The plight of the broadcast networks is in the news, and like the newspaper industry, their fate is all about the loss of monopoly power. Newspaper monopoly power was all about the sole ability to deliver advertising to an entire local market on a daily basis. Craigslist, monster.com and other web sites do that more effectively today. Newspaper business models will have to change or they will expire.
Likewise, broadcast television networks have lost their monopoly power over the television sets of the nation. A little over a generation ago, the three commercial broadcast networks controlled over 90% of the primetime television audience. Today, the share of the 11 different commercial broadcast networks is less than 40% and falling.
But let’s clear up a few misconceptions:
- The threat isn’t the Internet. Yet. Traditional TV viewing is at an all time high. While online video viewing is growing, it has had little effect on TV viewing, yet.
- The threat isn’t DVRs. Yet. The median broadcast primetime show still only has about 12% of its viewing via DVR, and DVRs are only in about 25% of the nation’s households (projected to rise to 44% in 2014). And because of the new way advertising is priced, measurements may have been propped up a bit in the short term by DVR viewing.
In fact,
- The threat *today* is advertising supported cable networks. Today’s threat to the broadcast television industry comes from a lot closer to home, its cable network rivals.Ad supported cable now commands 50% of the primetime audience and rising.
They threaten the advertising pricing premium of broadcast networks. Even with audience losses, broadcast networks had been able to increase ad pricing to largely offset them. Broadcast primetime still commands a premium for the same numbers of viewer eyeballs, but top cable networks are now pushing to equalize their pricing. A variety of things will keep that from happening instantly, but that disparity cannot exist forever. Particularly when the top cable network last week (USA) averaged nearly three times the average viewership of the CW and more than half the average viewership of NBC.
Cable network success has reduced one of the channels for syndication of broadcast network shows. With more original shows being produced for cable networks there are fewer opportunities for broadcast syndication.
The very business model for advertising supported cable, which relies partially on fees from cable MSOs threatens the wholly advertising supported business model for broadcast networks.
The major English broadcast networks aren’t going away (like some newspapers are), but their business models will have to change more in the next 5 years than they have in the last 25.
There’s a lot of talk about cable killing network TV, and it’s true. But it’s a mistake to think of cable as a monolith – no cable network yet draws the average viewership of a network. As you’ve said, USA triples the CW, but it’s the top rated network and the CW is widely regarded as a failure. As is NBC at this point.
And for all the talk of quality of network TV driving people to cable, there’s much more junk on the average cable channel than the average broadcast channel. A cable network is lucky to have one or two good series – the rest of their programming is usually syndicated series or cheap productions. What hurts broadcast, essentially, is audience fragmentation. And it will eventually happen to the bigger cable networks too.
As broadcast continues to fall, though, it raises an interesting question – the bane of many, many cable channels are those syndicated series that came from network TV. What happens when broadcast no longer is producing these hits? Yes, USA has substantial hits in a couple of original series, but they make money off of their incessant reruns of the Law & Orders.
Cable networks, despite claims that they are about to take over the world, still cannot do what broadcast channels can – offer up 3 hours daily weekly of original programming in primetime, plus daytime, plus late-night. Maybe this will change for certain cable networks, but I really don’t see that happening in the short-term.
Another advantage that cable networks have over broadcasters is that they pay lower licensing fees for programming.
USA has Monk and Burn Notice which both get at least 6 million I think. That’s more than NBC shows. That’s only a couple million less than several other shows on Network TV.
I can’t see the math working out this way. The viewership of Monk and Burn Notice doesn’t really care about TV vs cable vs ‘Net. What newspapers, et al, have shown us is that the crash of obviated distribution networks is shockingly fast and very much non-linear. The pricing of individual newspaper ads isn’t crashing so much as the demand for volume. I don’t see a particular reason why cable is immune from that in the way that you imply with, “… major English broadcast networks aren’t going away….”
As long as broadcast continues to pander to the lowest common denominator of TV viewer and pump out sitcom after mindless sitcom, reality show, cop and doctor shows and are stifled by puritan-like censors, the audience share will continue to drop.
The difference between television and newspapers ads is that there isn’t a falling demand for television ad time, not yet anyway because as of right now there isn’t a viable and effective alternative to advertising on television. What the networks are finding is that they’re now no longer the only option advertisers have on television, cable has become an increasingly attractive option for many advertisers primarily because a lot of the cable channels can afford to have much more targeted and focused programming that allows them to be the network of [insert demographic here], something the broadcast networks can’t really do as The CW is finding out the hard way.
Right now network televisions biggest strength is that it appeals to the mass audience. When you want your product to be seen by everyone then network television ultimately remains your best option. However when advertisers have a product they want to aim at a specific demographic they’re finding they can reach that audience on cable in a cheaper and more effective way. I suspect that as and when cable tries to bring their advertising rates into line with network television that will change and cable may very well become a little less appealing then again it might not.
Basically the problem is that the advertising revenue is still there, its just that more and more of it is going to cable networks rather than broadcast networks. Although it is worth pointing out that a lot of the cable channels are owned by the broadcast networks or the parent companies of the broadcast networks.
In terms of how to counter this I suspect that we’re going to start seeing more shows like Flashpoint, financed by two networks which drives down how much the show needs to make to remain profitable. Away from that its hard to see what the networks can realistically do, unless they stumble upon the magic formula to make monster hits in the next couple of years.
Unlike newspapers getting their market stolen by monster and craigslist, network and cable TV are in league with each other. USA network is part of NBC-Universal. ABC is linked to ESPN. CBS is MTV and Nick. Fox is FX and Fox News. The networks aren’t having to deal with too many outsider networks. They are in this game with more than one player. What’s disturbing is how the networks are being deprogrammed to resemble their cheaper cable sisters. Next season there won’t be much difference between MSNBC and NBC with all but 2 hours a day of the network’s programming being people sitting on sofas and desks talking directly to the home viewers.
