With all the ‘bull’ being raised at the CRTC hearings in the National Capital District it amazes me that nobody has glommed onto the obvious. The great television networks of North America are a dying breed. CTV and Global are wasting their time and ours by arguing for a future that doesn’t exist. In fact if you read between the lines, subscription fees are another way of saying “we want to be a cable service.”
The greedy part of what they are doing is that they are attempting to keep all the perks of over-the-airways channels: must-carriage, simulcasting, the best spots on the dial, while charging the same sort of fees that TSN, Slice or W charge.
The real truth is that they cannot win these new fees without offering something huge in return. The most obvious is to promise greater amounts of Canadian content. It will be the CRTC’s job to make sure that the content they offer is in the form of drama, comedy and documentary production. The nets would far prefer to offer cheaper reality TV. The nets will offer the Canadian programs in dead zones like opposite hockey, Friday nights, outside prime time. It will be the CRTC’s job to get guarantees for a percentage of prime time and while I’m at it, an assurance that Canadian shows will have the same sort of promotion budgets that the big U.S. shows get.
I’m not holding my breath. The CRTC is toothless in dealing with the networks. Global seldom if ever lives up to its license guarantees. CTV uses every trick to shortchange Canadian production. The CRTC has always been silent on any transgression.
The bread and butter of CTV and Global is the big U.S. blockbuster series. That’s where they get their audience. That’s where they make their money. The U.S. shows are way cheaper to buy than spending $2 million and more per episode on Canadian drama. And here’s the rub: the U.S. networks are in as bad shape as CTV and Global.
Many American media experts point to two events in the past year as forewarning the end of the network era. First came Jay Leno’s new prime time talk show. It basically said NBC doesn’t have the money to produce three hours of prime time every weekday. More recently Oprah’s announcement that she is walking away from her hugely successful show that runs on network television. Everyone knows she will reappear on her own cable station that’s about to be picked up by cable and satellite companies in the U.S.
The writing is on the wall. NBC is trying to sell itself to Comcast, the biggest U.S. cable operator. What’s fascinating about this sale is that it’s General Electric’s cable channels: Bravo, USA, MSNBC, SyFy and CNBC, not NBC are what Comcast wants, not the fourth place broadcast network.
The experts agree that broadcast TV that relies on advertising may be a broken model. In a recent article in the U.S. Tim Arango and Bill Carter looked at the future of broadcast networks:
“The business model of the big three networks — which became four when Fox began prime-time programming in 1987 — has for decades relied on a simple formula: spend millions on original programming that will attract advertiser dollars and later live on as lucrative reruns in syndication.
But ratings are going down. In the 1952-53 television season, more than 30 percent of American households that owned televisions tuned in to NBC during prime time, according to Nielsen. In the 2007-8 season, that figure was just 5.2 percent.
The mass audience — the bread and butter of broadcast networks — has splintered into niches as viewers flock to alternative entertainment choices on the Internet, to video games and to cable channels dedicated to individual tastes, like Ms. Winfrey’s forthcoming OWN, the Oprah Winfrey Network.
And yet, programming remains expensive — a network drama costs about $3 million for one hour — and advertisers are becoming reluctant to pay ever-rising premiums for prime-time shows. All the networks have tried to adjust, putting on more reality programming, for example, that is cheaper to produce.
NBC made perhaps the biggest bet of all — moving Jay Leno to prime time each night at 10, saving the millions it would have cost to develop a scripted show in that time spot. The Leno move has been the subject of intense scrutiny by the media, because Mr. Leno’s ratings have lately fallen on several nights well below even the modest guarantees NBC made to advertisers.
While networks have found it difficult to charge ever-higher advertising rates in the face of declining ratings, big cable channels — like USA, TNT and TBS — have flourished with the millions of dollars in subscription fees from cable operators that they receive, on top of advertising.
“The cable players have a robust affiliate fee stream that allows them to better finance original programming,” said Anthony DiClemente, a media analyst at Barclays Capital. “The main structural issue right now with broadcast is that the vast majority of revenues are from advertising.”
Profit margins for cable networks are also much better than broadcast networks’. Derek Baine, a senior analyst at SNL Kagan, said big cable networks earned profit margins of 40 to 60 percent, while a good year for a broadcast network is a 10 percent profit margin.
Illustrative of this is a comparison of NBC to ESPN, one of the most popular cable channels. Last year, revenue for the two networks was roughly equal. NBC, according to SNL Kagan, generated about $5.6 billion in advertising dollars; ESPN generated a total of about $6 billion in revenue — $1.6 billion from advertising and $4.4 billion in subscriber fees. But ESPN was vastly more profitable. Its cash flow was about $1.4 billion, while NBC’s was $304 million.”
What does this mean for CTV and Global? It means the shows they have depended on to survive, the ones they want even better access to, may soon cease to exist. How long can a dying industry continue to produce $3 million episodes that get smaller and smaller audiences? Not long. Global without House and NCIS is dead. CTV without the CSI’s and Grey’s Anatomy is likewise in big trouble.
So, instead of looking at ways to save the dinosaurs shouldn’t the huge brains at CTV, Global and the CRTC be planning for a very different future? A future where all TV is either by subscription or pay-per-view. A future that includes on-demand TV and television via the internet and cell phone. If these guys are so smart why can’t they see what’s happening before their eyes right now? The stupidity of the Aspers, Fecans and von Finckensteins is frightening to me. How about you?