May 23rd, 2009 by Mike Fulton

It should be quite clear to anybody paying attention to the television business these days that in many important respects, things are horribly, horribly broken.   Shows come on the air and are cancelled two weeks later, while other shows bounce from one time and night to another from week to week.  And then some shows even go from one network to another.  What’s the reason for all this chaos?

There are basically two things going on.  First, modern technology has had a big effect on every aspect of the television business, from production to figuring out who watches what.  This has affected the way television is made and the way decisions about television are made.

The other reason is that the overall television audience has been steadily shrinking for awhile now, as other things become more commonplace, such as usage of the Internet, playing video games, or even non-entertainment activities such as working or going to school at night.  The TV networks are scrambling to figure out ways to attract viewers back to the tube.

Scheduling

Once upon a time, what seems like a few hundred years ago but was really just the 60’s and 70’s, and even most of the 80’s, the TV season was pretty easy to figure out.  Basically, it paralleled the typical school year schedule.  New shows came on in September and played 10-12 first-run episodes leading up until Xmas. Then in January, a few of the most poorly performing shows would go away and a few new “mid-season replacements” would take their place.  Then all the shows would show another 10-14 episodes leading up until the end of their season in mid-May or early June.  In the summer, you’d see a few new shows come on for 6 or 8 episodes, and if they did well in the ratings, they might become one of those mid-season replacements.

This basic scheduling model was used by all three of the major networks for decades for one simple reason: It worked.

The Forgotten Network

Many people today have forgotten that there was once a fourth “original” TV network. The DuMont network was co-owned by Paramount Pictures and DuMont Laboratories (an early manufacturer of televisions and broadcasting equipment). NBC called its own network “the world’s first regularly operating television network” when it started in June 1947, but the DuMont network had already started broadcasts in 1946. CBS and ABC started their television network operations in 1948. The DuMont network ceased operations in 1955.

Today, TV schedules look quite a bit different from the old days.  For one thing, there are now five major “broadcast” networks, with FOX and CW joining ABC, CBS, and NBC.  Of course that’s down from six a couple of years ago before UPN and WB merged into CW.  That by itself is enough to reduce each of the original 3 network’s share of the pie, but that’s not all.  There are now a wide variety of cable networks that produce their own original programming, and they have been gaining viewers steadily for several years now.

The new “season” begins anywhere from mid-August to mid-November for most shows. Unless you’re on a cable network like USA or SCI-FI, which typically split each show’s year into two separate mini-seasons that follow their own unique schedules. One can be forgiven for getting confused, since they typically refer to both halves in their promotions as “a season”. And of course, there’s the “premium” cable networks like HBO or Showtime, which have a variety of original shows, but no discernable schedule at all. One of the most successful cable-based shows ever, The Sopranos, had a hiatus of over a year from the end of one season to the start of the next.

By the way, I’ve been putting “broadcast” in quotes because most people don’t actually get their TV from old-fashioned RF broadcasts any more.  At least here in the USA, more people get their TV from Cable and Satellite than from over-the-air broadcasts. 

Promotion

Up until a few years ago, FCC regulations included restrictions regarding several aspects of what the TV networks could own, with respect to individual TV stations and also with respect to ownership of the content that they aired.  In other words, for most shows, the production company was the owner, not the network.  This meant that there was usually a clear line between the network and the production company that actually owned the show.  It also meant that shows were on a relatively even playing field against one another.

But the FCC changed those restrictions a few years ago, and now it’s quite common for a show to be produced by a studio owned by the network that airs it.  This has created an odd situation where networks often give lower-rated shows more marketing and promotion, not to mention better timeslots, because they own that show.  It doesn’t even always matter if their own show is less profitable overall.  Meanwhile, other more successful shows are ignored because the show is owned by another studio.  The idea is that if the network can somehow turn their own show into a hit, it will ultimately be more profitable.  The idea seems like it has some merit, but the reality is that the lower-rated show usually just fails, while the more successful show ends up underperforming because of the treatment it gets. And in the long run, the network ends up making LESS money as a result.