Sorry but, can somebody explain what is happening in layman’s terms?
playe, Basically, fewer people are watching broadcast TV because more people are watching cable, not because of DVRs or the internet.
All of you seem to forget that the networks parent companies has cable networks. NBCU has USA and MSNBC, Disney has ABCF and ESPN, News Corp. has FX, CBS has NICK and MTV.
While the broadcast nets has less viewers than before, the cable nets have more viewers than before (in general).
Here are some of my prodictions the things that will happen in the next five years:
CW – There’s no way it will stay in it’s current form, there are a couple of options:
a) Becoming a basic cable net.
b) Merging with another network, probably without CBS.
c) WB buying CBS’s share and going to cable.
d) WB buying CBS’s share and transforming it to a real network. Long shot, but my dream is WB teaming-up with Sony Pictures (the only major studio without a steak in broadcast as far as I know) to make a real network.
NBCU – Regardless of Leno, NBC will probably never again will air at 10 PM. Because of USA increasing ratings, NBCU will start to give them shows originally for NBC and basically making NBC and USA to equal sister nets.
Disney – If in the next 3 years ABC will continue to fail producing suitable replacements for Lost, GA and DH they will be worse off then NBC right now. Disney will have to start thinking about Merging or selling ABC.
News Corp. – Fox is in a relative good position right now and if they can continue to make “hits” like Fringe and L2M every few years and the occasional House once in five years they will be fine. Even if they’ll fail to do so News Corp. has enough money to support Fox for years.
Could merge with or buy another network.
CBS – CBS is in the best position from all of the nets and I don’t see how that will change in the next five years.
Most of (more than 80%) the shows the studios will make would be for their sister nets (Universal to NBC, FOX 20TH for FOX…).
In five years there will be only four networks, and in ten years most likely three networks.
i agree with everythin said above!!
But… Would the CW benifit from becoming a cable network, how much would it cost for the network to change ect…
NBC will stay the same i think, just showint prometime shows 8-10, but with USA showing all there new shows from 10-11!
FoX might start to program 10-11? who knows, they have allot of shows to fit in, or they might consider moving some shows to FX, as they dont have any real hit shows anymore!
CBS i think will start to program Saturdays again, they have too many shows that have good numbers (even if they dont do well in the demo) Or they might start there own cable network like usa/FX
ABC is going to be in real trouble soon! IMO they should buy some of CBS’s cast offs and try to make some of there own cop shows (CSI/Law & Order) ABC Family is doing ok at the moment
Fox would never get the 10 PM slot back from the affiliates.
TomSD and others, I didn’t forget that the corporate parents that own the broadcast networks also own cable networks. That fact doesn’t change the situation that the broadcast networks themselves are in though.
But it does matter because as long as the corporate parents are making the same total amount of money from broadcast and cable, they won’t care how it’s split up between them.
But, Tom, they aren’t. They have one part of the business that is successful, though not nearly as successful as their broadcast nets used to be, and they have another part of the business that is in trouble and losing money.
“CBS i think will start to program Saturdays again, they have too many shows that have good numbers (even if they dont do well in the demo) Or they might start there own cable network like usa/FX”
I believe I’m right in saying that CBS owns Showtime.
“But it does matter because as long as the corporate parents are making the same total amount of money from broadcast and cable, they won’t care how it’s split up between them.”
The parent companies aren’t making the same money.
As things stand it is currently much cheaper to advertise on cable than network television and I can’t see a situation where that’s going to change. If you take a successful cable channel like USA for example and translate their big hits (Monk, Burn Notice etc.) to network television they’re not really hits. I haven’t seen enough of the demos for anything USA has to judge with complete accuracy but I would guess the big USA hits would struggle to survive on any network outside The CW with their numbers. Five million viewers, whilst big for cable would be disappointing on network television.
So whilst cable revenue is increasing they aren’t and can’t charge on the same levels as network television so the money coming in is less. The very real problem that you’re also missing is that parent companies aren’t going to budget a network to run at a loss. With network television revenue falling the amount of money the networks get to play with each season will ultimately begin to fall as well. NBCU for example can’t justify letting NBC spend $500 million if it knows the chances of NBC making anything more than $300 million are slim to nil. So NBC goes from $500 million operating budget to $300 million. And for the record I just made those numbers up to demonstrate the point.
Alex, CBS does own Showtime, but that’s not the same sort of cable net as USA or FX. Before the Viacom split, they had several basic cable nets under their umbrella, but they do not now, and I think it would be a good move for them to move back into that realm.
Network TV isn’t dying and it’s not likely to get much worse. Cable is not really the “enemy,” here. DVR however is (for cable as well). Sure cable will continue to draw viewers away from TV Networks. However we’ve seen the largest hit already happen. It’s just going to trickle away now. There is too much competition for me to see say USA or TNT getting close to Network TV numbers. However USA does finish 2nd compared to all the networks on Friday Nights if I’m not mistaken.
DVR is growing. I don’t know about the rest of you with DVRs, but I haven’t seen a commercial in years except for sporting events (Super Bowl, NCAA football, NBA finals, etc). I hit the skip forward button, and I definitely never notice a commercial brand except for the first and last commercial at best, and I don’t see the commercials themselves.
That is the biggest “killer,” out there. That is why they think “maybe we should become cable networks too,” because then they get revenue from subscription costs.
I’ll tell you now, that CBS is the leader in the industry so far in cable revenue. They’re aggressively going out and making their locals switch from “free to subscription,” in their local cable markets. NBC is quickly trying to catch up with CBS. This is inevitably the future. Of course, it’s still free to get the station over the air. Cable companies are likely to raise your cable fees to adjust to them having to pay for stations they got for free for years.
