If TV Networks Are Dinosaurs, Then This Is Still the Jurassic Age

Despite declining viewership of 'free TV,' advertisers flock to it

THE networks nearly stumbled this fall. The new season premiered an unprecedented 42 shows, confusing many viewers who were still reeling from last year's record number of affiliate switches. The O.J. Simpson trial on cable distracted audiences even more.

Adding insult to injury, young upstart FOX beat old stalwart CBS for a full week's rating period - a first.

To some analysts, who point to the networks' steadily declining audience, this is finally the beginning of the end: "The network bubble has burst," contends Billy Sternberg of Network Broadcast Marketing Consultants, which sells advertising time on cable stations.

The death knell has tolled for broadcast networks many times since the advent of cable TV. But "the webs," as they are known, continue to defy the naysayers, bringing in whopping profits and commanding billions of dollars on the auction block.

Even though most industry analysts agree that the networks' audience will continue to shrink, they also bet that webs will dominate the dial far into the future. That's because of their broad reach, brand-name recognition, strong affiliate base, and deep pockets: They have the cash to produce high-quality shows that draw the mass audiences cable networks can only dream of.

"I don't see the network business going into decline anytime soon," says Alan Gottesman, managing director of West End Consulting in New York.

Back in the late 1980s, when cable first began to erode significantly the networks' audience share, the bottom fell out of advertising for a variety of reasons. Experts then routinely began to dismiss the networks as dinosaurs that would soon be lost on the ever-expanding TV dial.

But Rupert Murdoch saw their inherent strengths and risked hundreds of millions of dollars to build his own: FOX. It paid off.

The "Big Three" are now the "Big Four," and if Warner Bros. (WB) and the United Paramount Network (UPN) have their druthers, it will soon be the "Big Six." That will inevitably fragment the TV audience even more. But network executives continue to exude confidence in the future.

"A lot of our destiny lies in our own hands," says David Westin, president of the ABC Television Network. "If we continue to put on successful programming, there's no need to continue the downward spiral."

Fifteen years ago, 91 percent of America's prime-time TV audience was watching ABC, CBS, or NBC. Today, with FOX included, only 69 percent is tuned to the networks.

Ironically, even with that audience shrinkage, the demand for commercial slots on the networks has increased, and the price of a 30-second spot has soared. ABC network profits were up a record 84 percent last year; the NBC network doubled its profits. The FOX network posted a 22 percent gain, and even struggling CBS's profits were up 5 percent, according to Broadcasting & Cable magazine.

"Everything is relative, but we're still the best way to reach the largest number of eyeballs," says Neil Braun, president of the NBC Network. "As long as we maintain that critical mass [of viewers], the price of network advertising is likely to continue to rise."

That logic causes consternation in the cable industry. While the networks' audience has dropped, cable's has grown. During the first few weeks of the new season, cable viewership jumped 26 percent, bringing its combined share of the prime-time viewers to almost 30 percent. (Share represents the percent of all televisions in use at a given time.)

For cable executives who have watched the networks' so-called critical mass of viewers steadily decline, this fall's sagging ratings were yet another sign of their eventual demise. "That critical mass will implode one day - we're already seeing it implode at [third-rated] CBS," says Jonathan Sims, vice president for research for the Cable Advertising Bureau (CAB).

But many industry experts disagree. Broadcast and cable TV are too different, they say, ever to compete as equals. The networks still offer free, over-the-air entertainment that blankets the country. Although 98 percent of American households are wired for cable, only 70 percent subscribe.

The networks have a solid distribution system in their affiliate stations that provides a strong local identity. The affiliates' local news shows give the networks a strong lead-in to their national news and prime-time lineup.

The vast majority of cable networks are nationally generated, with nothing to anchor them to the community - although CNN has begun to offer local-news inserts. For promotion, many cable stations still depend on grabbing the channel-surfer's attention.

The networks can still generate huge amounts of cash from advertisers willing to pay a premium for a mass audience, however diminished. The webs reinvest those revenues in the kind of high-quality programs that generally deliver more mass audiences and generate even more cash.

Cable, meanwhile, has perfected "niche" programming, delivering targeted audiences to specialty channels: CNN for news, A&E for arts, or the Comedy Channel for a good laugh. Most cable networks rarely surpass a three or four share, unless there's an event like the Simpson trial to push up Court TV's numbers. Even with subscriber fees, cable channels can't afford the kind of first-run programs that generate mass audiences.

"Advertisers have a stake in free TV succeeding," says Max Robbins, who covers television for Variety. "It is still an extremely efficient medium if you're a mass marketer." Most advertisers would still rather send one message to a large audience one time, than run a commercial 10 times to 10 smaller audiences on cable.

"Cable [stations] are purveyors of hamburger versus the networks' filet mignon," says a buyer at a major agency who asked that his name not be used, in part because his agency is one of the top cable billers in the country.

BUT others in cable TV, like Mr. Sternberg, say advertisers are wasting a fortune focusing primarily on the networks. If a company buys time on all the major cable stations at once, he argues, they will reach a mass audience similar to the networks'. While major advertisers are buying more cable ads, most still put their stock in the webs.

That's in part why FOX succeeded. By targeting teens and young adolescents and aggressively signing up local affiliates, FOX generated enough of an audience to begin to command higher prices for advertising.

But to do that, FOX's parent company, the Australian-based News Corporation, poured millions of dollars into programming that, in some cases, sat unnoticed on the dial for years.

"This is not for the weak of stomach; it's an extremely difficult game," says Garth Anciers, who was the first head of programming at FOX and is now in charge of programming at WB.

WB and UPN - the "netlets," as they are known - premiered in January with several hours of programming, to which they have regularly added more. Both have affiliates that reach between 80 and 90 percent of the country.

Warner Bros.'s WB targets young families, billing itself as youthful, irreverent, and edgy. Its six hours of children's programming on Saturday morning have already won critical acclaim.

UPN, owned by United Television and Paramount/Viacom, targets a sci-fi-oriented audience. With shows like "Star Trek: Voyager," it bills itself as: "the first network for the next century."

It's too early to tell whether the "netlets" will succeed. Time Warner, WB's parent company, has committed to nurturing it through the first few costly years. UPN has a base of owned-and-operated independent stations that can offset its massive losses.

"It's all going to come down to an issue of content," says Donald Stump, a CAB vice president.

ABC, CBS, and NBC will never dominate American viewing as they once did, especially now that FOX is playing in their league. But because all four networks can command the best programming, the prevailing wisdom says they will remain the dominant forces in TV well into the future.

But as the "Big Three's" unexpected recovery from the dim days of the late 1980s proves, you can't always trust the experts.

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