Vulnerable Nets Must Grasp The Big Picture or Pay Through the Nose

Feb 9, 2004  •  Post A Comment

Broadcast television’s vulnerability is showing in so many places at the moment that the lack of effective and timely response by the media companies that own networks and TV stations-as well as their inability to grasp the bigger picture-could eventually cost them a lot of money.
For starters, the recent Super Bowl halftime fiasco and all of the valid and invalid indecency debate surrounding it would be easy to cite as an example-if broadcast television’s problems were only that simple.
Whether or not CBS knew and signed off on Janet Jackson’s breast-baring stunt in advance almost doesn’t matter. Clearly Viacom’s intent was for CBS’s Super Bowl broadcast to have a centerpiece with all the risque edginess that has come to define its MTV cable network, which produced the halftime show.
The infractions involved could cost CBS and its TV stations $6 million in fines once the Federal Communications Commission completes its so-called investigation of the matter. CBS also may be required to refund any or all of the $10 million sole sponsorship fee an angry AOL is demanding. That’s enough of a black eye to have CBS and other broadcasters asking, “At what price profits?”
That the Super Bowl game drew a whopping 41.1 rating and 63 share of the audience makes the event a victory in that advertisers paying more than $2 million for a 30-second spot got the massive delivery of eyeballs that has become synonymous only with a handful of big events on television.
The long-term penalties CBS endures for its black-eye affair will more likely cause inconvenience than economic hardship. CBS and its peers are now sworn to use up to five-minute delays on live extravaganzas to avoid more words or deeds that jeopardize their regulated licenses.
This is not the first time that the broadcast networks and their TV stations have been caught in this vortex. They often want to look and act like the most popular cable programmers so they can appeal to more of the large numbers of viewers they could easily draw during their monopolistic heyday. But they want to price and sell advertising time using the broadcast network premium that is increasingly being challenged, if not discredited on a more routine, daily basis.
Capturing a mega-audience several times each year while scrimmaging over a meager 14 rating and 20 share of the audience (if they are lucky) most prime-time nights hardly qualifies any of the broadcast networks to label themselves as mass media anymore. At best, ABC, NBC, CBS and Fox can claim they are able to snare the largest number of viewers at any one time in a media universe that has expanded well beyond the boundaries of early-morning and late-night broadcast TV to include cable and satellite TV, the Internet, video games, downloaded music, movies on DVD, satellite radio and electronic newspapers.
That’s where broadcast TV networks and stations are missing the boat.
Viewers gravitate to brands on television-MTV, ESPN, CNN, CNBC, Fox News-because they know what they are getting. The same still has to be true even for a more broadly oriented broadcast network such as CBS, which is now paying a price for acting like an MTV wannabe.
In a strange way, that same redefining challenge also is NBC’s biggest problem right now. Having made itself a predictable spot for sophisticated comedy and drama Thursday nights, it is charged with besting its own retiring hit series to retain the 10 percent premium it charges advertisers for reliably delivering an upscale demographic. But the viewers NBC loses on Thursday nights after this season won’t necessarily scatter just to rival broadcast networks. It takes an extraordinarily strong lure these days to keep consumers from opting for other media and interactive pastimes.
Local TV stations, undergoing their own identity crisis at the hands of aggressive cable advertising interconnects and cable system programs, need not look any further than the golden franchise they have always had and never fully exploited: their unique link to local consumers and advertisers.
What the broadcast TV networks and their stations are failing to recognize as they slay ratings dragons night by night is that their universe has been undergoing dramatic changes for a long enough time that they are beginning to impact their lifeline metrics.
For instance, this could be the year that the broadcast networks-selling flat compared with last year’s upfront 15 percent aberration and with prime-time schedules characterized by a lot of one-off hits (like “American Idol”) and too many untested new series-are confronted with pricing adjustments they can no longer avoid.