The local affiliate of course splits the money with the Network. It still won’t match the money that say USA or TNT or MTV get.
So with that in mind, the Networks need solutions. Because DVR is going to grow and continue to whittle away at viewership. The C3 list is surprising. There are many shows that drop an average of .3 in the demos compared to just LIVE + SD viewing numbers. There are some shows that drop as much as .6 in the demos compared to LIVE + SD numbers. These people are either changing the channel or skipping past commercials with their DVR. Then you have FRINGE and DOLLHOUSE both shows in the new “Remote Free TV,” FOX experiment that GROW in their C3 numbers compared to LIVE + SD numbers.
The future is likely “Remote Free TV,” and sponsorship. TNT is leading the way with sponsored programming. LEVERAGE for instance will have its sponsorship attached to the upcoming DVD release. So buyers of the DVD will constantly be reminded of the Brand. Of course, currently TNT isn’t getting enough for it. Advertisers are cheap. They know internet adverts work better than TV adverts but do internet sites get paid more than a commercial gets? Nope.
” LEVERAGE for instance will have its sponsorship attached to the upcoming DVD release. ”
Kind of like in the episodes when they always showed the car sponsoring the show.
Nick C, Both the Internet and DVRs are definitely long term threats. To date though, they have done far less damage to broadcast networks than has cable competition. And as for “we’ve seen the largest hit already happen.”, it’s true that having lost 50% of the TV population in primetime, and holding only 40% now, broadcast networks can’t lose that much again, but I don’t think the annual ratings gains by ad supported cable show any kind of slowing trend if you examine the chart linked in the post above (and here).
Nick I do believe advertisers pay more per viewer on the internet(sites like
hulu) than television, especially once you average in per click revenue. There’s just less viewers than on TV.
I could be wrong, but that’s what I read a while ago when reading about the Hulu business model.
Yes, CPM is higher on sites like Hulu than on TV, according to every report I’ve read. But there are not as many commercials per episode on Hulu as there are on TV. So there would have to be a hell of a lot more viewers than there currently are to make the two comparable.
I think, very much in layman’s terms, what first the remote, then the proliferation of cable channels and products and services like VCR, DVD, DVR, Tivo etc have done is: changed the way people watch TV, and fragmented brand loyalty. It’s like death by a thousand cuts. No one cable channel delivers consistently anything close to even NBC’s overall numbers, but when you add them all up, the old three-network stranglehold just isn’t there. Plus, standards are more relaxed on basic cable. You could never get by with the themes and language of say, South Park, or Adult Swim, etc. A lot of cable is bland, but even the weaker channels like E or VHI and notoriously MTV push the envelope in ways advertisers on the big 4 would never, ever allow. Niche advertising targeted for young presumably hip audiences has its own style as well. The audience is younger, likes to channel surf, is easily bored, sensation-seeking and impulsive; drawn to flashy sex and violence which the FCC just won’t allow on the networks, especially in the eight to nine PM hour. It’s kind of amazing that broadcast quality is as high as it is, really.
After thinking about it, I also want to add, on the networks’ behalf, that production values even on your typical procedural have got to be astronomical comapred to TV in the 70’s and 80’s. Remember old hits like Barnaby Jones, Columbo, Rockford Files? You had a few fistfights and car chases – but you had Columbo in a rain coat, one or two sets, Rockford in a trailer and a cheap-looking police station, etc. Compare the set of the old Star Trek with Battletar Gallactica or New Generation, or the elaborate shots and scenes in ER, CSI, Law and Order. Location shots where you are lugging expensive equipment around, more camera angles, much more complex editing of each shot, much bigger casts and casts of extras … When blockbuster movies scaled up expenses in the 1990’s, TV had to follow suit and scale up productio costs and salaries to attract decent talent. I think that’s another reason they are failing. They spend more and more money chasing fewer and fewer viewers.
Nick on the subject of ‘Remote Free TV’ is that really a viable option across the board? I know that the C3 stats for Fringe and Dollhouse have been impressive but my understanding of the situation is that Fox is essentially losing money with the ‘remote free’ concept in that they’re making less with this than they would be with traditional advertising blocks and the shows are now 10 minutes longer so marginally more expensive to produce.
Looking at it I assume that this was, essentially, a teething problem for ‘remote free’ and that advertisers weren’t prepared to deal with a jacked up price tag for the concept when no one was sure how it would work out. Has the C3 success put Fox in a position where they can apply the model to something like House, American Idol or the network as a whole and be as profitable as they are now or preferably make more money? I mean that in the sense of, is it now generally agreed upon that more people watch the ads with ‘Remote Free TV’ and since there’s less time to buy it becomes more valuable still or are we still a long way off that point? Basically are we likely to see Fox become Remote Free Primtime next season?
Alex, yep, whether we see Remote Free back next fall will tell us everything we need to know about how well it is working for the time being. My bet is that it’s gone, and that FOX will declare the experiment was very successful, they still like the idea and the results but that it was difficult to launch (AKA, sell high enough premiums to make it work) during the current economic conditions, etc.
Alex, Hulu does a better job than FOX does with Remote Free TV. CPMs are not high enough for Remote Free TV currently. FOX is having trouble selling the spots at the premiums they want. It is most definitely proving that shorter commercial breaks increase commercial viewing both during Live Broadcast and during DVR viewing. In fact the DVR viewing is according to Nielsen is immensely better than normal DVR viewing. I can’t understand why more watch those commercials when for me they tell me exactly how many times to hit the skip button, but for some reason I suppose people sit through those 60 second commercials.
Is it a success? Yes. Is it a financial success? Nope. Should it be? Yes. I think the answer is combining the Remote Free TV concept with a sponsorship concept.
