As marketers mull over decisions in the next month on whether to shift more money from the broadcast networks to the cable networks in the 2005-06 television season, the spinmeisters have been out in force on both sides.
The headline in last Wednesday's “Wall Street Journal,” "Desperate No More? Networks See Rebound in Viewers," comes at a time when broadcasters are desperately trying to avoid their second straight year of falling revenue. The story noted that for the first time in years the number of adults in the key 18- to 49-year-old demo watching broadcast TV in primetime this past season did not decline from the previous year. That marks a strong a turnaround from two years ago, when the broadcasters were cursing Nielsen because their young male demo numbers had collapsed.
But is it a blip or a trend? Trend, insists Sanford Bernstein analyst Tom Wolzien, who had first predicted the broadcast comeback in a report published in August 2004 when he prophesized: "Distribution-induced growth is coming to an end for the cable/satellite networks and, conversely, 25 years of distribution-induced declines will end for broadcast networks.” Last week Wolzien said that "the TNTs and USAs of the world will have to earn their growth by pumping millions into producing more original programming."
Not surprisingly, cable executives disagree. Two weeks ago, Turner Broadcasting researchers issued a report of their own asserting that broadcast primetime viewership has actually fallen 3% among the 18-49 crowd this season.
There was one difference between the two claims. Turner included all seven broadcast networks, but the “Journal” and Wolzien were referring only to the Big Four networks -- CBS, ABC, NBC and Fox -- which have the largest national distribution and gear their programming largely for the 18-49 demo. UPN and WB are more youth-oriented, and few advertisers take the lightly rated Pax network seriously.
Turner executives argued that leaving out Pax would hurt the broadcasters and leave the cable company open to charges of distortion.
One prominent Madison Avenue research executive, who requested his name not be used, agreed with the cable networks. He argued the broadcasters’ audience spike happened cyclically every few years -- although he did not explain why. To him, the bigger issue is the actual number of channels each home receives; he contends that when growth levels out, cable will stop stealing share points from broadcast.
Considering that at year-end 2004 only 24.3 million homes -- about 22% of the U.S. -- had signed up for digital cable, that leaves a lot of room for growth in the gross number of channels. Further, cable's introduction of DVR services (TiVo-like digital video recorders that are encoded in cable set-top boxes) has proven popular beyond expectations.
One cable operator executive, who did not his company named, said that DVR sales had stalled over the winter and spring because his company failed to anticipate the keen demand for the set-tops last year and ran out of inventory.
If DVR service continues to grow strongly, the number of homes with hundreds of cable channels will also grow for a while, a trend that will likely lead to more audience fragmentation and a continuing drop in the broadcast network audience.
A bigger issue for the broadcasters is that their "rebound" was based on a couple of blockbuster debuts such as Desperate Housewives and Lost, a development has does not happen very often.
Said one cable network executive: “Let's see them do that again.”
