12.08.2003 12:00 PM
Technology is transforming business of network TV

What a difference a bad television season can make. Declining viewership, unhappy advertisers and threatening new technologies are wolves at the door for network television executives this winter as the broadcast industry confronts massive change brought on by the advent of digital technology.

There have been no hit shows to debut on the networks since September. At the same time Nielsen Media Research reported that the number of male viewers between the ages of 18 and 34 has fallen more than seven percent in the past year. Advertisers, fed up with network performance and disruptive commercial-skipping personal video recorders, are looking for greener pastures.

“It’s pretty obvious that, in the long run, the network broadcast business cannot rely on the single stream of advertising revenue,” Sandy Grushow, chairman of News Corp.’s Fox Television Entertainment Group, told the Wall Street Journal. “Networks have got to figure out a way to open up another revenue stream.”

High on the list to revitalize the faltering broadcast industry are new technologies such as video-on-demand (VOD), personal video recording (PVR) and the direct marketing of programming on DVD media, said recent articles in the Wall Street Journal and Variety, the entertainment trade magazine.

Raising hopes are new revenue streams that could come from VOD, a technology that allows viewers to use their remote control to order a TV show and watch it for up to 24 hours, stopping or rewinding programming along the way. FOX has tested VOD with Cablevision Systems in New York City, while NBC is testing Comcast’s VOD service for news programming in the Philadelphia market and parts of New Jersey.

VOD “has the potential to be a serious killer application,” said Alan Wurtzel, NBC president of research, in a WSJ interview. Though he warned that results are preliminary, the NBC executive said the ability to time-shift is obviously valuable to people. “We’re very anxious to test this out.”

FOX, after several successful tests with cable companies, is considering subscription-based VOD as an additional revenue stream. The FOX experiment with Cablevision will determine whether cable subscribers will pay a few dollars a month to get unlimited, instant access to all FOX programming from the past month.

Variety reported that such network traditions as the “fall season” and “sweeps” are dead. “We’re at a watershed time in network television in terms of the way we market, launch and schedule shows,” NBC entertainment chief Jeff Zucker told Variety, arguing it’s “probably a mistake to premiere six or seven new shows every fall.”

NBC, the report said, has decided to debut at least one new show each month, even during sweeps periods and the summer. “Within two years, sweeps aren’t going to exist,” Zucker predicted. “When you’re doing (year-round programming), it just doesn’t make sense to save all your big programming for three four-week periods.”

Advertisers are taking their own steps to protect their impact on network TV. Last week, ABC debuted its biggest branded-entertainment deal to date, featuring Sears as the centerpiece sponsor of a reality series, “Extreme Makeover: Home Edition.”

The deal, estimated by the New York Times to cost Sears more than $1 million, includes the placement of products such as Craftsman tools, Kenmore appliances and Lands’ End home furnishings in each of the six episodes. During the series — now in production for a regular run expected to begin in January or February — there will be scenes of trucks delivering merchandise from Sears, plumbers and other workers from Sears home-improvement services making repairs and visits to Sears stores by the show’s makeover-team cast.

The deal, reported the Times, follows the recent trend of marketers becoming intrinsically involved in shaping the content of entertainment programming. The goal, said the newspaper, is “to counter the growing abilities of viewers to zip, zap and bypass expensive commercials.” The trend is so pervasive that Nielsen Media Research is starting a service intended to help track product placements on TV.

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