Bill, there is no doubt that DVR has yet to fully impact TV viewership, but I’d have to say that it has in fact hurt TV viewership already and substantially. Live +7 numbers show that around 20% of all viewing is done by DVR. I believe about 90% fast forward or skip by commercials.
That is significant and it’s only going to get worse. Shows aimed at younger viewers are hit even worse. The number drives up to around 25% to 30% at that point. Take 90210 last week. It had 3M viewers total. 1M of the viewers were by DVR. 450K of the viewers were same night viewers, or people who specifically start watching with enough time after it aired to skip all the commercials.
DVR is hurting the TV Networks and it is doing so significantly. While cable has already done the majority of the damage it is going to do. DVR hasn’t even begun to fully damage TV. It will double by 2015.
So yes, the TV Networks are in serious trouble, but cable isn’t their biggest enemy it is technology.
Is the problem with premiums down to their choice of shows or a general reluctance to commit to the idea from advertisers? If for example Fox were to have trialled ’Remote Free TV’ with prime television real estate like House and American Idol rather than two untested sci-fi shows one of which airs on Friday nights would advertisers still be reluctant to pay an increased premium? It seems unlikely, particularly in the case of Idol of course if remote free hadn’t worked that would have been a financial disaster for Fox.
And given the success of the 60 second ad blocks in terms of C3 numbers, is it perhaps time for networks to look at breaking away from the traditional commercial model they’re using? Increased breaks but shorter in duration. Halving commercial durations but doubling breaks would likely scare viewers aware and piss off a lot of production teams but adding an extra break by halving the duration of an existing break is at least worth looking at if its going to increase C3 numbers.
My solution to the DVR problem of the future: with satellite, digital cable, and now over the air digital broadcasts; it shouldn’t be too hard for DVR units to identify the commercials. DVR makers should program their units to make commercials unskippable on the first viewing(subsequent viewings should be programmed to automatically skip the commercials if the viewer wants) Networks would have to throw some money to DVR makers, but it would definitely increase those C3 numbers.
Broadcast “networks” should become 24-hour channels, with some space for local news to the affiliates ( 5 to 7am, 12 to 12:30pm, 7 to 7:30pm, 11 to 11:30pm)
The affiliates should be more like a re trassmiter, and focus only on the LOCAL NEWS, and maybe selling some space to local infomercials (3am to 5am)
And they need to give the people what they want (stop being so conservative, hipocrit, and riciculous about stuff like sex, or race.
Ok So the big threat right now is cable networks, but I see that with the digital transition that is going on that in 5 years cable will be a option for programming still but not the end all solution.
With the way the economy is right now I know a lot of people personally that are seeing cable as a luxury not a necessity and also when they only watch broadcast network programming and a very small amount of cable programming a week people see it as do I want food or do I want to watch tv, so they find out that they can get digital TV for free and also online as well they ditch cable tv.
So I see that people like Free and a that is a constant in the human mind that FREE is better even if disadvantages are present.
I see in 5 years that Broadcasting will be closer to 60-70% share of the viewers and will move some of the cable networks to digi-net platform that is now in its infancy. Take a look at the UK, France, New Zealand, Australia and many more countries that have been moving in this direction and the market share of broadcast digital tv has taken a majority share of the market.
NBCU – NBC will create a digital tv entertainment network that will be a sort of mini me of the main network a sort of minor league so it can take more risks with programming that it is not willing to do right now. I also see that MSNBC will become a digi-network and be renamed the NBC News Network and will have local cut ins for affiliates they are preparing right now for such a service in New York City as a pilot program like it did with NBC Weather Plus, and I see it using it’s Ownership/Partnership with the Weather Channel to provide national weather content to that network.
As for CBS I see that they will see what the other networks will do and see what is working and not working, but I see that they may surprise people and take the programming from the CW that is produced by CBS/Paramount and form it’s own mini-me network with the CBS sensibilities and ideals behind it and effectively devolving its deteriorating relationship with Warner Bros and Time Warner.
The CW will die, it is a given, because of the turmoil between it’s parent companies, and with programs that have been doing successfully on the CW are in fact produced by Warner Bros. I see them relaunching the WB as a network but with a new mandate this network is not just targeted to teen girls and tweens it will be a broadcast network in the truest since of the word not a niche network. And Yes I do agree with previous post by TomSD that it will have a partnership with Sony to bring more of its content to TV since in the WB’s heyday Dawson’s Creek pull bigger numbers then half of the CW’s current schedule combined. And no I don’t see the CW surviving to become a cable network. I see it becoming two separate networks again.
FOX will keep it’s current schedule since they are riding the American Idol horse till it dies and then will be worse for it. But before that they will be trying everything they can to get more scripted programming on the air that will be as big as House and 24 which Fox has through out the years had hit’s but then goes through a lull then find’s something and rides it to death. I do see them bringing FOX News Channel to it’s affiliates as a digi-network. But they may tend to be a little gun shy as when it comes to broadcast news they fail a lot even when news events are on FOX most of the time it never pulls big numbers as the other networks do with big news events in broadcast however in cable they are king of the ratings in most cases.
ABC – will find more shows that will be successful, they will most likely take another crack at TGIF on Friday’s and will help spur new growth on the comedy front. I also see them launching a digi-network that is geared towards teens and kids that is basically ABC Family but under a different name and most likely with more Disney content. they will also relaunch the ABC News Now network as a digi-network and allow Affiliate cut-ins.
Ion – the little broadcast network that could, will still be around, it will have become the TNT of the broadcast world but will have more original and imported content from Canada and the UK. But I see that they will use the Ion Life Channel to become more of the HGTV/Food Network channel will go through a major growth spurt and become the big lifestyle network in broadcast that people will watch and it will be successful, they are already trying out new programming that is imported from HGTV Canada and seeing if it works. I think it will but just not immediately until they get more original content and not repeat the same six episodes for weeks and months at a time.
