The network upfront, which formally opens today, is a range-country cattle auction transported into the Television Age. In a nation that loved its beef, if you were lucky enough to own one of the three or four ranches that produced it, as NBC, CBS, ABC and later Fox did, you were sitting on a fortune.
But Americans' tastes evolved. They started supplementing the broadcasters' beef with more-refined fare-cable, the Web, video games, branded entertainment. Yet even as we started dining out on other media, the broadcasters continued to act like oligopolists. I well remember the head of one network, in a chat before a Museum of Television and Radio event three years ago, explaining the continually rising upfront prices this way: "It's simple supply and demand. Advertisers need large audiences, and broadcast is the only place to get them. They have no choice."
Despite advertisers' seething anger that network chief's confidence was borne out. Broadcast-network revenues surged almost 22% in the 2002-03 season from the year before, according to Ad Age, and rose another 15% the next year.
It was always obvious, though, that at some point, the gravy train would come to a halt. In addition to the proliferation of information and entertainment choices, at least five other disruptions are threatening the broadcasting business model:
The swamp of sameness: Although certainly more diverse than in the 1960s, broadcast fare is routinizing around a handful of configurations that fatigue audiences yearning for novelty. Repetition of programs (the "CSI" series) and formats (reality programming) is making the networks seem less like the only game in town than like a large niche.
The breakout dilemma: Replacements for fading warhorses like the evening news and morning programs are proving hard to come by. With creative programming and programmers migrating to other media, it's becoming even harder to create or sustain hits.
The death of predictability: Network pricing power was built on the knowledge that audiences attracted by a single hit program would remain with that network for the bulk of an evening. Alternatives generally and DVRs specifically are wreaking havoc on conventional migratory patterns.
A flattening complexity curve: Despite declining efficiency, advertisers continued to buy networks because it was the simplest way to get large audiences. Increasingly sophisticated buying firms and technologies are making it easier to piece together better media plans from the widening range of alternatives.
The demand for returns: As my colleagues in Booz Allen Hamilton's Consumer & Media Practice put it, marketers are shifting from input-based to outcome-based plans and measurements. Where once they asked, "What is the cost per thousand of the audience I am buying?" today they are demanding, "How many people came through the purchase funnel into my store as a result of this campaign?" Dollars are flowing increasingly to media able to answer that question.
These disruptive trends can themselves be disrupted temporarily, of course. One "Desperate Housewives" can boost a network's returns immensely. But the direction is as clear as it is inexorable. The broadcast upfront may not break in 2005. But the model already has.
Randall Rothenberg, an author and longtime journalist, is director of intellectual capital at consultancy Booz Allen Hamilton