Exactly right. Here's the thing. A rerun of "Jerry Springer" might get more viewers than someone reading wire copy. But at least half of the commercials during Jerry Springer come with the show itself, because that's how Springer's team makes their money. Syndicated shows only leave a portion of commercial time open for the local station to sell for itself. You can't add more local spots, because the show would run over 30 minutes.
On the other hand, every single spot during a newscast is a spot sold by the station's own sales department. Even if Springer would get better ratings, the solitary fact that every newscast spot generates local revenue is what can make the mediocre newscast more profitable for the station.
=== Warning: Math Content! ===
For example, let's say Station X can make $1000 per ratings point on any given :30 spot.
(I know it's not that simple in the real world but I don't want the math to get too far out of hand... lol)
Springer gets a "3" rating.
Springer allows Station X to insert five :30's per show.
That's $15,000 for Station X
In the same timeslot, news only gets a "1" rating.
News has 4 breaks and each break has five :30 spots, for a total of twenty spots.
That's $20,000 for Station X
=== End Math Content ===
This is why management doesn't care if 10pm news gets only a third of the audience Springer would get. And that example doesn't include billboards, in-show promotional opportunities, or the occasional "extra spot" that runs for a week here or there, because the sales department oversold their inventory.
In this case, local news actually makes more money in the end. And it's usually at very little expense. If the 10pm news is produced by an outfit that already does an 11pm news, most of the staff and equipment is already on hand. The only "new expense" at most stations is the (usually cheap) salary to add a 10pm producer. In the example of Station X above, the revenue difference between Springer and local news could pay that producer's salary in less than 2 weeks. The revenue generated during the other 49 weeks of the year is pure gravy.