PBS – yes I said PBS, it will be the discovery networks of broadcast television and will start to show more growth and will show off it’s own lifestyle network called Create and also the PBS kids network will be a mainstay for kids across the nation that love shows like Sesame Street, WordWorld and other shows.
So I see that this is just the tip of the ice burg when it comes to the Broadcast Digital TV revolution I see more digi-nets like ThisTV, .2network and others like them coming and going but some will be very successful but others will not.
Nick B, “I see in 5 years that Broadcasting will be closer to 60-70% share of the viewers and will move some of the cable networks to digi-net platform that is now in its infancy. Take a look at the UK, France, New Zealand, Australia and many more countries that have been moving in this direction and the market share of broadcast digital tv has taken a majority share of the market.”
I’d love to see that data on those other countries. I am massively skeptical about pretty much all of your predictions for the future (broadcast back to 60-70% share, hah!) because they reverse the trends that have been underway in the US for 25+ years. But *if* that’s what’s been happening elsewhere, I’m willing to rethink. Please provide links with data.
I have seen the overall quality of TV head south during the last decade as quality Drama and Comedy Programming continue to be cancelled and replaced with shoddy “Reality”, Game and News shows. Also the number of Commercials thrust upon viewers has almost DOUBLED! Many Advertisers think the best way to sell their Product is to present them in an obnoxious or even ofensive manner. Is it any wonder people resort to recording a show before watching it? Cable TV has become a Joke, as most of the channels offered basically show the same programs over and over again. Those that show older shows do a hatchet job on them in order to cram in more Commercials. Two years ago I gave up on Cable TV. I asked myself this question: If the Networks continue to make more money by selling more Commercials, why should I continue to shell out my hard-earned money to watch their shows? In January of 2007 I cancelled my Subscription, and use the $65.00 that was formerly used to pay for my subscription to purchase DVD Box Sets of my favorate Shows and Movies. Now, whwn I sit down in front of my TV each evening, I no longer have to keep my finger on ,y remote, ready at a moment’s notice to mute out an offensive ad. I watch the Program and the Program only, and after I watch it I GET TO KEEP IT!
Doesn’t that get boring after a while, WH?
In response to Bill Gorman, I have my data I have found in the past in links below, I honestly believe that if the United States would have marketed this type of platform through the FCC and the National Association of Broadcasters we would have had faster and wider adoption of the new Digital TV standard.
When you think about it once 5 million more households finally make the switch it will be a major provider of TV and data services to alot of people. And I see more people putting up a Antenna and leaving Cable TV behind because the real reason people first really wanted cable in the first place is because they didn’t want to watch Fuzzy TV on Analog, and then more and more programming was added to the cable platform and so it was widely adopted but isn’t possible that with a crap-tastic economy right now people are looking to cut back on entertainment expenses and just do online viewing and free digital tv, I think so I have seen this starting to happen already.
But I gotta tell you I don’t think Cable will die, I think it will be a relevant way for millions of people to still get the news, entertainment and sports they want, but I also see a resurgence in Broadcast as well and granted 60% to 70% penetration of Free OTA DTV in 5 years might be a little off, but I think that it is possible.
UK digital TV info:
http://en.wikipedia.org/wiki/Freeview_(UK)
has 46% of the viewers in UK
Australia Digital TV Info:
http://en.wikipedia.org/wiki/Freeview_(Australia)
http://en.wikipedia.org/wiki/Digital_terrestrial_television_in_Australia
Is a newer service but already has 28% of the nation using the technology as the source of tv.
New Zealand Digital TV:
http://en.wikipedia.org/wiki/Freeview_(New_Zealand)
12.6% utilizing the technology which makes it New Zealand’s Third largest provider of Television services. But it is only about a year old and gaining and will be launching a Freeview Satellite service for rural viewers.
By the way Bill, I gotta say I do appreciate what you are doing with the site, it is way more informative then other sources I have found on TV ratings.
And thanks for asking for links on my data, It made me glad that someone actually paid attention to little old me. 
Nick B or C, If what you’re saying is true, why has it not already began?
How much does the digital converter you connect to the TV costs and how much of it the government subsadize?
Where I from the government want the people to pay over 120$ for the converter which currently provides the 2 broadcast nets we already have, the public channel, a music channel and probably the lamest imitation of C-SPAN in the world.
Fascinating discussion, I’d like some attention paid to the elephant in the corner though. In a not so distant future all tv will be distributed over the internet, broadcast and cable will be gone as distribution methods. Where does that leave the tv industry ?
Once possibble future is with branded portals like Hulu.com, Fox.com etc. based on advertising financed content focusing on the cheap/volume end of the scale with local news, reality, gameshows, some procedurals, while pay-for-content portals focus on quality content scripted/documentary for niche audiences willing to pay for specific content, content that frequently could gain additional revenue through second runs on advertising supported portals.
The currently ongoing downsizing of the broadcast network audiences is brought on by a combination of many things but changes in technology is the main driver. The networks are caught in a deathspiral of shrinking audience numbers leading to lower ad revenue leading to cheaper programming/lower quality and even fewer viewers. NBC could be a frontrunner in the race to the bottom and the idea of letting the cable outlets take care of the slightly higher quality programming.
A revival of broadcast based on ‘forcing’ people to watch more adverts goes against all the technological trends and is IMO a dead end, remote free on the other hand is a brilliant attempt to make people actually ‘want to’ watch ads, because current technology allows us as viewers the choice to watch what we want when we want it.
No edit function huh, One possible future it is.
The obvious counter of – You’re dreaming, many people will keep watching broadcast, whether it is of habit or second rate internet connections.
