Forecast 2009: Network TV

It has become increasingly difficult for the network television business to maintain profitability with a steadily shrinking audience and a financial model that relies primarily on one revenue stream, advertising. And with the recession in full swing, coupled with makegood units that could total $100 million this season by some estimates, the business won’t get any easier this year.Network and agency executives predict that in the face of continuing ratings erosion, network TV sales will be down 7 percent or more in 2009. Interpublic’s Magna, for example, said the decline will be 7.5 percent. CBS said the drop will be 7 percent. WPP’s GroupM predicted a 5 percent decline overall for network TV and a 7-8 percent drop in prime time. Rino Scanzoni, GroupM chief investment officer, said it’s a pretty safe bet that there will be a “significant contraction” in money spent in this year’s upfront, compared to last year when advertisers ponied up $9.23 billion, just slightly ahead of the prior year. His reasoning: “People buy upfront when they believe prices will go up based on their most recent experience.” Right now, there is little or no premium to buy scatter. On top of that, the ad market will lag the general market recovery, which is not likely to occur by mid-year. “The network TV business model has been challenged for some time,” said Scanzoni. “If the 11 to 12 percent audience decline we’ve seen in the fourth quarter holds up—coupled with a 15 percent drop last year—that means over two years they’ll have lost a quarter of their audience. At the same time, program costs aren’t going down.” That’s a pretty daunting predicament. And it led NBC, at least in part, to make the most intriguing programming decision of the year: to strip Jay Leno across its 10 p.m. time period week nights beginning next fall. CBS CEO Leslie Moonves reacted to the move by predicting that CSI: Miami (and presumably some of its other 10 p.m. shows) would beat Leno, “by a lot.” But even if Moonves turns out to be right, NBC could still succeed financially with the program because the cost of producing Leno is estimated at about $2 million a week, compared to $15 million or more to fill those same hours with sitcoms and dramas, which cost $2 million or $3 million or more per episode.NBC’s Leno move is a throwback to the early days of television, and is the first time in about 50 years that a network has opted to strip a series in prime time. Media buyers said the decision speaks volumes about the network business model going forward. “It might be a profitable move but it admits the reality that mass media really doesn’t have the potential to be as mass as it used to be,” said Tim Spengler, president, Initiative U.S. “That the big [ratings] potential is not worth trying to get with too much of your money.”If Leno succeeds in prime time, some rival nets may adopt the formula. “If it works, I think you will see the networks trying to do more programs on a strip basis,” said Scanzoni. “Viewers get inundated with all the options and tend to go quickly to what they know. Putting on something that people can come quickly in and out of is not necessarily a bad thing.”Clearly the nets have to do something to achieve better pay-offs from their program development efforts, said Steve Sternberg, executive vp, audience analysis, Magna. Over the past five years, with the possible exception of CBS, “development has been spotty,” he noted, arguing that NBC hasn’t had a bona fide hit, while ABC and Fox have been marginally successful during the same time. Meanwhile, cable has been producing hits and taking increasing amounts of audience away. Despite the problems, for many clients, national TV—a combination of broadcast and cable—will continue to be a sound investment, said Scanzoni. For clients that have used both, he added, shifting dollars to cable as the audience has migrated “has [caused] CPM disinflation over the last seven or eight years.”

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Forecast 2009: Network TV

Steve Mcclellan

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Steve Mcclellan