Changes in Network Structure and Ownership of US Broadcast Television - Essay Example

Changes in Network Structure and Ownership of US Broadcast Television: A Study into the Rationale and the Effects 0 Introduction: The United States Broadcast Television industry has undergone a tremendous change in the last few years due to various factors like shift in the viewers' media-consumption habits, technological advancements resulting in new digital products and reduction in the advertising revenue. Grabbing audience, holding on to them and to monetize on the audience have become tough jobs for the Broad Cast companies with the advent of Internet sites like YouTube that offer television programming including shows from NBC with little financial gain for the networks. Not only the net works but all the media companies are facing the brunt due to the uncertain future of the media business. Before the year 2006 television companies profited almost entirely from producing, distributing and selling TV content. Success in those areas meant higher profits and returns for the stakeholders. However this trend had changed with the intrusion of online stores and a variety of digital platforms with which the TV media had to compete. This paper makes a study as to how this state of affairs has necessitated changes in the network structure and ownership of US Broadcast Television industry. 2.0 Hurdles for Television to Survive as Entertainment Media: Traditionally the US television industry was guided by the sheer ethical standards of good programming and content presentation. The networks adopted the basic principle of understanding the viewers as the owners of the air and had been providing them with programmes treating them as sovereigns. Providing true entertainment was the sole business motto of the network companies. Principles of free enterprise system guided the network companies to broadcast programmes with values and commercial advertising formed a minor part of these entertainers. But with the advent of internet the situation stated drifting and the advertising revenues started declining "Faced with competition from an array of digital competitors, which produce content of their own and sometimes even carry network programming, TV companies have seen their revenues shrink, along with the confidence of traditional Wall Street investors". (Anne Becker 2007) The competition from the digital competitors was the major hurdle for the network companies to continue to survive healthily as this competition started eating up their advertising revenue. This echoed in the quality of the content and programming expertise of the network companies as even the larger ones had to resort to job cuts and were unable to retain real talents by paying hefty salaries and perks. 3.0 Effect of Reduction in Advertising Revenues on Network Companies: One of the major problems identified as leading to the reduction in the revenues to the net work companies is the reduction in the advertising revenues. As against the increase in the ad-spending for the internet was predicted to scale up to 13 percent in 2006 the network-TV advertising remained flat without any increase and newspaper advertising fell 3 percent according to a report by TNS Media Intelligence. Such drastic changes in the revenues had forced the major network companies to cut the jobs and thereby reduce the cost to increase the profitability. "NBCU announced its layoffs after its broadcast network dropped more than 15% in the adults 18-49 demographic over two consecutive seasons and the company saw its profit plummet 10% during third quarter 2006". (Anne Becker 2007) Similarly MTVN has also resorted to job cuts after the share price of its parent company Viacom fell over the past year. MTNV had removed all the staff from its two cable networks, giving their responsibilities to other staffers at MTV and VH1. 4.0 Commercials and the Web sites: Another important factor which needs consideration in falling revenues of the network TV companies is the shift in the advertising sponsors resorting to internet media than the Television media. Alex Mindlin (2007) says that the Super Bowl ads for Snickers were criticized for being homophobic and were quickly pulled. But they worked in one respect: Snickers.com's share of all Web visits was almost 16 times larger than it had been a week earlier, according to the traffic-measurement firm Hitwise. Budlight.com saw its share grow by 655.87 percent. It is worth noting that Hitwise reports Web site traffic as a proportion of all Internet activity, rather than an absolute number of visits. (Alex Mindlin 2007) Alex Mindlin (2007) further adds that the largest numbers of new visitors, meanwhile, went to Internet companies like Careerbuilder.com, which went from hosting 0.153 percent to 0.158 percent of all Web visits. One other thing is the advertising by the on line companies themselves in the network Televisions. The companies do think that is it still worth while advertising on the televisions paying huge sums of money. "You've got a dot-com spending $2 million on a 30-second exposure to upwards of 90 million people, not all of whom are going to even have Internet access," said LeeAnn Prescott, a research director at Hitwise.adding that online advertising can be much more targeted than TV commercials. 5.0 Structural Changes in Network Companies: According to NBC executives, Hollywood producers and agents, and many of the financial analysts who follow NBC, Mr. Zucker, the new CEO faces many pressing issues. Foremost among them: how he will deal with the rapid technological and financial changes that are throwing many traditional media businesses into upheaval. (Bill Carter 2007) The major network companies attribute other reasons also for such sweeping changes in their job policies. According to Zaslav of Discovery Channel, the company made sweeping changes in its structure because "New-media space is the key to our long-term growth because people are starting to consume content in a different way and our brands need to be there," According to the critics of the industry the old media companies have already crossed the limit of retaining the creativity by cutting too many jobs and this would tell upon their potential growth. It must be appreciated that the TV companies are basically creative ventures and low employee morale coupled with fewer in number of them would affect the creativity to a greater extent. Adding rationale to the structural changes these companies claim that they would continue to spend more on digital ventures including the provision of digital studios. NBCU is estimating to generate revenue of $ 1 billion from digital products by 2009 while Viacom is planning to net digital ad-sales of $ 500 million by the end of 2006. 