[opendtv] Re: An Unsteady Future for Broadcast
- From: Tom Barry <trbarry@xxxxxxxxxxx>
- To: opendtv@xxxxxxxxxxxxx
- Date: Sun, 22 Nov 2009 11:12:54 -0500
I still hold strongly to the belief there are still at least3 separate
but compatible workable business models for advertising supported
content, local content, and local OTA broadcast delivery. But the
Comcast acquisition of NBC may be the catalyst that makes it obvious how
much those business models will have to change.
For instance local OTA broadcasters believe they have an ongoing
business of acquiring local exclusive rights to national network content
and then peddling it to the cable companies. If Comcast owned NBC that
might be reversed and we might see more and more deals of local
broadcasters instead making deals to broadcast cable channels OTA while
inserting local advertising.
Also, if NBC was owned by Comcast I'm not sure it would distinctly be a
national OTA network anymore, say not much different than the USA
channel. It seems it would just depend upon content deals about who
could show it, including other cable companies and possibly local
broadcasters. Almost certainly there would be some changes the next
time NBC affiliate contracts were renegotiated. I think the whole
concept of being a network affiliate may get very muddied.
Meanwhile local broadcasters still make most of the local content and
this could still be peddled to cable.
As a current non-subscriber to any premium-cable channels I guess I'm
looking forward to local affiliate deals for things like the Syfy
channel. Or maybe even a la carte local "affiliates" showing various
things piecemeal at various times of the day from different cable nets.
Local broadcasters will still have the non-tethered advantage of maybe
5-10% more potential local audience reach plus maybe mobile and could
leverage that to negotiate for (parts of) cable channels even without
any real affiliate status.
The next few years should be fairly interesting for the various video
delivery businesses.
- Tom
Craig Birkmaier wrote:
> I had to include the graphic with this story, as it illustrates the
> dire straits that the broadcast networks are in. There have been some
> recent posts about the networks still dominating ratings; the reality
> is that their share of the prime time audience is below 30% - and the
> share is significantly lower for broadcasters in other day parts. Even
> Oprah is moving to cable.
>
> Regards
> Craig
>
>
>
> http://www.nytimes.com/2009/11/21/business/media/21network.html?th&emc=t
>
> An Unsteady Future for Broadcast
> By TIM ARANGO and BILL CARTER
> Published: November 20, 2009
>
> Oprah Winfrey is fleeing broadcast television for cable. NBC, once
> arguably the biggest cultural tastemaker in the United States, is
> being shopped to Comcast, the country's largest cable company.
>
>
>
>
> Have we finally reached a tipping point that suggests a remarkable
> decline in the fortunes of broadcast television in America?
>
> In the NBC Universal deal, in which General Electric is negotiating to
> sell a majority stake of its media business to Comcast, it is the
> cable channels - USA, Bravo, SyFy, MSNBC and CNBC - that are seen as
> the most valuable, not the NBC broadcast network, which is mired in
> fourth place in the ratings among the four major networks.
>
> Most analysts and many executives agree that the economic model of
> broadcast television - which relies much more heavily on advertising
> than cable - is severely fractured. What they are wondering now is if
> it is irreparably broken.
>
> "It's in a period of huge transformation," said Horace Newcomb, a
> professor of telecommunications at the University of Georgia and the
> director of the Peabody Awards, which are awarded annually for
> excellence in radio and television broadcasting. "It's in a state of
> confusion."
>
> The business model of the big three networks - which became four when
> Fox began prime-time programming in 1987 - has for decades relied on a
> simple formula: spend millions on original programming that will
> attract advertiser dollars and later live on as lucrative reruns in
> syndication.
> But ratings are going down. In the 1952-53 television season, more
> than 30 percent of American households that owned televisions tuned in
> to NBC during prime time, according to Nielsen. In the 2007-8 season,
> that figure was just 5.2 percent.
>
> The mass audience - the bread and butter of broadcast networks - has
> splintered into niches as viewers flock to alternative entertainment
> choices on the Internet, to video games and to cable channels
> dedicated to individual tastes, like Ms. Winfrey's forthcoming OWN,
> the Oprah Winfrey Network.
>
> And yet, programming remains expensive - a network drama costs about
> $3 million for one hour - and advertisers are becoming reluctant to
> pay ever-rising premiums for prime-time shows. All the networks have
> tried to adjust, putting on more reality programming, for example,
> that is cheaper to produce.
