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Wednesday, October 10, 2001

Confronted for the first time with a staggering drop in advertising revenue, all four major broadcast television networks are contemplating sweeping changes to the face of prime-time programming. [...] Product placement, reintroduced last year in CBS' unscripted series "Survivor," will be more common and obvious. Also in vogue is sponsorship--and even ownership--of shows in which advertisers can insist on details as mundane as whether the cast of NBC's "Friends" wears Prada or Armani.

The soft ad market, caused by both the dot-com crash and the overall economic slump, is spilling over into television as well. TV seems to be headed forward into the 1950s and 1960s; it's been that long since a sponsor owned a weekly series (ownership of soap operas lasted somewhat longer). It will be interesting to see how the public reacts to this reversion to the early days. There have been relatively few shows that had only one sponsor for even a single episode, and those tend to be comparatively special events, handled differently. For example, this season's premiere of ABC's Alias was sponsored by Nokia (resulting in surprisingly noticeable use of cell phones in the show) and ran entirely without commercial interruption. These days, single-sponsor shows generally run without commercials, or with very limited commercials. It's also not clear that people will react to such things the way sponsors would like, especially if they do this with established shows. People would never refer to "Proctor and Gamble's Friends", for example. The only established show, if that's the quite right way to refer to it, with a title sponsor that people remember is the Hallmark Hall of Fame movie that appears every network sweeps period, and Hallmark up and created their own cable channel (and a perfect time they picked to do that, didn't they?).

It is easy to understand why networks are looking at these options, however. A possible drop in revenue of 6% this year and 9% next year is pretty drastic, and will almost certainly interfere with their ability to produce programming of any quality. It's understandable that they're looking to cut costs and augment revenues any way possible.

(That said ... with a 45% drop in ad revenue, why on earth is NBC buying Telemundo? Hispanic viewership may be expanding, but it can't be expanding THAT much. To be sure, it's going to lead to layoffs throughout NBC as they combine staffs -- Telemundo's staff will probably be left mostly intact, as a Spanish-language station probably has need of a staff that speaks fluent Spanish, and NBC proper really doesn't; conversely, Telemundo's staff almost certainly speaks perfectly good English, so that means the redundant people must come primarily from the NBC companies. One does wonder what Viacom, the apparent other bidder for the company, would have done with it. The FCC has already waived rules once for the Viacom/CBS/UPN combination; even a business-friendly commission such as the current one wouldn't be likely to do it again to give one corporation that dominant a position in reaching audiences. But I digress.)

To be sure, after September 11, the ads themselves are ... problematic. They're attempting to wrap consumerism into patriotism, and the public is not only not quite biting, many find the ads utterly distasteful. It's going to be difficult for companies to find ads that work.

One idea mentioned is for networks to stop programming for Saturday, currently the lowest viewership night, altogether. (Saturday night programming has come low in recent years. Through the 60s and 70s, it was one of the nights with high viewership; classics such as The Carol Burnett Show, the Bob Newhart Show and The Mary Tyler Moore Show were all Saturday staples and Top Ten shows. Now most Saturday night shows reside somewhere in the bottom 20.) They're thinking to hand Saturday back to the affiliates in their network group, to allow them to buy syndicated shows and do local programming. That has certain risks of its own; it may sharply decrease the profits for their network groups (some network affiliates apparently have profit margins of 40% and higher, so "profitable" is something of an understatement -- and even they aren't immune to the downturn), and higher demand could drive up the competition for and costs of syndicated programming. (Here's a thought: repeat all the week's nonnews reality programming on Saturday night, the week it normally airs. Reality programming normally repeats badly at any rate, and as long as you're going to lose money no matter what you do, you might as well get what you can from them. Besides, there's a vague chance you might pick up new audience.)

Networks are also talking about filming fewer pilots and picking up fewer new shows. However, if new shows continue to fail at their current rates (something like 75-80% of all new shows don't survive the first season, I think) but they film fewer pilots, that means they'll have to stick with some shows, even if they're dogs, because there's nothing else to put in there. In the past, they tried to finesse this issue by broadcasting more news and reality shows. Unfortunately, the reality phenomenon seems to be tanking now -- a combination of overprogramming and the fact that REAL reality (now there's an oxymoron) is considerably more interesting and makes the shows pale by comparison. The public has also shown a certain resistance to too many news programs; maybe news programs individually cost less (although the cost of cutting foreign news bureaus is now evident), but who needs to see Dateline six nights a week? 60 Minutes VII?

Programming executives say that they'll cut costs for everyone but top talent ... but I expect that top talent will soon be asked to cut corners, as well as to accept product placement and show ownership. ER, to pick a show at random, may be the top rated drama on television, but if it sucks in 30% of NBC's hourlong dramas budget all by itself, is its audience ultimately worth that much to them? Does it deliver one-third or more of NBC's dramatic audience? (Actually, I think it does, but that's more a reflection of the paucity of NBC's dramatic landscape than of ER's relative quality.)

Chances are good that the "war on terrorism" will provide a short term jolt to network audiences ... except that, except for certain regular news programs, news alerts and special bulletins aren't counted in the ratings (especially when all networks are running bulletins at the same time) and frequently have no advertisements at all, because it's felt to be inappropriate. Every time something major happens, and the networks all feel the need to cover it, they lose money because they have to give back advertiser dollars for commercials that don't run. Even Fox transferred FoxNews Cable Channel over to its network during the week following the WTC attack, and has shown a willingness to cut into programming with periodic special bulletins from FoxNews. On the other hand, the WB and UPN, having no actual network news, have been content to almost completely ignore the news during primetime. This means that they don't have to give back all the advertiser money -- although they may have some givebacks due to having unexpectedly smaller audiences. Depending on what happens to viewership at the Little Two during the periodic crises, it may turn out that they come out of this transitional period in slightly better shape, relatively speaking, than the major networks. (After all, being new networks, they don't quite expect to be making major profits at the moment anyway.)

The side effects of all this -- the real "people" costs -- are that the economies of Los Angeles, heavily dependent on studio production, and New York, where most networks are headquartered, are about to get somewhat worse. (As if New York needed another jolt.) There will be layoffs in the production units, in the studios and in the networks. New York's unemployment average was already running more than a percentage point above the national average even before the attacks; the aftermath and this type of layoff are likely to kick it to somewhere around 8-9%; a number not seen since the worst of the last recession, if then. Since most of these look to be long term changes, rather than short term reactions, it's likely to be quite some time before things get better.

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