market size again, reporters were expected to produce more news packages at stations that spent the most on equipment.

The problem is often that incentives are going in the wrong direction. High-tech equipment is tax deductible, which means it hits the bottom line as profit. People do not. They add cost. This makes it hard for stations trying to maximize profit in the short term to recognize the value of investing in people.

[For those interested the statistical correlation was = .6, p <01]

With the overwhelming majority of stations adding broadcast hours, it means even more pressure on news production. At more than 70% of the stations surveyed, reporters produce one news package a day — the rest produce more than one. The result is that reporters already stretched pretty thin are being stretched even further. This may be a case where more is less.

The demands on news may help explain the discovery in this year’s study of a drastic drop in enterprise reporting. Beat reporting, indeed, has not been abandoned. Only 11% of the stations in the survey had one or no beat reporters. Most commonly, stations covered two to four beats. The problem is that the demands of daily news production leave too little time for the kind of enterprise reporting that many news directors and reporters would like to pursue.

A large number of news directors (44%) cited the pressure of time as a serious constraint on quality. Other problems mentioned included budget pressures (37% rated it their first or second problem) and inadequate staff training (28%). One news director wrote that there was “not enough åquality’ staff.” Another mentioned the “inadequate skills of reporters, producers and managers.” A news director from a medium-sized market said it was “difficult to keep quality reporters and turnover was the largest obstacle.”

Only 14% indicated that having “too great a news hole to fill” was a serious concern. One news professional cited “commercial pressures.” Another news director from a large market wrote of a “lack of long-range will to produce television in the public interest opposed to certain private interests.”

The survey also unearthed these other findings: Four in ten news directors were willing to report proprietary information about profit expectations, as long as we did not identify them by station. At stations responding where news directors did name a figure, the median profit margin was 40%. The highest was 50%. The lowest came from a lone news director who said the news division was not considered a profit center. We also asked what percentage of the stations’ budgets went to on-air talent. Two-thirds of our respondents were willing to share that information with us. On average, stations spend a median of 41% of their budget for on-air talent (with two-thirds of respondents answering). Forty percent of stations reported that someone in addition to the reporter edits scripts. Virtually all stations had some sponsored segments, most often sports and weather. The next most common were health or money. These segments were likely to be sponsored by health or financial companies, which raises questions about potential conflict of interest.

The bottom line on our survey of local news stations is that staffing is the most valuable and valued resource in news production. The more a station spends on human capital, the better the news program and the better the ratings. If managers have to choose between hiring reporters and buying satellite trucks, our survey shows reporters ought to win every time.

Marion Just is a professor of political science at Wellesley College and a research associate at the Shorenstein Center for Press and Politics at Harvard. Rosalind Levine, an attorney in Boston, and Todd Belt, a Ph.D. candidate at the University of Southern California, provided research assistance for this article.