In the June 1 issue of Entertainment Weekly, Jeff Jensen asks the provocative question, "Are you killing TV?" The article starts with a discussion of how Heroes returned from a seven week hiatus to find that they had lost roughly 20 percent of their viewership, a jaw-breaking drop of 2.6 million viewers, from its September debut to its final few episodes of the season. Many other popular and cult series have experienced similar drops this season, including Jericho (as a result, the show was canceled), The Sopranos, Lost, The Shield, Desperate Housewives, and 24. The magazine offers a range of theories about why the networks are experiencing such dramatic drops in viewership including:
The competition of American Idol which whips out pretty much all other competition.
Creatively uneven seasons, which resulted in mis-steps and lulls in the dramatic pacing of some key series.
The shift towards daylight savings time three weeks earlier this year.
A loss of interest and attention due to the extended hiatuses (an experiment in having continuous blocks of programming followed by periods of downtime). The result of this factor has been the fact that Heroes is actually producing a second spin-off series, Heroes: Origins, which will be a placeholder or miniseries during the downtime between episodes of the original series.
Shifts in the mechanisms by which fans access television series, ranging from timeshifting to downloads and waiting for the boxed sets. EW reports that 1.7 million viwers of Heroes do not watch it during its regularly scheduled time and an additional 2 million viewers watch Lost on DVR within seven days of its original airing. These numbers do not include those watching legal or illegal downloads of the series. About a third of the viewers of Lost don't watch during the regular series but catch up with it on DVD exclusively. Major shifts are occurring in how networks measure their audiences in response to these shifts in when and how we are accessing their content but in the short term, these shifts may leave some cult shows vulnerable.
This debate about the viewership of cult television programs is part of a larger discussion about the fate of the networks in an era where methods of content distribution and access are shifting dramatically. Eleanor C. Baird, a Sloan MBA student, took my graduate proseminar on Media Theory and Methods this term. She wrote a very solid analysis of the future of network television for the course, one which mixes modes of analysis common to business schools with those we teach through our media studies classes.
Switching Channels: Branding Network TV in an Era of Mass-less Media
by Eleanor C. Baird
No matter how hard they try to convince us otherwise, the big four U.S. broadcast networks are, at their core, a mass medium that fits awkwardly into our newly democratic and participatory media ecosystem. Their marketing strategy follows the widely outmoded "push" model of consumer promotions and advertising to draw viewers. Even as they become increasingly integrated into the media industry's value chain, broadcasters are challenged by new cultural norms of consumption and engagement that are combining with technological change to create a "perfect storm", an environment where they are creating more value, but scrambling to capture it.
What is happening? It is not that people are not watching network television or becoming engaged with the content anymore. New ways of consuming television content are challenging the old revenue generation models. Consumers are turning to DVDs, DVR, and digital alternatives on the web to fit more television viewing into their lives. Advertisers, enticed by the prospect of more affluent and targeted audiences on cable and online, are beginning to spend their budgets on content sponsorship along the long tail. Broadcast networks are consequently in the strange position of having a strong collection of sub-brands - the individual programs - under a relatively weak primary brand - the network itself.
TV and the big four may not be going anywhere for now, but the future is becoming less and less certain.
In this essay, I will explore how broadcast networks can respond to this changing and converging media environment by promoting themselves as distinct brands of television. To do so, I will address three questions. The first question is one of focus, if the primary role for a broadcast network in this environment is content production or advertising aggregation channel. The second question is one of consumer loyalties and identification, if the consumer's relationship to the content is stronger than their relationship to the channel through which they receive it. The third question is, can a channel such as a network be branded, and how can that be done successfully.
In order to answer these questions, I will begin by defining the broadcast networks and then analyze the major issues at play for them today - advertisers and audiences, content, channels, metrics, and digital distribution. Then, using Raymond Williams' concept of flow, as well as the writing of John Caldwell as a framework, I will address the macro issues of the role of the medium and the impact of branding, and then proceed to an analysis of the strategies of the four networks. The paper will conclude with some preliminary answers to the three questions based on my analysis.
What is a network?
Networks can refer to cable and broadcast channels, however, in this paper, the term is used to refer to the four major U.S. broadcast networks: ABC, CBS, NBC, and FOX. These four properties are linked by their intended mass appeal and accessibility, their advertising-based revenue model, "push" programming and promotion, center-affiliate operational model and reliance on the network-mediated model of content delivery, based on a set flow of programming. Another key commonality is their lack of a clear and consistent brand identity, in contrast to many of the more popular cable networks - including CNN, A&E, MTV, Discovery Channel - which have very clear value propositions.
With what I am calling the network-mediated flow model, there is an implicit contract between the consumer and the network to provide some editorial control over the content, to choose which programs to broadcast, when, and in what order to provide a unified viewing experience. This experience can stem from engagement with the brand, but also with a need for a completely passive viewing experience, something that sets this medium apart from the Internet, which is intrinsically interactive. Networks, with a relatively wide variety of programs airing on a particular night, are uniquely suited to appeal to those habitual and/or passive viewers.
Another defining feature of the network is that it uses a "hub-and-spoke" model of distribution; most content developed and chosen at the center then distributed by local affiliates. Although the interaction in the consumer's mind between the identity of the affiliate and the larger network are not heavily studied, keeping strong affiliates in major markets is a key priority for networks to secure viewers. A recent study also found that there was no evidence that a more media-rich environment weakened the branding of a network affiliate to the parent, meaning that the common use of new media did not affect the television stations association to the network.
Yet another shared characteristic among the networks is their strong reliance on metrics, particularly some form of the Nielsen ratings, to entice advertisers to purchase time on air.