>
> NBC made perhaps the biggest bet of all - moving Jay Leno to prime
> time each night at 10, saving the millions it would have cost to
> develop a scripted show in that time spot. The Leno move has been the
> subject of intense scrutiny by the media, because Mr. Leno's ratings
> have lately fallen on several nights well below even the modest
> guarantees NBC made to advertisers.
>
> Nicholas P. Heymann, an analyst at Sterne, Agee & Leach who follows
> G.E., said that the consistently ineffective efforts to rebuild the
> prime-time portion of the NBC network might have led G.E. to begin
> thinking it was time to exit the entertainment business. And this one
> particular decision may have pushed G.E. over the edge, he said.
>
> "I think the Leno move was the last straw," Mr. Heymann said, "the
> last roll of the dice for G.E."
> Mr. Heymann acknowledged that it seemed unlikely on its face that such
> a huge deal could hinge on one decision in one slice of an enormous
> company. But he said, "It's the domino effect of the move, on the
> shows in front of 'Leno' and the late-night shows after it. I think
> G.E. decided, 'We can't go on doing this.' "
>
> While networks have found it difficult to charge ever-higher
> advertising rates in the face of declining ratings, big cable channels
> - like USA, TNT and TBS - have flourished with the millions of dollars
> in subscription fees from cable operators that they receive, on top of
> advertising.
>
> "The cable players have a robust affiliate fee stream that allows them
> to better finance original programming," said Anthony DiClemente, a
> media analyst at Barclays Capital. "The main structural issue right
> now with broadcast is that the vast majority of revenues are from
> advertising."
>
> Profit margins for cable networks are also much better than broadcast
> networks'. Derek Baine, a senior analyst at SNL Kagan, said big cable
> networks earned profit margins of 40 to 60 percent, while a good year
> for a broadcast network is a 10 percent profit margin.
>
> Illustrative of this is a comparison of NBC to ESPN, one of the most
> popular cable channels. Last year, revenue for the two networks was
> roughly equal. NBC, according to SNL Kagan, generated about $5.6
> billion in advertising dollars; ESPN generated a total of about $6
> billion in revenue - $1.6 billion from advertising and $4.4 billion in
> subscriber fees. But ESPN was vastly more profitable. Its cash flow
> was about $1.4 billion, while NBC's was $304 million.
>
> "The viewership continues to migrate from broadcast to cable," Mr.
> Baine said. "Over time, advertisers have continued to pay premium
> prices for prime time, but over time the audiences continue to go
> down. Eventually you are going to hit an inflection point."
>
> Perhaps the most steadfast defender of the broadcast model is Leslie
> Moonves, the chief executive of CBS. He says he believes broadcasters
> can survive without the additional subscription fee revenue that goes
> to cable networks. He frequently points to the power of broadcasters
> both to reach mass audiences and to create assets unmatched by
> anything on the cable side of the business.
>
> Though he declined to comment for this article, Mr. Moonves, in an
> appearance at the Paley Center for Media in Manhattan earlier this
> week, said he had recently closed a deal for a new CBS drama, "NCIS:
> Los Angeles," to sell its repeats for the impressive price of $2.35
> million an episode. The buyer? USA network, which happens to be owned
> by NBC.
>
> The original "NCIS" is the most successful program on USA - in repeat
> episodes.
>
> Mr. Moonves noted that the two NCIS editions taken together "are a
> billion-dollar property." No show created on any cable network has
> been able to approach that level of revenue. "My model isn't broken,"
> he said.
>
> CBS executives have pointed out recently that the advertising market
> has started to show signs of revival. The so-called scatter market,
> where advertisers buy time on an individual commercial basis, is up
> about 25 percent, the CBS executives said.
>
> But the cultural implications of the decline of broadcast television
> may be as profound as the business forces at play. Gone are the days
> when the nation gathered around television sets in the evening to
> watch, say "The Cosby Show" or "All in the Family" and then chat about
> it the next day at work.
>
> Broadcast television was "a place, an arena, where ideas were
> presented in a fashion in which people could become attached to or
> explore," said Mr. Newcomb, the professor.
>
> "Issues with civil rights and the women's movement were embedded into
> entertainment programs and people would see them and either accept it
> or reject it," he said. "Today, you can watch TV and not have to be
> challenged."
>
>
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