Friday, October 20, 2006
Over-The-Air Television Networks:
Adapting to the Cold Realities
Mark Fratrik, VP BIAfn
NBC Universal's announcement of the reorganization, significant cuts in personnel and changes in their programming strategy are just other indications that the present media landscape is vastly different than it was just five years ago, and does not even resemble what it was twenty to thirty years ago.
Over-the-air television networks now face more competition from other over-the-air networks, cable/satellite delivered networks, and the unlimited number of video choices available over the Internet. While NBCU has diversified to become more of a presence in these other related areas, it still has suffered as a result. Hence, the cutbacks and reorganization announcement.
The specific details of the reorganization will be determined over time, but the early indications of a major shift are evident with the first comments of NBCU executives. Jeff Zucker, chief executive of NBC Universal Television group, simply said, "The entire way that we are distributing our content is going to change in a fundamental way." That comment combined with others and the labeling of the new reorganization plan as NBCU 2.0 are public pronouncements of a major shift in the operation of an over-the-air network that has many resources for producing and distributing programming.
Given the competitive landscape, a drastic change is necessary for these operations. Over-the-air networks still provide a forum for high quality programming that attracts large audiences that are important for many advertising campaigns. Yet, those audiences are smaller given the many more choices available. Many advertisers, for that and other reasons, are not as drawn to these advertising options.
A previous sign of the decrease in advertiser demand for network programming was the decision by the major networks to stop airing original programming on Saturday nights. The smaller audiences viewing television that night and the resulting lackluster demand by advertisers made it impossible for networks to profitably invest in new programming for that night. Instead, they air repeat programming from some of their more popular series of the week before. NBCU's announcement that they will no longer air dramas the first hour of prime-time is just a reaffirmation that the advertising community is not interested enough in the smaller audiences at that time to warrant the more expensive drama programming. Once again, Mr. Zucker paints the picture very plainly when he says, "but there's a reason that two of the five broadcast networks program two hours of prime time each night instead of three."
BIAfn's Take:
Will these changes work? The answer to that is unclear. What is clear, however, is that NBCU and the other over-the-air networks have to adapt and react to the cold realities of the present media environment.
NBCU has to recognize that consumer choices are so plentiful that maybe they cannot profitably provide the same level and amount of programming that they have historically provided. They have to continue to invest in other distribution channels (which they have begun to) to move their product to all audiences, young and old.
Some are still sitting together in the family room watching the 54 inch wide screen television receiver, but others are sitting at a coffee shop hooked up via a Wi-Fi connection or watching an Ipod. NBCU's announcement is recognition of those changes. They know they must adapt, and we will see whether their plan will succeed.
BIA Financial Network, Inc. has served the media, technology and communication industries for over two decades with financial, strategic and operational advisory services and investment resources. We are also the nation's leading communications appraisal and valuation firm. Visit www.bia.com for more information. |
