Trouble in TV Land

Viewers are defecting to cable, DVD, and other formats -- and with them may go the networks' traditional business model

By Ronald Grover

Last year, when NBC Entertainment President Jeff Zucker announced he had signed Friends' Matt LeBlanc to star in a spin-off, he joked that the title of the new show would be Hey, Where'd Everyone Go? Big yucks back then. But it now looks like Zucker's one-liner might not have been too far off the mark.

Indeed, at the halfway mark for the TV season, it's clear that the network faithful are dwindling. According to the most recent Nielsen ratings, the erosion in network viewership -- which has fallen over the past decade by an average of about 2% a year -- is accelerating. This season, the drop has been especially alarming among younger viewers: a 7% fall among those between 18 and 49, the TV audience advertisers most want to reach.

Hardest hit have been Fox and ABC. CIBC World Markets analyst Michael E. Gallant figures that the unforeseen fall in ratings at both Fox and ABC will make both networks face large "make goods" -- giving away free ads because their shows didn't hit the audience levels promised to advertisers.


  "The fall season was a wakeup call for everyone," summed up ABC President Susan Lyne at last week's meeting between network execs and the Television Critics Assn. Lyne is one of several network brass who understand the need to change the networks' business model. "There are things that we need to do differently," she conceded.

Ah, but what things? That's less clear. Last summer, to promote the final season of Friends, NBC took to the movie theaters, putting trailers before summer blockbusters. WB is doing the same thing with one of its few hot shows, One Tree Hill, and has started plastering major cities with billboards.

That's one way to get noticed in a crowded market. The other is to launch your season ahead of the pack and attach it to real must-see programming. That's why NBC said it would kick off its next season in August, right after it airs the Summer Olympics, TV's biggest promotional platform after the Super Bowl.


  Fox, which usually starts its season later than other networks, launched its new drama The O.C. during the summer -- and promoted the heck out of it during its fall airings of Major League Baseball playoffs. Fox heavily hyped Skin -- which started in the fall and was a quick cancellation -- during the highly watched playoffs. Network execs admit that Skin's failure might have been because "the show just didn't work" -- and not because of its traditional start date. And that's the dirty little secret of network planning: Audiences tend to look elsewhere for entertainment when shows don't work.

And viewers have no shortage of places to go when they're turned off by the less-than-stellar fare that networks offer up. There's cable, which darted ahead of network TV last season in total prime-time viewers by picking up reruns of hot shows such as Law & Order and by ordering up new movies and TV shows that are edgier than network pabulum.

Now, TV -- network and cable -- has new and potentially greater competitor in DVDs, computer games, and the Internet. All you have to do is check with your teenager -- as I have done -- to figure out she doesn't know NBC from MTV, or CBS from a Friends DVD. The networks are going to have trouble down the road if they don't figure out a way to get the viewers of the future back from their game players, PCs, and DVD machines.


  In the next few years, an even bigger distraction is coming in the guise of the digital video recorder (DVR) -- the time-shifting, ad-zapping machine that will allow folks to retrieve programs from last night, last month, or just about anywhere in the TV universe. Satellite and cable companies, in a fierce battle to win subscribers, will soon be all but giving DVRs away.

That's likely going to mean reconfiguring the entire way that networks create and release their shows. Fox has told agents it intends to start cranking out scripts 12-months a year -- not just over the customary January-May period. That will give them hot shows to launch in March or over the summer, says Fox network head Gail Berman.

Still, getting anyone to notice will be a toughie. Maybe that's why Fox plastered ads for its latest edition of American Idol all over its coverage of the National Football League playoffs. Oh, and Fox didn't even wait for commercial breaks -- it threw promos on the bottom half of the screen between plays. Am I the only one who smells desperation here?


  Other network executives figure they'll simply copy cable TV's m.o. -- after all, cable has been successfully grabbing viewership from the Big Boys for years. ABC ripped off The Learning Channel's house makeover show Trading Spaces (itself a rip-off of a British show) with its Extreme Home Makeover.

Extreme did such stellar numbers that ABC is bringing it back in mid-February. And borrowing from HBO, which runs truncated seasons of such hits as The Sopranos and Sex and the City, ABC will air Stephen King's Kingdom Hospital (based on a Danish miniseries) for half a season. ABC's Lyne admitted that the network was using the "HBO model." If you try to do a traditional season -- run three original episodes and then two repeats -- "you just lose too much ground," she says.

Among the downcast faces, Leslie Moonves, chairman of top-rated CBS, was a beaming exception. Indeed, he was almost smug during the Tiffany Network's presentation, citing statistics that showed CBS has been gaining viewers, thanks in large part to the Charlie Sheen vehicle Two and a Half Men and the Navy drama NCIS. Throw in the upcoming Super Bowl, and Moonves figures he can't be beat. He professes not to be worried about the disappearing viewer, saying, "It's not affecting us as greatly."


  Moonves, one of TV's shrewdest executives, should know better than to tempt fate. The history of TV networks is that whatever goes up inevitably comes down. CBS is doing terrifically right now, but it may lose its top-ranked sitcom -- Everybody Loves Raymond -- if star Ray Romano sticks with his decision to pack it in after this season.

And sure, Moonves announced that CBS would add a third installment to its CSI franchise with CSI: New York City. But does America really need another crime show set in New York, even one from the highly regarded CSI shop, which produces America's top-rated show?

Maybe Moonves' team can continue to work magic and keep the ratings going for another season or so. In the meantime, the rest of the networks will have to contend with falling viewership, which gives mean fewer opportunities to promote their new shows -- and smaller audiences. Ultimately, smaller audiences means fewer advertising dollars, which is still network TV's bread and butter.

That thought has got to have half of Hollywood reaching for the Maalox. Back in the '70s, ABC chief Fred Silverman -- one of the greatest programmers ever -- was called "the man with the golden gut." Today, plain cast iron must be looking good to a lot of network execs.

Grover is Los Angeles bureau chief for BusinessWeek. Follow his weekly Power Lunch column, only on BusinessWeek Online

Edited by Patricia O'Connell

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