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Broadcasters Focus on Challenge From Web

Local television broadcasters, seeing their networks potentially bypassing them in the rush to offer shows and other content online, will meet this week to figure out how to hang onto viewers and dollars.

TV stations are already moving to provide their own video clips to Web sites hungry for content and insist they can use their strong relationships with local audiences to market network shows on their own sites in exchange for a share in the profits.

It's not entirely clear yet they can cash in on the growing shift of advertising dollars and eyeballs to the Internet, but local broadcasters have no choice but to try.

"The question is, do they partner with those new forms of content or those new providers? Or do they sit on their hands and become less and less relevant," said Jimmy Schaeffler, an analyst with The Carmel Group, a market research firm.

Those challenges will be discussed at the annual gathering of the National Association of Broadcasters, which begins Sunday in Las Vegas.

The show draws more than 100,000 TV and radio broadcasters from 130 countries as well as TV networks and technology companies that provide everything from cameras to traffic helicopters.

Networks began selling hit TV shows like "Lost," "Survivor" and "Law and Order" on the Internet last year, generally for $1.99 per episode.

They are sold through network Web sites, Apple Computer Inc.'s iTunes store and other Web portals for downloading to computers and portable devices. Some of the deals were done without consulting local affiliates or a commitment to share profits with them, although networks have said those discussions are ongoing.

The local stations believe the networks may be making a mistake and overlooking the key advantages that affiliates have.

"The local station is kind of in the driver's seat," said Paul Karpowicz, president of the Meredith Corp. Broadcasting Group, which owns 14 network-affiliated stations around the country. "We have the infrastructure. We have the branding in these local markets no one else can replicate."

Karpowicz said affiliates need to make a stronger case "that we've been in partnership with these guys for 50 years."

Networks and affiliates have a complicated and sometimes tense relationship.

Broadcasters get to sell some ads during network shows, but make the bulk of their profits from local programming, such as news. Affiliates have long had exclusive rights to air network shows, including repeats. But affiliates worry that as networks sell or stream programs the day after they air on TV, it will hurt ratings, which are used to set advertising rates.

Some networks appears to be getting the message.

Last week, NBC Universal and its 213 affiliates formed a joint venture to market news, lifestyle, sports, weather and other video by local stations as a way to grab advertising dollars that are migrating from prime time network shows to the Internet.

The target market are Yahoo Inc. (Nasdaq:YHOO - news), Google Inc. and other Internet sites that are clamoring for video around which to sell ads.

"Advertisers can't buy enough video in today's market," said Terry Mackin, executive vice president of Hearst-Argyle Television Inc. and chairman of the NBC Affiliates Board.

Fox recently reached a deal with its affiliated TV stations to share revenues from video-on-demand, the Web and other nontraditional ways of distributing shows like "American Idol."

The growing interest in offering video online is reflected by the presence of some first-time exhibitors at this year's broadcasters trade show. They include technology providers Nokia Corp., Cisco Systems Inc. and Qualcomm Inc.

"They are looking to partner with broadcasters because they know we have something of value to them," NAB spokesman Dennis Wharton said.

At the gathering, broadcasters will also address other challenges they are facing, including increased federal scrutiny regarding decency standards.

Broadcasters have complained that the federal rules are vague and enforcement is inconsistent, yet millions of dollars in fines have been levied based on the standards.

"It's still so difficult to determine what the criteria for indecency is or isn't," Karpowicz said.

In March, the Federal Communications Commission levied a record $3.6 million in fines against stations that had broadcast an episode of the CBS drama "Without a Trace," which, the FCC said, contained graphic depiction of "teenage boys and girls participating in a sexual orgy."

Under federal rules, local stations wind up paying fines for network shows deemed indecent.

The issue of federal indecency standards is sure to arise when FCC Chairman Kevin Martin makes his first appearance at the NAB convention. Other FCC commissioners are also scheduled to attend.

Local broadcasters are considering time delays on live programming to avoid fines if guests on talk or awards shows utter an obscene word or spectators at a sporting event make an indecent gesture.

Meredith has already advised its local stations to abandon live shots at sports bars for fear of angering the FCC. Instead, stations are advised to videotape the fans there so footage can be screened before airing.


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