The End of Broadcast TV Nears

In case you haven’t noticed, the business of broadcast television is in trouble. Ratings have been trending down year over year for more than 30 years and there’s no end in sight. Most pundits blame this audience fragmentation on outside forces like the proliferation of cable channels, DVDs, video gaming, DVR’s and most recently online video, personal video and wireless offerings.

People, who should know better, constantly parrot misinterpreted data about the deleterious effect of TiVo (the noun describing the entire genus of DVR’s) on commercial advertising and how the :30 second spot is dead. Others like to call the medium a vapid wasteland of unwatchable programs. All of the professional explanations for the decline of broadcast television ratings seem to agree that the problem comes from outside forces and an unavoidable changing landscape. I disagree.

Yes, the business is not what it once was, and yes, there is a bit of empirical data to support the idea that enhanced consumer control over media consumption has had a significant impact on viewing habits since the introduction of the “included with purchase” electronic remote control in the mid-80’s. But, none of this has had even a slight impact when compared to the business culture and business rules that have evolved over the same 30 year time period.

According to the New York Post, Ben Silverman, co-head of programming for the NBC Television Network said the following: “We’re managing for margin and not for ratings.” There is nothing technology can do to help or hurt this strategy. It is truly the end of broadcast television.

If you want to see TV ratings improve, the business improve and the ROI improve, try investing in programming, not margins. It will be a refreshing twist for the 21st Century. And, it is really the only thing that will turn the business around. The recipe for profitable broadcast television is pretty simple: Develop large audiences that you can accurately measure and sell them to advertisers who need to reach them. The shows that do this even have a name, “Hits.” If, on the other-hand, you want to sunset an organization and squeeze every last dime out of it before it gives up the ghost, manage for margins.

By the way, Ben Silverman is a personal friend of mine and I both respect and admire him. His success is laudable and he is a great guy. In fact, what I love about Ben is that he actually had the guts to come out and say something that no one else in his position would ever have the guts to say. This is not an NBC problem; it’s an industry problem. Ben just held up the mirror. The title of the Post’s article was, “Silverman Channeling Jack Welch.” Not only is this is not a compliment for a television programming executive, it portends a dismal and disturbing future.

Winston Churchill once said, “The farther you look back, the further you can see into the future.” So, let’s look back a few years to the “golden age” of radio. Back then, disc jockeys ruled. They became the stations’ program directors because they had their fingers on the pulse of the audience. As the business evolved, very successful program directors were promoted to station management. It was easy to spot a station with a GM who came from programming. Talent was treated with respect, content was king and audiences came first.

As the business of radio matured, professional business people started to look closely at the cash cow and you could see the focus of management turn to sales. Radio became extremely competitive from a commercial point of view (it was always creatively competitive). The new superstars of the business were the sales guys and you saw a shift in senior management to sales-oriented executives. It was easy to spot a radio station that was run by a former GSM, it was all about sales and promotion. These execs knew where the money came from and managed the stations differently than their programming predecessors. But the industry kept growing because sales and programming had always been in a surrealistic paso doble that, when properly managed, produced excellent financial results.

Ultimately, sales-oriented station management caught the attention of pure money people from the outside world. If a well programmed station was a cash cow, a fully sold out, well run station was a cash machine and pure money people like that kind of ROI.

What happened next was inevitable, but unfortunate. Management evolved once again. This time, accountants, bankers, lawyers and professional P&L managers from outside the radio business took over. They looked for efficiencies, consolidated divisions, rolled up station groups and turned the entire enterprise into a mass of M&A deals. The term “exit strategy” was the new goal and everything else was secondary.

Ben Franklin, who, among other things, is the great, great grandfather of mass media in America, once said, “Those who are unwilling to study history are doomed to repeat its mistakes.” If you look at the radio business today, it is hard to find a station that has made any meaningful investment in programming in the recent memory of man or beast. The business is about consolidated sticks, pre-canned, pre-formatted programming, sales of aggregated, de minimis audiences and margin. The industry is not about growth, it’s about holding on to what’s left.

The television industry has always followed the fortunes of the radio business. A quick rule of thumb is that changes in the video business are usually about 10 years behind similar changes in the audio business. I think this arm-chair research and the associated aphorism is supported with enough historical evidence to be taken seriously. “There’s nothing to watch on Saturday night.” says the viewer. “There’s no audience on Saturday night, so there’s no reason to invest in it …” says the margin-oriented television programming executive. This is a vortex of logical rhetoric. It is almost impossible to break free and stop the cycle. What can be done?

The answer is very clear. Super Bowl XLII (February 3, 2008) was the most-watched sporting event on record and the second most-watched TV program in history. Nielsen says an average of 97.5 million viewers watched the Giants-Pats contest. (The most-watched program is still the M*A*S*H finale, which drew 106 million viewers in 1983.) The big game also broke a record for total viewership, with 148.3 million viewers (persons age 2+ watching all or part of the game). The previous record stood at 144.4 million for Super Bowl XXXVIII in 2004. What this tells us is that if you put on a compelling piece of content, there actually is a television audience to watch it.

Is it unfair to use an annual emergent sporting event as an example? Perhaps. The job of television is to inform, enlighten and entertain. So, I will simply point to the last episode of M*A*S*H as the appropriate benchmark. You will immediately argue that every show is not M*A*S*H and that most entertainment shows will never find an audience of that size. I agree. Most shows will not ever attain that kind of rating. But I can also assure you that M*A*S*H, Friends, Seinfeld, etc. were not programmed for margin. They were programmed for ratings to the exclusion of every other benchmark.

