August 21, 2009 Jill

An interesting week for indepth industrial coverage of the television biz.  There was the Walrus’s long piece on the Canadian industry but also The Wrap’s Josef Adalian’s article (part one and part two)on the end of television as we know it.  It’s a somewhat depressing read, but it definitely raises interesting questions.

Adalian believes that we are at the beginning of the end of the current tv business model.  The evidence?

A disastrous upfront advertising market that saw revenues plunge an estimated 15 percent from last year, dropping from $9.2 billion in 2008 to around $7.8 billion, according to estimates by several publications.

“This is a turning point,” argues Bob Garfield, author of the just-released media doomsday tome “The Chaos Scenario” and the long-time critic for Advertising Age.

He believes networks will continue to bleed ad dollars, which will lead them to reduce original scripted programming, thus causing deeper ratings declines…. and even further drops in ad revenue.

With dropping ad revenue we’re seeing much cost cutting on the part of the networks.  They’re making tougher and tougher deals.  They didn’t renew popular shows like Medium and My Name is Earl because of the price tag.  Series budgets are getting cut and writing staffs reduced in size.

Overall deals with writers, for example, have become all but extinct. Case in point: the creator of one of TV’s most successful franchises — Anthony Zuiker of “CSI” — recently saw his lucrative overall deal with CBS Television Studios replaced with a more modest first-look agreement.

Networks are also slashing writing staffs on shows, forcing producers to buy more freelance scripts or have their existing staffs crank out more episodes.

It’s a return to how TV operated 20 or 30 years ago, when many top dramas and comedies boasted staffs of four or five scribes, rather than the dozen-plus members that had become commonplace.

It’s not just talent that’s being asked to rein in costs. Earlier this month, a network publicity department sent a memo to all of its executives asking them not to eat any of the food served to reporters at the network’s portion of the TV Critics Assn. press tour.

For Canadian producers, all this frugality is not such a bad thing.  The US networks have learned that there’s a way to get cheaper drama up here and so we’re seeing their involvement in a lot of shows this year.  I imagine there will be a rise in service production too as the networks push the studios and producers to reduce spending by making their shows outside LA.

But cutting costs isn’t going to save TV.  With ad dollars dropping the networks need to figure out a new business model.

Like Canadian networks, the Americans have turned their eyes to the cable companies.  Those guys collect money hand over fist, they carry the network signal for free, why shouldn’t they fork over some dough to the networks?

We know that argument hasn’t been going over too well on this side of the border.

“Cable is no more insulated from chaos than anyone else,” [Garfield] says. “The very coaxial they’ve spent 50 years stringing is now the pipe for broadband that can distribute the very same programming for now fees and with less advertising.”

and the Americans actually have come up with another idea: a subscription model.

Looking ahead a year or so, technology is going to allow a broadband signal to be delivered to your television.  If the networks deliver their programming to your TV via the internet, they can charge you for it.  Of course, they’ll need a third party to handle part of the business — your ISP.

Suddenly your internet service provider is looking a whole lot like your cable company (which accounts for why the bills come in the same envelope and can be paid with one check).

CBS research chief David Poltrack earlier this month outlined a scenario under which networks would bring in big bucks by getting consumers to pay to watch their shows online– not directly, but via charges levied by their broadband supplier.

“If the broadcast networks can establish online video as a preferred form of nonlinear television distribution… then (they) can develop the second revenue stream that has to date eluded them,” Poltrack said.

But will consumers pay for what they’ve already been getting for “free”?  Are we moving into an era in which consumers will pay only for the pipe that brings them the content, but not for the content itself?

Clearly, most people like the advertiser-pays model.  Who wants to put one more thing on the credit card?  But a small audience is willing to pay for great drama, like the kind that is being produced by HBO, TNT, AMC and others.  Drama driven by creative forces is the future.  Shows like The Sopranos, Mad Men, True Blood where the intention was to tell great stories about great characters, not to draw the biggest number of viewers.

Ironically, the Canadian networks are chasing the big audiences more than ever right now, developing series that can play on both their main networks and their specialities and maybe even in the US.  It’s a strategy that may work in the short term.  But if the business model for television is about to change, we need to change our drama production strategy too.  If subscription is the future, then we need to be creating great scripted dramas in the HBO/cable style, not aping American network drama in its dying moments.

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