Springtime for the TV networks: Larry Black says broadcasting is back in the US as cable reaches the end of its technological tether

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The Independent Online
AFTER years of losing audiences to cable TV and video cassettes - and enduring even gloomier predictions about their future in a world of 500 channels - America's television networks are suddenly hot properties.

Cable, virtually non-existent a generation ago, has grown to capture 40 per cent of the evening television market. But growth of 'basic cable' channels such as the MTV music video channel and the ESPN sports channel has evaporated in the past two years. At the same time, advertisers are finding that 'narrowcasting' via cable channels has its limitations when it comes to mass-marketing national brands.

The two leading traditional networks, ABC and CBS, are thus rediscovering the benefits of broadcasting; CBS, for example, this week reported it had doubled its operating profits in the first quarter to dollars 54m. Fox Broadcasting, the industry upstart that Rupert Murdoch cobbled together out of six big stations acquired in 1986, will next month become a fully fledged network, adding a seventh evening of national programming to its weekly schedule.

But perhaps the best indication of changing fortunes was the announcement by the owners of the weakest of the traditional networks on Monday that 'NBC is not for sale'. For almost two years, Wall Street has been rife with rumours - none of them denied - that General Electric, its big industrial corporate parent, was shopping NBC to anyone interested: to Hollywood's Paramount studio, to former Fox chairman Barry Diller, to comedian Bill Cosby. It was even reported to be considering breaking up the network, selling off the right to produce programming under the NBC brand name and famous peacock symbol.

While NBC remains profitable, earning dollars 50m last year compared with dollars 600m five years ago, it has fallen to third place in audience ratings in prime-time, daytime and news programming. Since the beginning of the year it has had to replace both its top entertainment and news executives - the latter after an embarrassing confession that an investigative news programme had rigged a supposed crash test of a General Motors truck.

GE's chairman, Jack Welch, however has apparently changed his mind about dumping NBC, telling reporters that 'GE likes NBC and wants to be a part of NBC'. He is not alone. Dozens of big US media companies are suddenly interested in merging with a broadcast TV network: in the past month alone, Cap Cities, ABC's parent, has been mentioned as a possible partner to both the Paramount and Walt Disney studios in Hollywood; Turner Broadcasting, the owners of Cable News Network; Viacom, owner of MTV and producer of hits like The Cosby Show and Roseanne; and Tele-Communications, America's largest cable operator.

Cap Cities' chief executive, Daniel Burke, has done little to squelch the speculation; indeed, he has joined the game, suggesting last December that ABC was itself willing to spend dollars 5bn on an acquisition.

What makes the networks attractive - and a spate of big media mergers almost inevitable - is a new regulatory reality in the US. Broadcasters were big winners last week in Washington when the US Federal Communications Commission handed down two landmark rulings likely to reshape the emerging million-million-dollar 'information mega-industry' so keenly anticipated by businesses ranging from computer makers to libraries to telephone companies to catalogue retailers.

Recognising the diversity that has accompanied the fragmentation of the US television market since 1970, the commission a week ago scrapped rules originally intended to keep the airwaves open to independent producers. Networks will soon have the right to profit directly from producing programmes - both when they air them, and more importantly when they are sold into the dollars 5bn-a-year syndication and home-video market - and by extension, will be free to merge with the Hollywood studios that now dominate this market.

Such mergers would lower costs for the networks - their biggest current expense is the licensing fees they pay the studios for programming - while relieving the studios of production risks by guaranteeing broadcast slots for shows and enhancing their worth for syndication. 'Only the networks will have the economic clout to establish entertainment programmes,' predicts John Malone, the chief executive of Tele-Communications.

The power of the networks' resources and brand names has not been lost on advertisers, particularly as they confront the maze of 500 channels that cable operators like Tele-Communications and Time Warner promise to deliver in the next three to five years. Many of those channels will be occupied by information services, home-shopping networks and special-interest programming, but it has become increasingly clear that only network television can provide the audience base needed to introduce a mass-consumption product.

Even the worst-rated network shows - all of which appear on Fox - still draw audiences of about 4 million viewers, compared with 1.5 million for the top-rated cable programmer, the USA Channel.

'Advertisers are coming to recognise that when they get back to launching new products again on a regular basis, they're going to need viable national networks to get their message out,' says Don Ohlmeyer, NBC's new top programme executive.

The power of the broadcast networks as programmers - particularly if they merge with studios - will be all the more important once television takes the step beyond 500 channels, to 'video-on-demand'. Using technology already being developed by cable operators, telephone companies and computer firms, subscribers would have instant access to any programme they wanted any time, dispensing with channels altogether and customising their own viewing. Analysts foresee a time when TV schedules will disappear altogether; only live events, breaking news or debuts of new programmes will be capable of drawing an audience big enough to interest national advertisers.

In the plethora of choices, consumers will demand packaging, the networks argue: someone to select, present, organise and promote programming. The broadcasters say they are best suited to become distributors of programming, as well as stagers of media events necessary to attract a mass audience.

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