Broadcasters in a Social Media Bind

While the television networks are scrambling to extend their lives online in places like Hulu LLC , new social media platforms -- from YouTube (GOOG) to Twitter Inc. -- are reducing the onetime giants to low-CPM content providers.

This dynamic is a topic of a premium report I have authored that is published on Contentinople, called "TV vs. Web Video."

The big question now is what traditional broadcasters such as ABC (DIS), NBC (GE), CBS (CBS), and Fox (NWS) will do next in the sweeping changes in digital media.

The dramatic changes were apparent during the networks' upfront week when the ceremonious unveiling of their fall prime-time schedules was topped by the news of a Twitter-centric TV series being developed by Brillstein Entertainment and Reveille in which "ordinary people" track down celebrities using the micro blog. Bits and pieces of TV network programming are everywhere on the Web -- legally and illegally. Twitter and Facebook are considering ways to integrate video into their social services, and mobile video is gaining speed.

Still, maverick entrepreneur Mark Cuban complains that Internet video so far has been "a real disappointment" and blames Google for placing free video access on YouTube ahead of creating a sustainable business model for quality online video and advertising. Everyone is watching, and no one is paying.

NBC's prime-time rating recently sank to a record low in-season 4 rating (or about 4 million US TV households compared to Hulu's 42 million unique video viewers) -- a stark reminder of television's dwindling masses. Fewer people are watching, and Madison Avenue still fronts the bill.

This shows the impact of the tumultuous world of online video, currently accessed by 140 million U.S. consumers, and the TV networks' uncertain fortunes. Time spent viewing online video will morph to more than 75 percent of all Internet traffic by 2012, undoubtedly slicing into the TV broadcaster's $17 billion in advertising revenues and $24 billion in affiliate fees from cable and satellite providers. Mobile video could be a $16 billion global market in five years.

That phenomenon has disrupted the value and the process of creating content and advertising amid the most damaging recession in decades.

The networks' prime-time upfront advertising commitments could decline as much as 20 percent this year and some speculate spending will never return to prior levels as it shifts to online and other video platforms. The urgent needs to devise ways to move and measure video consumers as they reach across multiple platforms and devices is one byproduct.

While Walt Disney CEO Bob Iger and NBC Universal CEO Jeff Zucker concede that business as usual has ended, they aren't sure what role the TV networks will play in the evolving digital media universe that responds to consumer demand. "The business we are used to may be over and the business we're going to see may be quite different," Iger recently observed even as peers such as CBS CEO Les Moonves argue that the television model "is not broken."

The debate and fate of the TV networks in the digital video age is the subject of the new Contentinople report. It explores the ways in which the proliferation of free Web video especially is undercutting nearly $70 billion in total broadcast and cable advertising revenues and the $60 billion video subscription business.

Disclosure: Diane Mermigas does not directly own media or internet stocks.

Comments

[Beach2009:]

Amazing! Fewer people are watching Television. Go figure. Finally our lives are more interesting than any television program out there. The evolution of print media morphing into online network media is fascinating. The video this morning of Iran protestors holding up poster boards with cut out AMerican words aying who took my vote is priceless. I am so proud of Iranian young people. They don't want to buy into their elders insanity and closed minds.
If you think we're not paying, think again. Buying computers, then the services is not cheap. We, as the consumer, are paying for everything!! We are doing the work and paying the expense for you.

Jun 18 10:10 AM

[mlyn:]

I'm considering buying a 40" HDTV, only to hook my laptop to it to see all the shows I watch now: Charlie Rose, Bill Maher, Jon Stewart, etc. I also subscribe to Netflix and can catch up on TV serials like the Wire because I don't subscribe to cable. Who needs TiVo? Really, I don't want television programming to go away, but if one wants to determine one's own viewing schedule, from spontaneous watching to pre-scheduled, who needs the TV Guide?

The topic we should really be concerned about is China's mandate that all computers sold in China must have a blocking device installed. The ruse is to keep children away from pornographic website. But actually, this would be another way to contain public protest via the internet because version 1 may block porn, but version 5 may actually be spying on dissidents. I am quite sure China and the Chinese are observing what is occurring in Iran.

The tech company that kowtows to the Chinese gov is the company that gets the Chinese market. If all the tech companies acquiesce, there by the side of the road will be the "free" market and internet democracy.

Jun 18 04:10 PM

[ksmithdc:]

Agreed, 100% with Beach 2009. Very well said!

Jul 20 10:23 AM