A great example here is Scrubs.  This show was originally created by ABC Studios, but debuted on NBC.  The show was never really a huge hit, but was still a solid performer in the ratings.  Despite this, it was always treated relatively poorly compared to other shows that were wholely owned by NBC.  In 7 years on NBC, its timeslot was changed something like 29 times!

Competition

One of the biggest problems that the TV industry faces is a shrinking audience, as well as a balkanization of the audience that’s still there.

Other forms of entertainment, chief among them the Internet and video games, have contributed to the overall reduction in viewership.  At the same time, the existing viewership is now spread out much more widely than ever before.  30 years ago, most people had somewhere between 4 and 8 TV stations that could be received where they lived.   You typically had the local affiliate stations of the three major broadcast networks and a handful of local independent stations.  Prime-time programming for the independent stations was usually something along the lines of an old movie, a game show, or perhaps syndicated reruns of old TV shows.  New programming on the independent stations was a rarity.

Today, there are many, many more choices of original programming on any given night in prime-time.  Just off the top of my head, I can think of: ABC, NBC, CBS, FOX, CW, TBS, TNT, USA, SCI-FI, Lifetime, Bravo, AMC, HBO, SHOWTIME, CINEMAX, ESPN, MTV, VH1, and G4.  While the greater portion of the overall audience is still watching the major broadcast networks, a huge percentage has switched over to those other choices.

Realistically, there isn’t anything that a network can do about competition from other forms of entertainment, or from other shows on other networks, other than to offer up the best programming it can.

The Great Contradiction

Perhaps the biggest mystery about the TV industry is this: The entire business model of television is based on collecting viewership data and properly interpreting the statistics that indicate how many people are watching what show, at what time, and who those people are.  The industry uses this information to determine adverting rates and even more importantly, to determine which shows stay on the air and which ones get cancelled.

Any college freshman who’s ever taken a class on statistics will tell you that one of the first things you learn is that you cannot draw meaningful conclusions from your data unless you have what is called a “statistically meaningful sample”.  In other words, you have to have a certain minimum amount of data before you can figure out what it means.  In TV terms, this means that when they cancel a show that’s been aired twice, they’re not really using statistics… they’re just making a wild guess.

Part of the reason that the networks make such fast decisions these days is undoubtedly due to the fact that the ratings data is available pretty much instantly after a show has aired.  In the old days, it could take several weeks to collect the ratings data to see who was watching, and just as long to put that data into a meaningful context.  When the network put out a new show, it could be aired 4 or 5 times before they started to get ratings data.   And if the ratings showed that the first few episodes didn’t do well, you were still waiting on the data for another several episodes to come in.

Because of the way that the ratings worked, when a new show came out, the networks would typically order enough episodes for the first half of the season.  And then, even if the show didn’t seem to be a success after the first several episodes came out, the network would typically stick with the show until the end of the first half of the season, since those episodes had already been produced and paid for.

Because of this, a lot of shows that did poorly for the first month or two had enough time on the air to see their ratings improve.  Many shows that today would be cancelled after 2-3 episodes went on to be lasting hits for years and years.  A shining example of this is Cheers which was 3rd in its time slot for much of its first year.  Likewise, Seinfeld was not immediately a hit.

The Big Problem

There are a lot of players who would tell you that there is no problem.  Cable networks like USA are doing better than ever with their mix of syndicated reruns, movies, and original programming.  The current situation is a “problem” mainly for the big broadcast networks, who have yet to figured out how to adapt their business model and things like ad income to the modern world.

The first thing the big networks have to figure out is that they cannot make the audience come back unless they’re offering something they want.  For the last few years, an increasingly higher and higher percentage of what the networks are offering is reality shows.

The audience keeps shrinking.

While there are a few reality shows here and there that become significant hits, most of them just plain suck both critically and in the ratings.  However, they are generally cheaper to produce than a scripted series, so the networks have lower standards for what constitutes “success” for these shows.

The audience keeps shrinking.

