The internet overturned the print news business. And, thanks to services like YouTube, NetFlix, and Hulu, it's upending the television world as well. But even as the pillars around it fall, the local TV newscast has hung on strong; its mix of crime, politics, weather, and pets-in-distress is charming and unique.
At least for now.
Earlier this week, The Wall Street Journal revealed that Yahoo is in talks to acquire News Distribution Network Inc., an outfit that syndicates clips from more than 200 local news affiliates across the country. It seems that Yahoo, led by CEO Marissa Mayer, is looking to finally make local TV news a big part of the online landscape, something that is long overdue. People turn to the local news for stuff that's, well, closer to home, and that's not something that's readily available on YouTube or other outlets.
"Local TV news content and the web is a marriage made in heaven," says Jennifer Neeley, a former TV news reporter and online journalist who now serves as a digital media consultant. "In an era where more and more households are becoming Netflix- or Hulu-only, content that is relevant to individuals in a more personal way is a un-met need."
Local online video is treacherous ground, a field that wrecked would-be disruptors in the last technology boom, but Yahoo might just have the scale, the expertise, and the hunger to finally make it work. If the company can bring local video news to the masses, it will do more than reverse history. It will also establish a beachhead in a sector long dominated by Google's YouTube, the go-to platform for low-budget online video -- video from individuals, small media outlets, and non-media companies.
The talks are part of a larger video push from Yahoo. According to reports, the company made a failed bid for the French video hub DailyMotion. Apparently, it's now a looking to recruit current YouTube video stars. And last year, it poached network news star anchor Katie Couric from ABC News.
The Ad Premium
According to the Journal, Yahoo could spend around $300 million for NDN. Since Mayer took over in 2012, that would be the company's second largest acquisition, after it plunked down $1.1 billion for the microblogging platform Tumblr. But that would be money well spent, not only because of the quality of NDN's content, but because of its robust advertising network.
NDN takes video from local TV stations and from organizations like the Associated Press and CBS and then re-sells it for placement in other places, including newspaper sites like latimes.com and national services like Bloomberg. The company makes its money by inserting pre-roll advertising in front of the clips and splitting the proceeds with the creators, similar to how YouTube works. But since NDN sells polished content, it commands a premium.
That's a big deal. Across the web, online exchanges and other systems that commoditize ad inventory have driven down the price of traditional display ads. Yahoo is especially vulnerable to such commoditization because it does not have access to as much deeply personal data about users as a social network like Facebook, whose rich targeting capabilities command a premium. Quality video provides Yahoo with a way out of this bind; it lets the company increase its average ad rates without harvesting extensive user information, since video ads sell at a premium.
Roger Keating, the senior vice president for digital media at Hearst Television, thinks the higher rates for video ads explain why Yahoo is so attracted to video. Keating tried valiantly to build a successful business out of online local news clips during the last tech boom with his startup Zatso. Back then, online ad revenue was paltry. But he thinks the time is right for Yahoo's run in the space, if only because online video ads are now a booming business. "It's a good play for Yahoo. The more video ad inventory they can get, the better," he says. "Follow the money. Right now traditional display advertising is going only downward in terms of pricing. The last remaining ad medium in digital with pricing discipline is video."
The only hitch is that station owners might not want to get into bed with Yahoo. After seeing local print news squeezed by large internet aggregators and cable television under attack from the likes of Netflix, their first instinct may be to protect their profit margins. "It's not known yet how many or how few station groups will be eager to share content with outside aggregators," says Serena Cha, who has led the television news and multimedia program at the University of Southern California's Annenberg journalism school. "Internally, stations experience the push and pull between traditional broadcast views ... and the simultaneous urge to get their branded content seen as widely as possible."
