Is Broadcast Television Losing Its Mojo? Articles | Television

By: Randy Hoffner

In recent decades, we have seen broadcast television stations, like the rest of the broadcasting industry, undergo massive changes. Many of these changes are related to technological advances, on the consumer side as well as the broadcaster side. Many, if not most, U.S. commercial television stations are affiliated with networks, and while the stations and the networks are often so inexorably intertwined that it is difficult to separate one from the other, as time passes we do see changes in the respective roles of station and network.

A SIGN OF CHANGE

For some decades, the big three commercial broadcast networks, enjoying a three-part monopoly, seemed to be virtually licensed to print money. About 15-20 years ago, it had become so expensive to operate a broadcast network that we saw the stations owned by the networks themselves become profit centers that sometimes out-earned their parent networks.

Recently, we seem to have turned another corner regarding terrestrial broadcast stations. For various reasons, including the costs of converting to digital broadcasting and the proliferation of alternative outlets for television programming, the broadcast station business suddenly seems to be less of a financial sure thing than it used to be.

One recent harbinger of this change is the announcement that NBC Universal has put two relatively large-market television stations up for sale; those in Miami and in Hartford, Conn. Another is the recent news that Pappas Broadcasting, which owns 30 television stations, has filed for Chapter 11 bankruptcy, and will sell all 30 of its television stations under bankruptcy protection.

One of the several reasons for the softening of the business outlook of television broadcasting stations is the remarkably quick rise of a number of alternative delivery methods for programming. These include online viewing, sales of programming by such online stores as iTunes, video-on-demand, and the rise of the digital video recorder, also known as the DVR. Primetime broadcast television, according to the Nielsen overnight ratings, lost 6 million viewers between May 2007 and May 2008, with the ratings of three of the big four networks declining, and we have also seen ratings for major hit shows decline over this period.

While some of this loss of viewers may be explained by the flight to cable resulting from the recent writers’ strike, more significant, according to analysts, is the dramatic increase in time shifting by viewers. The time shifting is being done using DVRs, online viewing on the networks and other Web sites, cable video-on-demand, and by purchase of programs from iTunes, to name the major conduits other than broadcast.

The most used time-shifting technology is the DVR. The New York Times reported that in May 2007, 15 percent of U.S. households had a DVR; the figure in May 2008 is 25 percent. Viewing of recorded network programs has increased 60 percent during the current 2007/2008 season. This is good news and bad news for the networks. In recognition of DVR viewing, broadcast network advertising sales are now based on “live plus three,” in which DVR viewing within three days of the program’s airing is included in the audience guarantee to the advertiser.

When DVR viewing is factored in, many of the top-rated programs post 20 to 25 percent increases in viewership over live viewing alone. It is reported that in Los Angeles, half of the 18-49 aged viewership of certain programs is done on a time-shifted basis. However, reports also tell us that about half of the commercials are skipped through when recorded programs are viewed.


THE FALLOUT

Other avenues of distribution also add to the networks’ revenues. These include such channels as sales of programs on iTunes, iPhones, and the Microsoft online store. In the future, we will take a look at yet another distribution channel: mobile TV on cell phones. Cell phone TV has gained something of a foothold in Japan, Korea and Europe, and it is currently available in the United States.

These time-shifting alternative media have produced several consequences. While broadcast television is still far and away the most desired and valuable channel for advertisers to get their messages across, alternative media and their time-shifting properties have already changed the ballgame. They make the program lineup less important than it was in the past: it is less common for a major hit program to deliver its large audience to the program that follows it, for example.

But because of commercial skipping, the value of the broadcast commercials in DVR time-shifted programs is reduced. And “appointment TV” is less a phenomenon than it was in the past, because using alternative media, a program may be seen at the viewer’s convenience. These alternative media are coming on very strong, and getting stronger by the day. This is yet another major change for broadcasters to adapt to, and it owes its existence to technological advancement.