I’ve never made any secret of my general disdain for reality shows. What really confuses me about them is why the networks like them so much. While there are some hits, it’s quite clear that they aren’t helping to boost overall television viewership. There’s a good argument to be made that they are directly contributing to the shrinking audience.

Reality shows don’t directly deserve all the blame for the problems in the television business, but they are a good indicator of the sort of thinking that is the cause. Reality shows are all about short-term profit.  They are typically owned, at least in part, by the networks, so they are cheaper to produce and get on the air, but they simply don’t have the same potential as a popular scripted show for long-term income from things like syndicated reruns and home video releases. Don’t the network executives realize this? Short-term profits are great, but they’d better be freakin’ spectacular before you can ignore the long-term, and that’s just not happening.

The bottom line is that the networks have to stop airing shows whose main plus is that they’re cheap to produce.  All that’s going to do is continue to driver viewers away.  And yet with so much reality dreck filling the airwaves, it seems clear that the networks are more concerned with their short-term profit margins than they are long-term survival.

The Solution

A guy goes to a doctor, raises his arm up behind his back and says, “Doctor, it hurts when I do that.” 

The doctor says, “So, Don’t do that!”

It’s an old joke, but there’s truth in it.  The biggest thing the networks have to do is to undo the various mistakes of the past few years.  I know it can be hard to admit mistakes, but you have to do it eventually.

I don’t think we’re more than a few years away from a transition to where most TV shows, other perhaps rather than news shows, will be available on-demand.  We’re darn close to it now, as many shows become available for download through one means or another within a few hours of their original airtime.  The only real change remaining is to untether the on-demand availability from the broadcast timeslot.

But until we really make that transition, the networks have to make their broadcast schedules make sense.  The first part of the solution is to make it easier for viewers to find the shows they want to watch.  Let’s stop being so bloody creative and inconsistent about scheduling and go back to the days when you could expect a show to be on at the same night and time two weeks in a row.  I’m not saying that changing the schedule around is a complete no-no, but let’s at least try for a bit less volativity? 

At the very least, how about we stop moving popular shows from decent timeslots into black holes?  Networks frequently do something like this in an attempt to attract viewers to a time slot that is doing poorly, but really for the most part all it ever does is kill the popular show.  Historically, we’ve seen that the only way to turn around a “black hole” time slot is with a new show that you give enough time to build an audience.

Second, give each show the promotion it deserves and stop playing politics. The marketing department and the scheduling department shouldn’t even freakin’ be aware of who produces or owns a show.

Third, give new shows a chance to find an audience before killing them.  It’s extremely rare that a cancelled show is replaced with something that immediately does better in the ratings, so why not just give that original show a few more weeks to find its legs?  I’d say anything less than about 6-8 episodes is probably not enough to really know how the show is going to do.

Finally, instead of simply finding cheap reality shows to put on, or worse… 5 nights of prime-time Jay Leno, why not concentrate on solving the REAL problem? It’s not that scripted shows are too expensive to produce, it’s that they are typically less profitable for the network, especially if they’re not owned by the network.   How about we concentrate on figuring out how to improve both short-term and long-term profitability instead of simply finding a cheaper reality show to put on?

First, if long-term profitability is important, make the proper investment to develop and produce good shows yourself.  But keep in mind that most popular shows have had one or two people at the top that provide the creative vision that makes the whole thing work.  Don’t think that just because you own the show that it’s OK for you to get involved in the creative side of it.  Write the checks and let the artists create the art.

Above all else, what the networks have control over in the profitability equation is the price they charge for airing commercials. Advertising rates are based on viewership, and since viewership has dropped compared to many years ago, ad rates have dropped as well, when adjusted for inflation.  The problem is, it costs just as much to create a show watched by 6 million people as it does to create a show watched by 20 million.

Realistically, for the networks to protect their business model, CPM (cost per thousand viewers) ad rates should be going up as viewership declines.  Obviously, this makes TV advertising less of a bargain for the advertiser, but there’s typically no shortage of advertisers available to fill commercial slots in prime-time, so it seems like the market could handle some increase in rates.  When was the last time you watched a show that didn’t have enough commercials to fill all the slots?  That’s right: never.

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