Network fretworking
Feb 1, 2006 12:00 PM, BY PAUL MCGOLDRICK
When you think about it sensibly, the major networks in the United States are anachronisms in the business of television. They were created for purely commercial reasons, with the affiliate distribution system designed to cheaply get advertising (in the guise of programming) into the most number of houses in the country.
The model closely resembles that of the travel industry, in which travel agents enabled airlines, hotels and car rental companies to reach the maximum audience. And look at that business now.
In the same way that the travel industry has bypassed those agents — driving its clients to the Web for a much easier booking experience — the networks can also squeeze out broadcast affiliates at their whim and fancy. But are the networks going to be squeezed out first?
If you think that is a bizarre question, think about how our viewing habits (isn't that a dreadful word to describe a supposedly entertaining event in our lives?) have changed over the last 50 years. The networks held a solid footing with the public until the grown-up versions of cable TV came along, replacing the terrible systems of the 1970s, which were examples of engineering at its worst. The creation of so many new channels, all being fed with programming material, changed our industry in the way that productions were made, which is still something that many equipment vendors in the broadcast business have not woken up to. The spread of advertising revenues creates different financial models in the industry. Satellite TV, with more channels, has diluted those revenues even more.
Somehow, network television has come through it all, still paying premium prices for productions, whether they are from a studio, inside a penthouse at Trump Tower or from a sporting event. As the only place for viewers to catch a Super Bowl or a Rose Parade, network television has continued taking the top advertising dollars in the industry.
The networks have been hit with new technology: first VCRs, then TiVo and now recordable DVDs, all of which have been a disaster for advertisers' confidence in the broadcast product. The fact is, the old concept of prime-time television is a thing of the past. People don't sit down with their TV dinners to watch three hours of carefully lined up network television, with productions vying for the best time slots. They watch on their own time. They record programs they want to watch on their own time. They buy DVDs of the series to watch on their own time. They download programming to watch on their own time.
Those facts are not lost on at least some of the network executives who see revenue in those new viewing options. But it is a changed form of revenue. Payment for a product must be made available in a different format and come directly from the viewer instead of an advertiser.
This is causing the networks to stray from their core product, which is not making programming — it is to sell advertising. If you think this is a callous approach, you must not have met the same people in the industry that I have. I have seen major companies collapse because they have deviated from their core product. The USPS, Amtrak and Greyhound are prime examples.
Technology is not going to stop developing. As the information pipe to our homes and offices gets larger and larger, there are people who see the chance to beat the networks at their own distribution game. The industry has been hijacked with live productions being carried out on the Internet, and it won't be long — if it hasn't happened already — before pay-per-view materials are also hijacked — much like the pirated movies that are available before their theatrical releases.
As much as I love transmission equipment, I would hate to be personally responsible for paying the utility bill to broadcast 24/7 to an audience that is going in other directions for their visual entertainment.
Paul McGoldrick is an industry consultant based on the West Coast.
Send questions and comments to: paul.mcgoldrick@penton.com
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