The fact is there is no bona fide advertising recovery and only a softer-than-expected scatter and spot market. There are no major events in 2005 to render much more than a projected 5 percent upfront price hike for broadcast networks and a flat to slightly declining price point for most local stations. This should have the broadcast networks more concerned than they appear to be. The artificial boost from this year’s Olympics and national elections are already yesterday’s news.
To be sure, the broadcast networks’ selling points and stranglehold on advertisers, viewers and program suppliers are not about to crumble into dust. They continue to be the most powerful media platform in a market of marginalized options. But their deteriorating edge is being tested on a lot of important fronts that collectively create a picture of conventional media barons under siege.
Even recent attacks on The Walt Disney Co. and its embattled Chairman Michael Eisner are part of this phenomenon. When Pixar Animation Studios chief Steve Jobs called Disney’s animated film sequels “embarrassing” and called Disney “creatively weak” and uncompromising, he was attacking more than a studio. Mr. Jobs, whose “Finding Nemo” is the new global box office winner with $850 million in gross receipts, was attacking the brain trust that was supposed to sustain and advance the fortunes of the ABC TV Network and the ABC Family cable network, both of which have generally faltered under Disney’s creative management. Disney’s television empire was supposed to support and offset its cyclical core film, theme park and merchandising businesses. After more than a decade, Disney has yet to be a real TV force.
While the broadcasting industry powers-that-be have only been half-heartedly paying attention to and plugging into the radically changing media world around them, they remain ensconced in a single-revenue-supported cycle of program creation, distribution, marketing and pricing that is about to change. Interactivity will make sure of that.
It is what Credit Suisse First Boston analyst William Drewry calls TV’s “share game.” The broadcast, cable, satellite and premium program providers, Mr. Drewry notes, are battling for each other’s diminishing viewers and dollars. “The TV landscape is changing, and it now seems unlikely that the network model of receiving forward commitments for 80 percent to 85 percent of their inventory at double-digit [or midteens increases] is sustainable,” he said.
When Nielsen Media Research launches its new People Meter system across the 10 largest markets during the next few years it will pave the way for a 52-week TV season already endorsed by NBC and Fox. That could result in the selling of aggregate cable and broadcast network audience draw by these media conglomerates. When Nielsen begins providing DVR user data through TiVo this year, it will force advertisers, agencies and networks to create alternative ad vehicles and pricing. And such Nielsen measurement changes will almost surely bring an end to the concocted ratings sweeps. When enough consumers routinely embrace wireless Internet-connected broadband to better manage and customize their TV-viewing experience, they will be telling the broadcast networks what they want and when they want it. So much for those much-ballyhooed prime-time schedules and promotion campaigns.
A phenomenon such as the flight of young male viewers from traditional broadcast and cable television th
is season will no longer be easily waved off by the networks as an enigma or a Nielsen sampling error when Nielsen electronically sharpens its measuring capabilities and accountability. And none too soon.
A recent ratings study by Bernstein Research analyst Tom Wolzien makes the point that despite the still maniacal exercise of tracking prime-time ratings performance week to week and even night to night, the only real winners are companies like Viacom and Disney due to the number of broadcast and cable networks they maintain to cross-promote and collectively sell.
This is no small point, considering that much to his own surprise, Mr. Wolzien found the distribution of premium cable services such as Viacom’s Showtime and Time Warner’s HBO also have suffered a 7 percent viewing decline in the past year. Viacom’s advertiser-supported networks gained 1 million viewers during the past year, which was the best any media company could muster in the television space.
It is all part of a troubling if not uncertain larger picture that is emerging that suggests the expectations and realities of broadcast TV distributors, content providers and advertisers could be headed for a major collision as early as this spring’s new prime-time network schedule unveilings and upfront sales scramble.
That can only mean one thing: Such a widespread, dramatic change in the value proposition of broadcast TV networks and stations requires corresponding changes in the industry’s baseline economic models and expectations.
That is a tall but mandatory order that the broadcast networks and their corporate parents had better be prepared to fill, and soon.