I’d say that I’m willing to bet that in 10 years time, in the important US markets 25%+ of all tv shown on the big screen is going to come through the internet connection, much more in the all important 18-49 demo. The advertising revenue will follow the demo however much the media industry cries.
Sorry no numbers to back this up, just my finger in the wind.
NN, If you actually read the original post, Bill specifically mentions internet viewing, and the fact that so far it has had no negative effect on TV viewing so far. In fact, while internet viewing has increased in recent years, so has traditional TV viewing. And unlike you, Bill has actual numbers backing up his position.
What the 4 largest networks need to is restructure themselves to be more like just any cable network. Who knows, maybe Obama and “Turbo Tax made me cheat on my taxes” Geithner will bail them out with tens of billions of dollars as they are “too big to fail” and 90% of them vote Democrat.
Average Joe, sarcastic you may be but you have a point. I would not be surprised in the least to see a government bailout of broadcast networks “too big” and “too important” to fail. I can hear the current Congress and President’s administration making the arguement: they need to make sure everyone, regardless of income, has access to free television, if for no other reason than the *emergency broadcast system.*
The Big Three broadcasters (or three of the Big Four) – CBS, NBC, ABC – remind me a lot of the Big Three automakers – GM, Chrysler, Ford. For years upon years, they’ve assumed that their products are the best, and as such deserve cost premiums on advertising. Meanwhile, little cable stations are offering us some fun new options – with less expensive productions. That’s like GM cranking out Hummers and Cadillacs, while Hyundai and Kia are making functional little cars that people can actually afford to buy
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Ford would be tne “NBC” of the group – leveraging their strong overseas markets the way NBCU leverages its cable profits. As for Fox, they never bought into the 10p.m. hour, so they are not quite comparable in terms of programming costs. I’d see Fox as the safest network in the current climate, for the Idol factor and no 10 p.m. hour too. The CW and MyNetwork? Too small to matter if they fail, maybe?
“The very business model for advertising supported cable, which relies partially on fees from cable MSOs threatens the wholly advertising supported business model for broadcast networks.”
This is really the key to this story. You buried the lede a little here, Bill.
Broadcasters hold the ultimate trump card in the game: retrans consent. To me it’s inevitable that the four major networks will waive their right to free carraige on MSOs. It’s only a question of how aggressive the broadcasters will be in their pricing.
The big four are still the most popular offerings on every cable system by a huge margin. Eventually MSOs will have to choose to either pay them or compete with satellite services without their most popular programming. What do you think they’ll choose?
@Holly sadly the reports methodology misses the goal for my point, The report “A2M2 Three Screen Report”, implies that internet provided content is watched on a computer screen, if that content is watched on the big screen tv the points they try to make fails miserably.
But there are two discussions taking place here one is how is tv going to be distributed ? The other is how are we going to pay for the tv we want to watch ?
The first one I’d claim have already been answered by technology, all tv whatever the original source is going to arrive to our big screen tv through our internet connection.
The other question remains open for discussion but IMO the downward spiral for broadcast advertising supported tv seems clearly visible, the current model is broken, whatever CBS thinks.
Two cents worth re cable (1) Viewers of cable shows is up, not down, because penetration has leveled off but not declined. Nobody tormented with network shows considers basic cable a luxury. They’ll buy generic soda, cheap beer, and shop at Dollar Generel before they’ll cancel cable. on heavy promotional campaigns, better pay per view ( meaning hardcore porn ) and much better internet service packages. (2) I disagree with the statement cable is a joke. It’s niche programming. Studies consistently show people watch the same amount of TV or more than in 1990, but the audeience, with DVRs and DVDs especially, are no longer slaves to the broadcast schedule. If I’m in the mood for TV, I’ll watch a mediocre movie shown all the time on a particular channel ( Cocktail, Road House, Final Destination ) I would never rent, just out of boredom. The numbers for syndicated shows on cable like Law and Order, NCIS, House, some of which appear in the Top Twenty three or four times per week, as well as old sitcoms like Seinfeld and Raymond, are decent. Death by a thousand cuts. ( Local affiliates owned by networks must be desperate for cheap programming. I never thought I’d see the day when you pay $200 a month for infomercials. Talk about a stupid way to offend the public! I can’t beleive any local station owner not ready for a rubber room puts on one infomarcial after another because of choice and not economic necessity.
Sorry. After ” cancel cable ” in line two was supposed to be words to the effect that people are getting their cable shows from satellite dishes because of heavy promotional campaigns, etc. up to the crack about hardcore porn.
NN, I would have to disagree with your earlier post that technology is the main driver of the decline in broadcast ratings. The main driver is that people are migrating from ad-supported broadcast to ad-supported cable via the same technology they’ve traditionally used.
Will technology become the main driver in the future? I can’t say that it will or won’t but I would say that if a mass audience starts watching TV on a big screen via their internet connection you’ll see one of two things happen:
1) the networks will make their programming available online with the same commercial load that airs on TV. No more seeing the show online with fewer commercials
2) the networks will simply stop putting their shows online at all, making piracy the only online option
Now, there will always be an audience for pirated content, but I don’t think it will be anywhere near 25% because when it comes to TV, bottom line, people are lazy.
The biggest threat to losing viewers is simple: Lame programmers. Even on a cable level. How many times can a channel just decide to have a marathon of America’s Next Top Model? And how many different channels do this in a month? I’ve seen it on MTV, VH1, Oxygen, Bravo and perhaps the Weather Channel. If I want to marathon on show, I’ll break out the DVD boxset.
Friday night to Sunday night is a deadzone far as programmers are concerned. And why is BBCAmerica running American shows and American movies? Did anyone here expect to see reruns of Dancing with the Stars from the Anglophile Channel?
The Weather Channel has the most to lose in the digital age since most of the major local channels run a sub-station giving the same info along with the new Doppler image. What’s the point of the channel now? TVLand can also be replaced by a subchannel. In our area there’s RTN giving us all the old Universal shows.
