|THE RATINGS GAME|
July 29, 1999
Jeffrey Kaye of KCET, Los Angeles, looks at the impact of falling network ratings on the television industry.
JIM LEHRER: Network ratings: Jeffrey Kaye of KCET-Los Angeles reports on how they're falling.
COSBY: How can you have a housewarming at somebody else's house? (Laughter)
JEFFREY KAYE: Ten years ago, when the Cosby Show was the nation's most-watched television program, the broadcast networks were dominant. Then, two-thirds of all TV viewers watched CBS, NBC, and ABC during prime time. But network viewership has dropped dramatically, and now cable TV attracts almost as large an audience as the three major networks. The migration of viewers away from the networks is reflected in the changing marketing decisions by ad agencies.
SPOKESPERSON: We have all the broadcast networks, the cable networks --
JEFFREY KAYE: Earlier this year, T.B.W.A./Chiat Day of Los Angeles launched an ad campaign for Kinkos on ABC, CBS, and NBC.
AD SPOKESMAN: Kinkos. Express yourself.
JEFFREY KAYE: But as part of her $20 million promotion for the office supply chain, media director Monica Karo also bought commercial time on cable channels such as CNN, Discovery, and the Learning Channel.
MONICA KARO: We are spending probably 65 to 70 percent on broadcast, and the remaining amount on cable.
JEFFREY KAYE: That amount reflects a huge shift in dollars for the ad industry as a whole. Fifteen years ago, Karo would have spent nearly all of her TV ad money on the networks.
MONICA KARO: When I first started in this business, you could go out and make a buy on three networks and reach 90 to 92 percent of your audience in one fell swoop. You can't do that anymore, so it takes going to a number of many other places, in other media as well, to try to come close to reaching that number.
A number of new networks
JEFFREY KAYE: Those other places include the more than 50 TV channels most households receive.
SPOKESPERSON: And that's just the beginning of everything on cable TV.
JEFFREY KAYE: Besides CBS, ABC, and NBC, there are four other commercial networks and public television. There are independent stations and cable channels, as well as those transmitted by satellite. And there's growing competition from the Internet.
MONICA KARO: With this fragmentation, it means we're chasing audiences in a lot of different places, and they're harder and harder to find, and they're in smaller and smaller numbers, and it's only going to get worse before it gets better.
JEFFREY KAYE: Former NBC Entertainment President Warren Littlefield says network preeminence is a thing of the past, particularly for young people.
WARREN LITTLEFIELD: There's no concept of a network versus any other channel. Comedy Central's a channel; NBC or CBS is a channel. That's all. There's no prestige to one versus another.
JEFFREY KAYE: Since 1988, as ad agencies have followed audiences, the three major networks have seen a drop of $437 million in ad money, adjusted for inflation. The migration of dollars away from advertiser-supported networks poses a threat to the future of free TV. That's the view of media analyst Richard MacDonald of J.P. Morgan Securities, who says that viewers will have more choices, but at a cost.
RICHARD MacDONALD: The public should care that network and free television is still available to them, and that's the real question, is that somehow the structure has to be in place so that everything just doesn't go to cable and some place where you have to pay, you know, $35 to $40 a month.
JEFFREY KAYE: The networks don't publicize detailed financial reports, but analysts believe that last year, NBC, owned by General Electric, was the only profitable network.
The ABC Network, a part of the Disney empire, lost money, as did the CBS TV network. To make up for lost revenue, companies that own networks are pursuing broad strategies. They've diversified, invested in the Internet, and in cable channels which earn their money from subscriber dollars as well as from advertising. For the networks, not only is income down, costs are up. There's a bidding war over successful programs. In order to hold on to its hit series "ER," NBC agreed to pay Warner Brothers, the show's producer, $13 million an episode, the most ever paid for an hour TV drama. Big hits remain important to the networks' viability. But with so many channels and remote controls, even top network shows don't get or hold the audiences they used to.
|Looking for that one big hit|
SPOKESMAN: One big hit certainly helps. You still need to give audiences a reason to speed on the freeway and get to their television sets. If you don't have that, you're out of business. But the business models that you must employ today I think force you to say, "at what price, and what will the long-term value of that be?"
SPOKESMAN: Ready, and -- background? Action.
JEFFREY KAYE: To avoid future "ER's," the networks are driving increasingly hard bargains with program producers. The producer of NBC's "Law and Order," Dick Wolf, says the new cost consciousness may be short- sighted.
DICK WOLF: We're getting less money to create the product that will go on the network, which doesn't have as much patience as it used to, so there is kind of this built-in failure mechanism unless you are operating incredibly efficiently and have a great show.
SPOKESPERSON: From studio 3-B in New York -
JEFFREY KAYE: Wolf predicts the preference for comparatively inexpensive programs like news magazine shows will ultimately hurt the networks. And he complains the networks are too quick to cancel new programs if they don't get high enough ratings.
DICK WOLF: Getting new shows on the air is riskier, more expensive; the trigger finger is even faster because something that's not working they've got to get rid of, and attempt to get something on that is working.
JEFFREY KAYE: To bolster revenue, networks increasingly produce and own the programs they broadcast, instead of buying them from studios and independent producers.
DICK WOLF: You have got to have some control of your real estate. The networks are seeking some ownership, some protection.
JEFFREY KAYE: By owning programs, the networks can also benefit from the lucrative syndication or rerun market.
SPOKESPERSON: So was it a lot more money?
JEFFREY KAYE: "Friends," for instance, which recently ended its fifth season on NBC, is also in reruns. Warner Brothers, which makes the program, is reaping the rewards.
DICK WOLF: A successful program, once it goes off the network, can be worth a fortune in reruns. So something like "Friends" can generate, you know, $3 million to $4 million to $5 million per episode, once it goes into reruns.
JEFFREY KAYE: CBS hopes to profit from reruns of the sitcom, "The King of Queens," which it co-owns with the producer, Columbia-Tristar.
SPOKESPERSON: Do you understand why that girl didn't want to go out with you tonight?
JEFFREY KAYE: Co-ownership arrangements like this make networks and studios both partners and competitors. All these battles influence the local stations viewers watch when they turn on their TV's. The squeeze on networks has led to tension with their affiliated stations. Local stations have become the big moneymakers in the TV industry, collectively earning more from commercials than the networks do. So increasingly, networks are asking stations to pay them, instead of the traditional relationships where the big three networks paid stations to carry their programs.
SPOKESPERSON: The N.F.L. on CBS.
JEFFREY KAYE: CBS, ABC, and Fox stations are also helping to pay for their networks' multimillion- dollar contracts with the National Football League. Stations won't have trouble selling commercials during football games, so for station owners like David Smith, sharing the cost was an easy decision.
DAVID SMITH: If CBS comes to me and says, "do you want football?" The answer is, "can I make more money with football than I did with something else that I had in there?"
JEFFREY KAYE: But stations are frustrated with networks for recycling their television shows on competing cable channels.
SPOKESPERSON: More of that exclusive "Dateline" interview later.
JEFFREY KAYE: To the chagrin of station executives, NBC promotes its programs and personalities on MSNBC and CNBC.
SPOKESMAN: Well, it ultimately takes audience away from us to them. It's the issue of them trying to achieve a different level of profitability at our expense, and our response to that is, you can't do it at our expense.
JEFFREY KAYE: To increase their profitability, networks want to acquire more TV stations, and are asking Congress to lift the cap on the number they can own. The digital future of TV raises the stakes even further. Each station will be able to broadcast more channels, further dividing an already fragmented audience, and presenting a cloudy picture for the future of advertiser-supported TV.