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Parsing Two Pieces of Bad News for Television Networks

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"Parsing Two Pieces of Bad News for Television Networks"

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This weekend brought two pieces of bad news for traditional television networks. First, Business Insider reports that, from a survey of 28,000 international viewers, the number of people who self-report to Nielsen that they’re watching television one or more times per month fell from 90 percent to 83 percent in 2011. And now TV industry analyst Tony Wible is suggesting that while streaming services might have initially helped boost television ratings by helping viewers catch up or discover new shows, that boost is fading. 84 percent are watching television programming on their computers at the same rate.

That’s a big drop, to be certain, and it’s always worth keeping an eye out for whether this is a multi-year, recession-independent trend, or simply a result of a weak crop of fall television. And the question is whether the rise of watching television on devices means, despite its flaws, the industry’s backstop plan is working?

A lot of you believe, I think not incorrectly, that the network and bundled cable system is on some sort of collision course with consumer preferences. I don’t think television is going to go away entirely, of course. The rise of Sunday night event television has made watching shows at the same time as everyone else exciting again, and to a certain extent mandatory if you want to avoid spoilers. Cable in particular has invested in cinematography such that it’s fun to watch shows on bigger screens rather than smaller ones. Just because must-see shows are must-see for niches rather than enormous mass audiences doesn’t mean that the people who are tuning in are less passionate—in fact, maybe the reverse—but that in an era when there are more quality options, the giant mass audience is probably over.

The question, as always, is what is the new equilibrium? It’s one thing to know that a show is profitable at a certain ad rate and a certain Nielsen rating. It’s a much more complicated equation to figure out which combination of Hulu streaming, iTunes purchases, time-shifted viewing, and viewing in the time slot makes a show profitable, and beyond that, to figure out which combinations of shows based on those metrics, plus monetization of networks’ back catalogues, makes a network work. And if available revenues are simply going to shrink even as networks have the same number of programming hours to fill, what shrinks? Do shows start looking worse, whether it’s lower-quality cameras or cheaper sets? Does the trend of bringing big movie actors to TV stall as networks become unwilling to assume their contracts? Will networks cut down production orders to save money and shrink the length of the TV season? If it’s going to be impossible to scare up the $2 million per episode it costs to produce a comedy or the $3 million it costs to produce a network drama and still turn a profit, shows are going to look different.

Networks and viewers are locked in an impossible situation here. It’s hard to settle into a new equilibrium with incremental changes to the business model. The experiments networks are doing, whether with streaming services like Hulu or subscriber verification are an important way of gathering data, but they leave users with enormous uncertainty about where to find content—I essentially stopped watching 2 Broke Girls once CBS pulled it from Hulu, information that I’m sure is useful to CBS but remains frustrating to me—and that makes it hard for consumers to establish consistent new viewing behaviors. We’re stuck, at least for a while.

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