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Was 2003 a turning point for network TV?
12/9/2003

The decreased performance of network television advertising during the 2003 season is signaling changes that may alter the fundamental business model that has governed broadcasting since it began, say several major television industry executives. Finding new sources of revenue by creatively repurposing existing program content is key to success in the future.

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, according to recent articles in The Wall Street Journal and Variety, the entertainment trade magazine.

It’s no secret that the young prime-time television audience has been steadily declining for over a decade. However, this season the decline accelerated. Nielsen Media Research reported that the number of male viewers between the ages of 18 and 34 has fallen more than seven percent in a single year. Not one new network series launched since last September has qualified as a hit.

“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.”

New revenue streams under consideration include VOD, which allows viewers to use their remote control to order a TV show and watch it for up to 24 hours, stopping or rewinding as they like. 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 successful tests with cable, 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,” said NBC Entertainment chief Jeff Zucker, 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.”

Among the key issues facing broadcasters as they embrace alternative interactive technologies are the complex web of contracts between producers, studios, TV stations and advertisers. Allowances must be negotiated for future projects. Additionally, commercial advertisers must be accommodated in these new business models.

“[Network television] is a business that’s headed for a perfect storm,” one veteran television executive told Variety. “You’ve got PVRs, DVDs, more cable choices and young viewers who don’t know the difference between them all. What happens when all of that converges, and there’s not the same money in the ad marketplace there is now? If you’re at a network, and you’re not coming at this thing from every angle, five years from now you’ll be left holding the bag.”

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