Networks Party With Mad Men as Online Viewing Hurts Cable

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Broadcast executives descending on New York this week to court advertisers in the annual ritual known as the Upfronts have reason to crow: Online viewership is hurting their cable competitors.

Those are the same cable networks that spent the past two decades snatching viewers from the four broadcasters. Their success made it easier to convince marketers that their audiences, while smaller, were more loyal and younger than those of CBS, NBC, ABC and Fox. Cable’s share of upfront spending was 54 percent in 2014-2015, up from 18 percent in 1992-1993, according to data from Nomura Securities International Inc.

This year, however, analysts predict cable’s share will drop a couple of percentage points, the first decline since 2006-2007. Viewership has shrunk double digits at networks such as MTV and Bravo, whose younger viewers increasingly watch online video that doesn’t get factored into Nielsen ratings. The four big broadcasters will raise $8.61 billion in Upfront ad commitments, a 3.1 percent rise, Nomura estimates.

“Broadcast prime time hasn’t declined to the same degree that larger cable networks have,” said Jackie Kulesza, the director of video at media agency Starcom USA.

Kulesza is in New York this week to evaluate networks’ new and returning shows so she can decide how much money to spend ahead of the 2015-2016 television season. While 21st Century Fox Inc. Chief Operating Officer Chase Carey has called this practice “antiquated” in the era of Netflix Inc. and Hulu LLC, networks like Fox still secure more than 70 percent of their advertising dollars this way.

Online video consumption is “affecting the niche cable networks much more,” CBS Corp. Chief Executive Officer Leslie Moonves said on a May 7 call with analysts. Owners of cable channels -- Walt Disney Co. and Viacom Inc. each have more than a dozen -- may see ad dollars move online. But Moonves said he’s “not seeing the shift out of network.”

Growing Audience

CBS has reason to be cocky, with a prime-time lineup that attracts more than 11 million viewers a night. Its audience has grown 5.1 percent from last year, aided by the addition of “Thursday Night Football” in the fall. It led all networks in total viewers and and finished second among those between the ages of 18 and 49. (Comcast Corp.’s NBC edged CBS in that metric thanks to the Super Bowl, which CBS will air next year.)

CBS also replenished its prime-time lineup with two of the year’s biggest new hits, “NCIS: New Orleans” and “Madam Secretary.” Both were among the year’s 10 highest-rated broadcast shows. The network will court younger viewers with “Supergirl,” the latest superhero TV show, though one of the few with a female protagonist.

Rivals often tease CBS for its popularity among older viewers, yet Moonves says the network remains vital for all ages. Slimmer bundles of channels from Verizon Communications Inc. and Apple Inc., designed for younger viewers, aren’t a threat, he said.

Smaller Bundles

“The good news for us is that in every bundle from what exists now to the new ones that will come along, CBS will have to be a major part of every service that wants to succeed,” Moonves said on the call. “And in smaller bundles, we will always get a bigger slice of the pie, and that means higher fees for CBS.”

ABC has also attracted more viewers this year, thanks in large part to Shonda Rhimes, whose Thursday night block of shows with strong female protagonists is the envy of rival programmers. Young viewers, particularly women, love the pulpy excess of her creations, “Scandal” and “How to Get Away With Murder.”

The network has ordered another show from Rhimes’s Shondaland production company, “The Catch,” which stars Mireille Enos as a fraud investigator.

Though NBC’s viewership shrank slightly from a year ago, its advertising sales won’t take a big hit, says Nomura’s Anthony DiClemente. NBC, whose biggest hits are “Sunday Night Football” and “The Voice,” will have 14 new shows on its schedule next year, it said on Sunday. Those include a new drama from “Law and Order” creator Dick Wolf and scripted shows with strong female leads, “Telenovela,” starring Eva Longoria, and “Shades of Blue,” starring Jennifer Lopez.

The network with the toughest sales pitch is Fox, which is down 20 percent in prime-time viewers in the past year. The network will try to persuade advertisers that new hits “Empire” and “Gotham” are a sign of things to come, and that its new leaders, Dana Walden and Gary Newman, are just getting started -- especially since Kevin Reilly, their predecessor, picked those shows.

Walden and Newman on Monday axed “American Idol,” the popular singing show that started the career of music stars and ushered in a slew of copycats. It will end its run on Fox after its 15th season concludes in 2016.

Horror Story

Fox’s cable networks, meanwhile, have been reaping more money from advertisers thanks to programming best watched live, such as sports and news, and hit shows like “American Horror Story,” which, along with AMC’s “The Walking Dead,” draws audiences larger than many broadcast shows.

Blockbusters have helped some cable networks buck the downward trend in ratings, especially for those without sports. Though ratings fell at AMC and FX, the declines are not as steep as those at networks more dependent on reality television or shows less critically acclaimed than “Mad Men” or “The Americans.” Ratings are down more than 20 percent at A+E Networks’ A&E and History, for example.

Most viewers aren’t watching less TV, analysts and executives say. They are more often using streaming services like Netflix and Hulu, or watching several days after a show’s initial airing, a view that doesn’t count into Nielsen ratings.

Cable and broadcast networks are touting new tools that enhance the targeting of viewers. They’re trying to persuade advertisers not to shift dollars to online players who can rely on larger reservoirs of data.

Turner Broadcasting, which consolidated advertising sales teams across its networks, has created products to help demonstrate the boost it can give to brands. Donna Speciale, Turner’s head of ad sales, said she’s stressing how one of those, Targeting Now, helped brands such as T-Mobile US Inc. and Yum! Brands Inc.’s Taco Bell raise awareness of their products among key customer groups.

“We’ve been focusing on data and analytics,” Speciale said in an interview. “Marketers want to home in on business results, which is what we’re doing now.”

Turner, owned by Time Warner Inc., is at less risk than some of its peers thanks to sports contracts at TBS and TNT, two of the most-watched channels in all of cable. Though ratings have declined double digits at both in the past year, advertising sales rose in the most recent quarter thanks to basketball programming.

Turner brought in Reilly, the former Fox executive, to revitalize the rest of the lineup with big, bold dramas like “The Last Ship,” a breakout hit last summer.

“You’ll see winners and losers this year,” Speciale said. “Marketers will go to fewer networks, and focus video on fewer places.”