I do think digital is the big threat down the road, but not merely downloading or Hulu, but people cracking their DVDs and creating their own version of a TV channel – sort of like Live365. You have a few folks who have a fun sense of taste and they’ll become more addicting than what’s offered on your cable box.
Far as the budgets of shows go – Monk is being canceled because of that issue. The show is scoring high in the ratings yet NBC-Universal has their 100 episodes so off it goes. NBC Today Show now has one man camera crews getting their minor stories instead of hiring sound and a PA. Look at how all three news networks have become Talk Radio channels instead of real journalism in order to bring down costs. It is sad that we’re in a golden age of TV shows, but you can smell the most unentertaining people are getting back in power. Who’s ready for a fifth hour of the Today Show?
Corey3d, Fifth hour of Today? It’s going to 12 hours a day. Mark my words!
@Mikey let see if I can rephrase the technology thing, If I were to argue that the main driver is people looking for their preferred entertainment and technology provides them with a lot more options than just a couple of years ago, would you accept that ?
1. Makes sense though the content providers would have to figure out what ’same commercial load’ should be, less might be more here as in remote free.
2. I think the content providers really would work hard to avoid this option, the future of content programming surely lies in making your content available for as many people as possible whenever they have the time to watch, removing your content from Hulu or similar portals will be like removing it from iTunes, not achieving much for the bottom line.
Thinking about iTunes I do have a feeling there is a role here for paid downloadable/streamable content as well, probably not a big one but not to be ignored.
Because Yes Mr/Ms average are lazy but the niche people advertisers are willing to pay a premium to reach are not, they are the ones that follow their favorite shows with religious devotion, talk about them with friends, chat about them on the internet and are willing to pay extra to see them on their phones on the train.
So many of the replies are missing one extremely important point; WHO CARES HOW MANY PEOPLE WATCH TV???….WHAT REALLY MATTERS IS HOW MANY PEOPLE ARE WATCHING THE COMMERCIALS!!!
The fact still remains (fragmented audience or not), people watch TV for entertainment and the majority of viewers will say that they DO NOT watch TV for the commercials. The only exception to this rule is the Super Bowl. When commercials come on, that is when people use their DVR’s and TVO’s to FAST FORWARD to the next part of their entertaining program. TV commercials are intrusive and a waste of time for many people who want to watch the programs but do not want a 20 minute program to suck up an hour of their time.
Broadcast continues to talk about audience growing but it is a shame that the truth is not told. It simply does not matter UNLESS people are actually spending time watching commercials. If more people are watching TV it is probably because with DVR and TVO, busy people just like me actually have time to watch a program because of eliminating the commercials and being able to pause it and rewind, etc.
Most people who subscribe to a daily newspaper will tell you that they take it not only for the quality news (local and national) but that they also subscribe to it for the daily advertising information. Craig’s list and Monster are only a competitor with newspaper’s classified advertising revenue (employment, automotive, real estate). Many classified advertisers ALSO advertise in the main part of a newspaper to reach a large number of potential buyers, who may or may not be ready to buy right now but will likely be in the near future. Newspapers continue to deliver the largest reach in a local market compared to all other media.
Although many newspapers (not all!) are losing circulation and are struggling due to the enormous effect the economy has had on revenue, they still reach more people (with un-intrusive ads) who pay money to see those ads every day.
“Most people who subscribe to a daily newspaper will tell you that they take it not only for the quality news (local and national) but that they also subscribe to it for the daily advertising information.”
They do? Man, I’ve never felt that way. Newspaper advertising is the easiest for me to tune out, and I’ve been a loyal subscriber since I was a kid.
“Newspapers continue to deliver the largest reach in a local market compared to all other media.”
I find that incredibly hard to believe. Any network affiliate should reach far more people than even the most popular local paper. If you have a source for that claim I’d love to see it because that is an eye-opening comment.
NN, I tend to agree with you that my second scenario is way less likely than my first. Guess it would have been helpful if I had just said that upfront!
Right now the networks effectively incentivize people to view their content online by offering it with reduced commercial load. This can continue as long as the networks believe that online viewing is either “additive” (unprovable) or trivial, which it is now but may not always be.
As soon as online viewing is seen as cannibalizing TV viewing, they will change the formatting so that online viewing is no more or less attractive than TV viewing. If anything, you’ll see FF functions disabled online to make it less attractive than TV.
After three decades of year-over-year increases in ratings, cable actually has started to show its very first erosion in households. Small erosion, yes, but significant in that it’s never happened before.
The first two weeks to show evidence of overall cable erosion were week 10 (HH fell -1.2% from year before) and week 11 (HH fell 0.7% from previous year).
Meanwhile, over in broadcastland (the 7 Englishers, 4 Spanishers, PBS & independent stations), the overall broadcast numbers have shown year-over-year household increases in two weeks: week 9 (HH up 1.9% year-over-year) and week 13 (HH gained 4.4% over last year).
These are very early tea leaves of a trend towards cable cancellations / falling audiences caused by subscribers pinched by economic circumstances. We should see very low cable growth (week 20 saw a 0.2% year-over-year growth in households) and I expect to see ‘free’ broadcast recover some of its numbers back, even with the DTV shutdown of analog signals that began in February.
Mikey, it’s a common commenting tactic on the Internet to state what you wish was true as fact. We see this manifest in all ways from Internet viewing being a huge deal (when it’s not), to Lipstick Jungle not being canceled (when it is, but hey, at least Kim Raver landed a gig in a pilot!) to just about everything you quoted above. Most people don’t subscribe to daily newspapers and those who do, aren’t in it for the ads (though some surely are on Sundays), and they don’t deliver the largest reach, at least not anywhere television is available. Wishful thinking stated as fact!