6.0 Super Bowl and Advertising Revenue: In order that the major network companies retain the viewership and at the same time enhance the advertising revenue they have chosen the sports programmes which have a larger viewership and sold their spots to the sponsors so that they could maximize their revenues. One of such programs is 'Super Bowl'. "Only the 1996 Super Bowl between Dallas and Pittsburgh, which had 94.1 million viewers, had a bigger audience, according to Nielsen Media Research.. Behind that 1996 game and the M-A-S-H series finale, last Sunday's game was the third most-watched program in television history." (CBS SportsLine.com wire reports) However, despite the huge audience, the Super Bowl didn't provide much of a jolt to the CBS drama Criminal Minds, which just followed the game. There were only 26.2 million viewers for the dram as against the 93.2 million viewers who were glued to their TVs.. This is the kind of viewership the 'Super Bowl' is generating and the ad-sponsors are extremely pleased with the number of audience their products are reaching. Another interesting factor is the quality of the commercials that are being broadcast during the Super Bowl show. "The fact that the spots are to be made widely available - on Web sites, for downloading, as video-on-demand programs - outside the broadcast of the game on ABC, seemed to inspire advertisers and agencies to broaden the appeal beyond the typical male football fanatic, who stays glued to the set to giggle at ads with jiggling cheerleaders or flatulent horses." (Stuart Elliott 2006) Another feature that makes the Super Bowl attractive for the network companies and the ad-sponsors alike is the increase in the viewership of the program due to the fact that important clippings and highlight moments of the game are made available officially through streaming video online. In the past, Super Bowl spots virtually vanished after the game was finished, apart from unauthorized clips posted by some enthusiast Web sites. This year, the commercials are gaining far more visibility because they have officially been made widely available through streaming video online - for watching again, forwarding to friends, adding to personal Web pages and even downloading to video iPods. (Stuart Elliott 2006) The inclusion of current topical issues and policy matters make the commercials more likable for the viewers. Even the Iraq war was a theme in the commercials during the 'Super Bowl' program which attracted the viewer's attention "No commercial that appeared last night during Super Bowl XLI directly addressed Iraq, unlike a patriotic spot for Budweiser beer that ran during the game two years ago. But the ongoing war seemed to linger just below the surface of many of this year's commercials. (Stuart Elliott 2007) 7.0 Advertising Revenue and 'American Idol": Just the same way the 'Super Bowl' attracts more viewers and provides additional revenue to the network companies the program 'American Idol' is also equally popular among the audience and yields more revenue through commercials. "Most television shows, no matter how successful, fall off sometime after their second or third season, but against all expectations, and most of the historic record of network television, "American Idol" has come back for its sixth season bigger and stronger than ever." (Bill Carter 2007) Adding the comments Bill Carter (2007) says that improbably, this season the show has done even better, averaging 33.5 million viewers over its first five weeks. It may so happen that at this point "Idol" could lose half its audience but would still rank among the top 10 shows on television. It would be really difficult to predict when this phenomenon will fade. 8.0 Conclusion: From the foregoing discussion, it is observed that the network television companies had to undergo structural changes to cope up with the declining advertising revenues as well as to meet the challenges placed by the digital competitors. In a way to augment the resources and revenues from advertising popular television shows like 'Super Bowl' and 'American Idol' with larger viewerships come in handy for the network companies. The programs as such and the commercial as well make the viewer attracted to their televisions and enhance the chances of the products being advertised reach the maximum number of viewers. References: 1. Anne Becker 2007 Old Media, New Media The Business of Television Broadcasting and Cable http://www.broadcastingcable.com/index.asplayout=articlePrint&articleID=CA6419245 2. Alex Mindlin 2007 Super Bowl Commercials Echo on the Web The New York Times February 12 2007 http://www.nytimes.com/2007/02/12/business/media/12drill.htmlex=1328936400&en=0949b804beb3cd46&ei=5088&partner=rssnyt&emc=rss 3. Bill Carter 2007 A New Boss at NBC, and Even Newer Issues The New York Times February 6 2007 http://www.nytimes.com/2007/02/06/business/media/06nbc.htmlex=1328418000&en=89e8ccbe1d9f44f9&ei=5088&partner=rssnyt&emc=rss 4. Bill Carter 2007 For Fox's Rivals, 'American Idol' Remains a 'Schoolyard Bully' The New York Times February 20 2007 http://www.nytimes.com/2007/02/20/arts/television/20idol.htmlei=5090&en=6a21cd6f4f1a4dde&ex=1329627600 5. CBS SportsLine.com wire reports Super Bowl XLI attracts near-record 93.2 million viewers http://cbs.sportsline.com/nfl/story/9976386/rss 6. Stuart Elliott 2006 Lifting Super Bowl Ads Above the Lowbrow Level The New York Times 06th February 2006 http://www.nytimes.com/2006/02/06/business/media/06adcol.htmlex=1173931200&en=3caea7d887784da4&ei=5070 7. Stuart Elliott 2006 Can You TiVo to See Just the e Ads The New York Times 07th February 2006 http://www.nytimes.com/2006/02/07/business/media/07adco.htmlex=1296968400&en=30f2548c3c21e4af&ei=5088&partner=rssnyt&emc=rss 8. Stuart Elliott 2007 Super Bowl Ads of Cartoonish Violence, Perhaps Reflecting Toll of War The New York Times 05th February 2007 http://www.nytimes.com/2007/02/05/business/media/05adcol.htmlex=1328331600&en=b7461af69e596e0b&ei=5088&partner=rssnyt&emc=rss Read More