The Future of TV

How Network TV Will Reinvent Itself


It's not easy being a network executive these days. Consider the challenges: While NBC (GE), ABC (DIS), CBS (CBS), and Fox (NWS) continue to siphon upwards of 60% of the television advertising dollars and to attract the biggest audiences, broadcast revenues are down an estimated 9% this year and may never be what they once were. Competition, meanwhile, is everywhere. The cable guys are making some of the most popular shows on TV and are pressing for an increasing share of advertising dollars as companies target the kind of audience niches in which the likes of AMC, TNT, and Bravo specialize. And it goes without saying that the array of entertainment options—YouTube clips of improbable Scottish singers, online games, pirated movies and TV shows—is luring eyeballs away from destination television.

These forces have been gathering momentum for some time, of course. But some network bosses seem to understand they have reached an inflection point. "The business model has to change, and I think every network executive knows that," says BBC Worldwide Americas President Garth Ancier, a onetime top programming executive at Fox, NBC, and the WB. "I'm just glad I don't have to be the one to do it."

For decades network TV has been about reach. Programmers traditionally chose shows with broad appeal, the better to get millions of viewers and, in turn, persuade national advertisers to buy those eyeballs. That era is essentially over and the networks are scrambling to adapt to a fragmented landscape where even popular shows are lucky to pull in 10 million viewers. "They have to rethink what they put on the air, how many hours they'll do it, everything in their playbook," says a former top executive who now produces TV shows.

A Shorter Prime Time

Network executives are loath to reveal much about their plans. But it's fair to say that five years from now network television will look very different. The 8 p.m. to 11 p.m. prime-time period likely will be shorter, programs will be tailored to audiences, and increasingly advertisers will show up in the programs instead of just the commercials. Even more radical, say industry insiders: Networks may turn over programming to outsiders some nights or let local stations provide their own shows on, say, Saturday evenings.

NBC, currently the most challenged of the Big Four networks, has been the first to rethink its strategy. To save money, the Peacock network already shares its Friday Night Lights programming with satellite operator DirecTV (DTV), which jointly finances production of the football programming but airs it on DirecTV's own Channel 101 before it airs on NBC. And this fall, the General Electric-owned network will air late-night talk show host Jay Leno on prime time five nights a week, giving it a lower programming cost than its current fare of cop dramas like the Law and Order franchise. "This is not going to get the same ratings as the scripted dramas at 10 o'clock," NBC Universal CEO Jeff Zucker acknowledged at a recent BusinessWeek media conference. "We can put our heads down and we can cross our fingers and wish this was 1987. But it is not."

Although other network executives say Zucker is motivated mostly by NBC's dismal ratings, the fact remains that programming costs are skyrocketing at a time when the audience is shrinking. The answer, say experts, is that TV networks will be increasingly forced to share the costs of making new shows to keep the costs of failure down. That's why CBS is making two of its new cop shows, Flash Point and The Bridge, with Canada's CTV network and why NBC picked up the 13-episode series Merlin to run after its airing on BBC. Those deals not only reduce the $3 million it often costs to produce an hour of TV but also slash the millions more networks usually pay to film pilots for shows that never air.

Radical Overhaul?

Of course, that will stem only the financial bleeding for networks. A more radical overhaul could take shape down the road. Networks eventually will give back to their affiliates the 8 p.m. to 9 p.m. time slot, legendary network executive Fred Silverman recently told a Syracuse University TV symposium. Local affiliates could fill that time with even more reruns or, Silverman believes, reality, news, and other TV shows more closely tailored to the needs of the communities they serve. Daytime soap operas will disappear from the schedule as well, Silverman predicts.

In time, TV networks likely will start to look more like cable channels that have built audiences based on shows that cater to specific groups, such as Bravo's women-centric offerings and the testosterone-laced Spike TV programming, says a former network executive. In its heyday, NBC provided shows that lured yuppies. At least one network—the CW—is already focused heavily on shows like Gossip Girl aimed largely at younger women. "CBS is the cop channel," says the BBC's Ancier. Indeed, CBS continues to lure heftier audiences than its three larger rivals, mostly with its highly rated CSI police-forensics series and other "procedural dramas" such as The Mentalist, Numb3rs, and Without a Trace.

As more and more viewers move online to watch their favorite TV shows, the networks are scrambling to follow them. NBC and Fox have Hulu.com, an increasingly popular site with TV shows and movies, old and new. CBS and ABC both have their own sites. In the coming years, the networks will go mobile, too. David Poltrack, chief research officer, CBS Corp, and president, CBS VISION, expects networks to tailor their offerings for smartphones and other devices—everything from clips to entire shows. "We could offer our prime-time shows at 3 p.m., or at any other time when [viewers] are out of their homes," he says.

As audiences continue to fragment, the sell to advertisers gets harder and harder. That's why viewer engagement—how involved audiences are with a given show—is becoming increasingly important. As such, expect the networks to embrace new ways to reach and retain their audience. That in itself will change the whole TV-watching experience and make it more Web-like. One product now being tested, called MediaFriends TV Chat, will allow viewers to send text messages—"OMG, can you believe what Miley is wearing?"—that will show up on friends' TV screens if they are watching the same show. The goal is clear: keeping viewers glued to the program instead of channel-surfing or heading to the Web.

Grover is Los Angeles bureau chief for BusinessWeek. Lowry is a senior writer for BusinessWeek in New York.

Ron_grover2
Grover covers the media and entertainment industry for Bloomberg Businessweek in Los Angeles.
Tom_lowry
Lowry is a senior writer for BusinessWeek in New York.

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