Audiences and Advertisers - No more "monolithic blocks of eyeballs"
Audience attrition is not a new problem for the broadcast networks, but it is still worrying for net executives, advertisers, and media buyers. Five percent of the share of the lucrative adult 18-49 demographic has slipped away from the broadcast networks in the last year (from 15. to 14.3). FOX leads the broadcast networks in ratings for this demographic with just fewer than 5 million viewers, ahead of ABC and CBS. NBC is by far the weakest in this demographic, with just under three million viewers.
At the same time, ad-supported cable's share of advertising spend grew by 3% and continued to garner a higher rating (from 15.5 to 15.9). As early as 2004, Nielsen Media reported that cable owned a 52% share of the market in contrast to broadcast's 44%.
In other words, there is a discernable trend away from mass media advertising. Part of the problem is that advertisers are seeking out more specific demographics, diverting advertising budgets to more specialized and targeted media channels. According to Eric Schmitt of Forrester Research, "[m]onolithic blocks of eyeballs are gone...in their place is a perpetually shifting mosaic of audience micro-segments that forces marketers to play an endless game of audience hide-and-seek."
From the late 1990s to the mid-2000s, advertisers spent more than $10B a year on cable advertising, which has drained an estimated $1B a year from network prime time. Looking forward, a recent study projects the trend to continue, with ad revenues growing more than 13% per year for "narrowcast" media and only three and a half percent per year for the mass media from 2003 to 2010. The same study estimates that, by 2010, marketers will spend 41% more on cable and nearly 18% more on Internet advertising than on network TV ads.
At the same time, advertisers are demanding more flexible and non-traditional options from networks in order to get their messages across in the era of TiVo and free content online. Options sought from the networks include a range of embedded devices, including onscreen banner ads, product placement, single-sponsor infomercials, entertainment programming, and virtual product placement to achieve product "presence" in the content, not just "placement". In the new terrain of interactive television, the players also are optimistic for making up some lost advertising revenue through e-commerce applications that enable viewers to buy products that, in the vein of The Truman Show, are featured in the television show, reducing the need for traditional 30-second spots.
Content, Channel and Keeping Score
VCRs and cable television began to appear in American households in the late 1970s and early 1980s. Since then, networks have faced the disturbing realities of both competitive channels for advertising and opportunities for consumers to effectively remove and view TV texts from the channel altogether alongside opportunities to make money by selling content as a stand-alone product. Taken together, these developments set the stage for weaker identification with networks and the TV flow and stronger identification with self-directed content consumption that paved the way for TV on DVD and digital distribution.
Content ownership is part of the story; the more content the networks own, the more tempting the prospects of finding alternate ways of connecting viewers directly to content. Relaxation of the so-called fin-syn laws in the mid-1990s also led to a number of content deals between the conglomerates (AOL Time Warner-NBC, Disney-ABC, Fox, Viacom-CBS) and competing studios to capture as much value as possible. In 1995, networks owned the first-run and syndication rights for an average of 40% of their schedules, by 2000, 6 major networks owned or co-owned more than 50% of their new shows, while 3 had stake in more than 75% of them. This trend seems to have remained constant; for the 2007 season, the four broadcast networks, at least 42% of the new programs are produced in house or with a partner (see Appendix A).
In writing about the changing role of television and convergence, John Caldwell argues that the "real issue" has been syndication revenue, from cable in the 1980s and Internet in the 1990s, and that shows have consequently been designed with re-release in syndication in mind. Syndication is a lucrative way for producers to keep revenue flowing from older properties over time, similar to DVD, but still within the context of the television viewing experience.
TV is taken out of television with an affordable technology complimented by changing consumer expectations and viewing patterns. Digital video recorders (DVRs) like TiVo are becoming increasingly popular, and bringing a new and interesting twist to the question of network branding by splitting of content and channel. The frustrating issue for broadcast networks is that people with DVRs watch more of their programming, building a strong or at least passing affiliation with the sub-brands of individual shows, but they skip advertising. Research reported in BusinessWeek showed that DVR owners watch 20-30% more television, but bypass 70% of the advertising. NBC currently has two of the top five shows in the Nielsen rating "live-plus-seven" group of 18 to 49 year olds, the group that either watches the program live on television or uses a PVR to record and watch it within seven days of the broadcast. However, if live broadcast viewers only are included, the NBC shows barely make the top ten. Convincing advertisers to look beyond the traditional ratings is an upward struggle for any network, especially when those ratings are in decline across the board.
How big an issue is DVR adoption and use? One network executive estimated that time shifting viewers are resulting in lost revenue of as much as $600 million a year for a single broadcast network, or about $2.4 billion for all of them. On the plus side for the networks, these devices do enable some tracking of post-broadcast viewing, unlike playback using a VCR, which was almost impossible to measure. Adoption of DVRs has already lagged expectations reported in 2004 , however estimates for percentage of American households with a DVR by 2010 ranges from about half to about a third, up from only 16% in 2006.
Finally, taking the spilt of content and context even further, producers have also chosen to repackage television content completely distinctly from the format of television itself. Writing about the advent of television programming becoming commonly available on DVD, beginning with the X-Files in 2000, Derek Kompare argues that divorcing the content from the advertising enabled the content to "'transcend' television" and become a "multilayered textual experience" distinct from the medium. Although this generates revenue for the networks, it does little to strengthen their brand or capitalize on the strength of one show's sub-brand to promote another, potentially increasing profits.
A native of Toronto, Canada, Eleanor Baird is entering her second year as an MBA student at the MIT Sloan School of Management. Before coming to Boston, Eleanor worked in media relations, consulting, and strategic planning in the public and private sectors. She holds a Bachelor's degree from the University of Toronto, where she specialized in Political Science and
History. This summer, Eleanor will be an intern with the Corporation for Public Broadcasting's Media Strategies department in Washington, DC.