The notion that the Internet is going to be the distribution for all video might not be pure urban legend, but in the current architecture it is. In a few weeks we’ll be reading about the glorious numbers CBS.com is getting for NCAA viewers online. What we likely won’t read is how much more expensive it is to serve these viewers, and how relatively inefficient it is. The TV distribution model has no added incremental cost for additional viewers. If 12 million watch instead of 9 million, it didn’t get any more expensive to reach the additional 3 million. BUT, if 4 million try to watch a game online at the same time instead of 2 million, there is definitely a cost associated with that, and while on a per viewer basis it gets down to practically nothing, it’s not practically nothing in the aggregate.
Robert, while my posts might include some wishful thinking there is no tactic involved at all
If your argument against the transmission of tv content over the internet is based on the cost difference you’re walking on thin ice indeed, considering the business benefits for the advertising industry I suspect they’ll happily pick up the difference. The possibilities for interactive marketing alone would make the average ad exec drool.
Once the internet enabled tv sets goes from expensive oddities to cheap standard product the network execs will be dragged kicking and screaming into the future.
Mikey, see above why the ad people are going to tell the broadcast execs “the internet is the future, you in or out ?”
The last sentence in the original article is so very true.
“The major English broadcast networks aren’t going away (like some newspapers are), but their business models will have to change more in the next 5 years than they have in the last 25.”
NN, the difference is, if you sell ads expecting 2 million people to watch something on the internet, and you have the capacity for that, and then 4 million people decide they want to watch, servers crash, videos don’t load, and no one can watch. And therefore the impressions don’t happen and the advertisers don’t pay. With TV, you don’t have to be prepared in advanced for double the amount of viewers, while with the internet you have to be.
NN, it’s not just cost. it’s infrastructure. Wishful thinking wise, I’d love for something to be my source of full on-demand. I’d like immediate access to all content I’ve paid for, whenever I want it. If the Internet becomes my DVR, it’s fine with me, but there is no good infrastructure in place to do that for everyone, and creating such an infrastructure will be more expensive than many people think.
Right now, I think your take on the advertising industry being willing to pick up the costs is…out there. I mean if you think about it, these are the same people who clamor for additional ratings insights, but when they’re told what that data will cost? They decide they’re not that interested. So, I take with a grain of salt that the advertisers will be willing to pick up the burden of something that would be a many billions of dollars proposition.
The cable companies seem in the best position to do this. the pipe between me and Comcast is very, very fat. The pipes from Comcast to the rest of the Internet are not as fat. Speaking of pipes, the notion that Comcast will give me that at a significantly reduced cost to what I’m already paying is, for now, but a pipe dream.
Robert, Julia all valid points, infrastructure takes time. But the price of bandwith is dropping like the stockmarket in most of the world, if that’s not the same in your local area I’d be much surprised.
Someone is going to offer you the bandwith to hook your tv to the internet at a price that’ll keep dropping month by month whether that’ll be Comcast or someone else I don’t know.
Not everywhere but starting in the top ten urban markets the infrastructure is close, if you live outside the major urban areas it will take longer no question about that.
Hulu and CBS.com numbers might currently be considered additive and/or trivial as Mikey mentioned earlier but those numbers are going up while the broadcast numbers are going in the opposite direction. Unless the broadcast networks wants to focus on the 50+ demo they have to react to these changes, the advertising industry will force them to and they are the ones paying after all.
NN, you seem to be equating internet access and bandwidth between you and your ISP with total bandwidth of the Internet, and the total bandwidth required if everyone is watching their TV on the Internet. They are not the same thing.
On a $/bandwidth basis, it’s certainly cheaper than it was 20, and ten years ago, and it might be cheaper than it was five years ago on that basis, but I am not paying any less for my high speed Internet connection now than I was 5 years ago (I’m not paying much more, either).
In the aggregate I think Hulu is the real deal, but on a per episode basis for television shows, it’s not a big deal for most of the shows available via Hulu. Though I agree that the under 35 crowd is much more amenable to watching TV via the Internet, the numbers show that even the youth still watch most of their TV on TV.
I know plenty of people who enjoy clipping coupons out of the newspaper – especially in these depressed times. 25 cents off soup matters when you can double them.
Also remember that major spenders on ads are banks and car companies. They don’t have cash to burn that way. Likewise people are bracing for Bud to cut back it’s revenue spending since InBev isn’t so loose with a dollar like the folks in St. Louis. It’s just going to get bleaker as far as revenue sources for major ad buy. How much time can Cash 4 Gold buy?
And it turns out that Oxygen is running a marathon of America’s Next Top Model this afternoon.
Robert, “They are not the same thing” agreed, but both areas are growing fast, and the idea to be able to give the ability to viewers to watch a show, think they’d like the car in the show, point at the tv screen and get a window pop up with local dealer information would make many an ad exec weak in the knees.
Anyone less wishful than me willing to take a stab at guessing how long it will take for this functionality to be available in a large urban market ?
“the numbers show that even the youth still watch most of their TV on TV.” If those are the numbers from the report above and you believe the three screen scenario they are based on is going to continue to be relevant sure, I don’t.
Still believe NBC have the right idea and is a forerunner in the race to the bottom between the networks, I believe there was an article in Variety recently covering Dean Devlin of Leverage where he got to explain how much more creatively fulfilling it is to work for cable than in broadcast, another nail in the broadcast networks coffin
The internet is pulling away large numbers of viewers YET. But the networks should be planning for this eventuality. Right now the only thing that is stopping it is the bandwidth isn’t there to support it for everyone yet.
I recently moved to using internet television. I lost several channels because the FCC wouldn’t let some of the digital stations power up to pre-Feb. 17th levels. Rather than pay $400 for an antenna or pay for cable, I started using Boxee instead.