Remember, people don’t have Internet rooms in their houses, they don’t have video game rooms in their houses, most don’t even have reading rooms – but most households in America do have TV rooms. And, in most of the 112.8 million television households, there is a TV in more than one room. TV technology is everywhere; it’s the programming that’s nowhere!

Comments

[fatcat:]

Well written article and good food for thought.The baby boomers are all that keeps it alive. Welfare class are another source of viewership,that being the main reason for so many fastfood ads...

2008 Jul 20 08:10 AM

[notsosmart:]

thanks for the computer.i watch less & less mindless idiotic tv.

2008 Jul 20 10:20 AM

[mikel:]

Good article. I like to call the medium "a vapid wasteland of unwatchable programs". In a world that is demanding higher and higher intelligence from its inhabitants, the last thing kids (or adults) should be doing is watching TV. I say, let it die.

2008 Jul 20 10:27 AM

[Zigg:]

been off tv for 6 months, and it feels great. [internet + netflix] = [entertainment - mind control]

2008 Jul 20 10:42 AM

[dixie:]

The birth of TV had many great and upbeat family shows which were reflective of society of that era.

The forerunner of Jerry Springer was Queen for a Day.

As is so apparent the dumbing down of society has arrived with TV playing a leading role. Mickel98's above post scores a bulls eye. What America needs to be competitive in today's world market is not provided by NBC, ABC, CBS, CNN, or FOX.

At least we have TCM for entertainment!

2008 Jul 20 01:23 PM

[hbball:]

While I agree that the networks should try to fill their slots with creative, intelligent, original programming, the headline about the end of broadcast TV indicates the author does not know what he's talking about. Neilsen just reported that more Americans are watching TV than ever. Using NBC as the apparent main gauge for the downfall of TV, when they consistently have the fewest top rated shows is ridiculous. While cable TV may be taking a greater share of the television-viewing pie, all of the four networks' parent companies own cable TV networks. This doesn't sound like the end of broadcast TV to me.

2008 Jul 20 03:16 PM

[crowdofchee...:]

if you want to know what's going to be "red hot"? : just wait till analog is outlawed in 2009. local pirate broadcasts are going to be what every intelligent curious entertainment goer is going to be watching. this country's population is already super-thirsting for unfiltered broadcast, and only satellite can deliver something remotely related to that. but even satellite can't deliver real unfiltered mystique as illegal local origination broadcast. the nonsensical Congressional ban on analog is only going to help that along very nicely.

does this help anyone in investing? no. do i care? no. fact: young people don't watch network TV. the profit engine of advertising is falling in conjunction with that. you can bring up any Nielson stat you want, nothing is going to change the reality.

broadcast TV has lost touch with people. finished.

2008 Jul 21 04:02 AM

[CT Programmer:]

Good article, but I think your "big show" type of thinking won't go far anymore with TV, or any other media for that matter. I'm 40, and when we were kids there were basically 4 or 5 channels to watch. You still watched on days when, if you had been the program director, shows were on that you wouldn't necessarily put on. Sure, there were really good shows on. But if there had been adequate competition, would you really have watched one of the big three networks during prime time? How many half-hour shows had good ratings just because they were plugged in between the good half-hour show at 8pm and the good show at 9pm? "Good" content is relative. People say that there are 200 channels on cable and nothing to watch, but the reality is that out of those 200 channels they may be interested in about 10 of them, but someone else would pick 10 different channels. Media is now spread out amongst a vast array of programming that can't possibly hope to attract the huge audiences of the past because not everyone is interested in the same thing. Your Superbowl analogy is an anomaly. I wasn't one of those millions of viewers because I can't stand football. You put on nothing but football on TV and you're lost me entirely. What will save the big media companies is to continue to buy up the little channels, but keep the targeted programming. Look at how many cable channels NBC owns now. The ad revenues will be lower for any given channel, because the audience is smaller, but the scale of the entire multi-channel operation will provide the revenues.

2008 Jul 21 08:49 AM

[User 190816:]

another in the long long line of shock columnists pronouncing the death of broadcast TV. but i have to say this is the first time i've read in the same article the solution is the same = broadcast TV.

you can't have it both ways. which is it? (here's a hint: see your own line about "people don't have an Internet room in the house")

2008 Jul 21 10:12 AM

[Nigel Shift...:]

What a great article! As an engineer that deals with broadcasters and networks, I learned several years ago that with minor exceptions, the technology and programming are irrelevent to management. They don't want to pay for anything unless it interrupts the flow of the commercials. Good enough is good enough. Redundancy? Nobody's watching our digital anyways. 2009 is going to be a lot of fun.

2008 Jul 21 02:19 PM

[Not surprised:]

Like the movie studios, the networks have become divisions of very large multi-national corporations with many other interests.Each division must show substantial profits or else. The result is the production of least common denominator tv and films notwithstanding the abysmal content of the product.TAKE NO RISKS in the choice of material.I write this as a former film producer and studio executive of many years standing.

2008 Jul 21 02:56 PM

[The Shepherd:]

I don't understand why the stockholders don't demand more from TV executives. Sort of reminds me of General Motors, "We just need to market the product right, more gas hogs, more Hummers". TV is a vast wasteland, I too say, "Let it die". I canceled my satellite service in 2002 and have been TV free since then.

2008 Jul 21 05:08 PM