Gray Television Gets The Scoop On Local News Winners

While lifestyle and technology changes have ended some U.S. household rituals, there’s one ritual that many Americans still cling to: watching the local TV news after they get home from work or before they go to bed at night.

That’s the case even as more people consume news on smartphones, tablets and computers. There might come a day when sitting in front of a TV to watch the news seems as quaint as gathering around the radio in the parlor, but that day hasn’t come yet.

“One thing we know is that more people watch local news as they grow older — that has not changed,” said Jim Ryan, senior vice president and chief financial officer at Gray Television (NYSE:GTN).

At the same time, he told IBD, “We certainly are aware that people are getting content in different areas, and we’re preparing for that as well.”

Gray Television owns and operates stations in 44 TV markets comprising 76 affiliates of the Big Four networks: CBS (NYSE:CBS), Comcast‘s (NASDAQ:CMCSA) NBC, Walt Disney‘s (NYSE:DIS) ABC and Twenty-First Century Fox‘s (NASDAQ:FOX) FOX Broadcasting.

News Equals Dollars

Gray primarily targets stations in small to midsize U.S. markets that rank first or second in local news ratings.

Its focus on local news is a matter of simple economics: Nearly half of its revenue comes from local programming, and most of it is centered on news. The other half of revenue is mostly split between network programming and syndicated programming, though it also gets some revenue from its Internet operations.

Revenue comes in the form of ad sales as well as retransmission fees that Gray charges to cable and satellite service providers that carry its content. Those providers include top names such as Comcast, DirecTV (NASDAQ:DTV) and Time Warner Cable (NYSE:TWC).

While Gray continues to make moves into digital content that can be viewed on mobile devices and computers, it still relies heavily on traditional TV viewing for the lion’s share of its business. Last year, only about 5% of its revenue came from digital media.

The company wants “a very strong local news franchise in every market we own or would consider buying into,” said Kevin Latek, senior vice president, business affairs.

“It’s that local news content that is unique to those markets,” he told IBD. “It’s expensive to produce, and the barriers to entry are very high.”

Gray says that it ranks No. 1 or No. 2 in 41 of its 44 markets. Most of its stations are concentrated in the South, Midwest and Central Plains states.

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