Saturday, February 14, 2004

Thoughts on network TV and shelf space The networks, until a decade ago, were cash machines. They held the shelf spaces so desired by everyone, advertisers, program creators, and audience. Networks attempted to get the maximum value out of each slot, much like supermarkets getting the per-inch return on their shelves. Only with networks, the shelf space is severely limited. There are only 48 half-hour slots per day, and only six prime-time slots between 8 p.m. and 11 p.m. While it is impossible to predict in advance what shows will be hits and which ones missing, a large part of the game that executives fancy they can affect is in making marginal improvements. Every share point means millions of dollars to the networks, so the executive who can inch up share on a few shows looks like a genius. After all, to move a slot up one audience share point is an attainable goal, much easier than coming up the next Friends or Law and Order. For this reason, the networks are constantly making adjustments. One of the most common is moving a show from one slot to another; this is done sometimes in hope of gaining more audience in the new slot where the demographics might be better or the competition easier; more often it is done in order to anchor a set of slots to allow for improved ratings for neighboring shows, just as perhaps placing salsa next to the tortilla chips in the supermarket might help the sales of both items. For this reason, broadcast schedules are constantly being tinkered with. Even with successful slots, executives think they can do better. For this reason there was a flap not long ago about replacing the journalistic Nightline at ABC with a new David Letterman show. Even though Letterman's CBS show did worse than Nightline in the ratings, a younger demographic meant that Letterman was more profitable. The result was a string negotiation point for Letterman to get a higher salary counter-offer from Viacom/CBS. Another example is the endless succession of TV shows NBC has placed between its two Thursday Night hits, Friends and ER. Shows between those two always get an artificial boost in the ratings, at least at first. The few decent ones get moved to other night to set up new anchors (usually in vain). The majority start off strong and then fail. Nevertheless, NBC keeps slotting in new programs and making profits, no matter how eventually unpopular those programs end up being. More and more, networks have tried to create the equivalent of store brands, so that the margins they get are not reduced by the demands of the independent studios that produce the shows. For example, that seems to have been a prime reason behind GE/NBC's acquisition of Universal Studios. The problem with store brand programming is the difficulty of in-house innovation and risk-taking in a large company plus the myopia and office political involved in any company where one division is supplying another one, a situation that makes objective financial judgments increasingly difficult. That's the reason which companies in other fields are encouraged by stock markets and analysts to spin off operational divisions no matter how seemingly efficient now. The big problem the networks have is that their shelf space gradually becoming less valuable. Like supermarkets who compete with other type of stores for the grocery dollar, there's lots of other shelves for video entertainment, from cable to DVDs to video on demand. As with supermarkets, this tends to make the shelf space on the networks less valuable. But, happily for the network, they already own some of the alternatives in the form of cable companies. And since cable stations are supported by both fees and advertising, they often another way of making money, even as the value of any individual shelf decreases, 2:44:06 PM

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