Broadcast TV Ratings Start to Strain

Late Night's Back, as Is Plenty of Reality, but Not the 18-to-49 Crowd

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NEW YORK ( -- Getting Matthew Krehbiel to watch broadcast TV was already a tough task. Generally, the 29-year-old graduate student said, he grazes a bit on cable, occasionally sampling a repeat of one of the "Law & Order" shows, or something on Food Network. Now, Mr. Krehbiel is about to become even more elusive.
Photo: John Paul Filo

David Letterman and Jay Leno are back on air, but with fewer viewers.

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He usually relies on word-of-mouth to figure out if he ought to watch anything on CBS, ABC, NBC or Fox. That's how he discovered the off-kilter Fox comedy "Arrested Development." Thanks to the writers strike, though, his friends are quiet. "When there are less new shows, it probably affects the number of recommendations I get," the Kellogg School of Management student said.

Network TV already was facing ratings erosion. As Mr. Krehbiel demonstrates, more viewers have switched at least some of their attention to the web and other pursuits. What's more, an increasing number have armed themselves with ad-zapping DVRs -- so even if they watch, there's no guarantee some of them will see the ads. Now the strike threatens to accelerate the trend by removing the very things that draw millions of potential consumers to the tube night after night: glitzy special events and water-cooler shows.

'Plan B'
"The business model hasn't been working for network TV for a while, and the perception that the networks are making money hand over fist on scripted programming just isn't true," said John Swift, exec VP-managing partner of activation, PHD U.S. "I just think that if we get past some point in February, I wouldn't be surprised if some of the studios and networks don't start coming up with a Plan B."

Some telling signs already have started to emerge. Sanford C. Bernstein media analyst Michael Nathanson found through the end of the fourth quarter, broadcast-network prime-time audiences between the ages of 18 and 49 -- the favored advertiser demographic -- are off 11% on live-only viewing. More ominous: The return of some shows that were on hiatus due to the strike hasn't sparked an uptick in viewers. Jay Leno and David Letterman are back on the air, but viewers between the ages of 18 and 49 were off 11% for "The Tonight Show" compared with a year earlier for the program's first three post-hiatus nights starting Jan. 2, according to Aegis Group's Carat. Viewers in that category were flat for "The Late Show" for the same period.

The strike has the potential to exacerbate some of these conditions. "It has definitely gotten dangerous," said Steve Farella, president-CEO of TargetCast TCM. Advertisers often worked for months to line up promotions around events such as the Oscars, the Golden Globes or even a prominent episode of a hit show. The writers' strike means networks can't guarantee those events will air or even bring in the numbers of people marketers expect.

Cable outlet
Some have spread out their dollars. Anheuser-Busch has diversified its media spending in the past several years, said Mark Wright, VP-corporate media. While the brewer advertises "significantly" during network sports broadcasts, he said, "the majority of our entertainment-programming ad dollars have shifted to cable, which is largely unscripted and thus not affected by the strike." Cable is expected to benefit in the short-term should the strike continue to crimp original broadcast programming.
Source: Advertising Age estimates based on reports from industry executives.

The longer the strike continues, the more likely the possibility of a diminished upfront-sales market this year. The glitzy ceremonies designed to lure billions of dollars may be kiboshed in favor of smaller meetings, simply because the networks will have no shows to present. That could mean fewer ad dollars earmarked for network TV. In 2003, the upfront hit a high of $9.5 billion, but then the industry booked less in '04, '05 and '06. Last year, it bumped up to $9.2 billion. With the adoption of a new ratings metric, C3, and the dearth of new shows, you would think the networks will have a much tougher sell this year. The networks' leverage, however, is an incredibly tight scatter market. Marketers may be willing to spend early with networks if they can avoid another year of high prices.

The networks face their strongest test in the weeks ahead -- proving their writer-less offerings can still draw people. "What I'm going to be looking for is how does this stuff do through the end of the first quarter? How are these guys doing year to year? Does 'Dance Wars' over time have as much power as 'Dancing With the Stars'? Does 'Idol' keep going in the same direction?" asked PHD's Mr. Swift. The answers could bolster advertiser confidence or prove broadcast is no longer the biggest piece of the media pie.
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