It is in the best interest of all parties to come to an agreement quickly. The options for consumers to find alternative forms of entertainment are voluminous. At a time when broadcasters are doing everything possible to build additional value into their assets, a derailment of this kind from a ratings and engagement standpoint spells long-term trouble for advertisers and financial peril for broadcasters.
In 1988, cable penetration was around 55%. Today it is around 85%. While the previous strike lasted five months, the TV landscape was entirely different. The networks were not partners with major studios and the large majority of the programming schedule was made up of comedies and dramas, there were no reality shows. Unlike today, comedies (which generally repeat better than dramas) dominated the top-rated programs in 1988, led by "The Cosby Show," "Roseanne," "A Different World," "Cheers," "The Golden Girls" and "Who's the Boss?" Moreover, the average home had about 30 channels (today it is more than 100).
The 1988 writer's strike resulted in a drop in ratings on average of 10%. Now, there is the possibility that an unscripted program could be launched and attain high ratings vs. watered down competition. Needless to say, consumers had less options back in 1998 when there were no digital cable, DirecTV or EchoStar, DVDs, internet, cellphones or MP3 Players.
Media sales will be affected as advertisers have more opportunity to spend money elsewhere now more than ever before. The impact may not be felt until the upfronts next spring. The result on ad rates will depend on how long the strike goes on and whether viewers come back to network TV. Nielsen ratings will provide an indication soon.
Advertisers that participated in this year's "bullish" upfront marketplace will be protected from any ratings shortfall, with either "bonus" units or, in a worst-case scenario, cash returned. If the strike is prolonged or other unions walk out in sympathy, it could have a greater impact on the "scatter" marketplace in 2007-08 or the 2008-09 upfront.
While new programs stand to be affected, Horizon Media predicts any impact won't be seen until January. Ratings are always precarious, and the bigger question right now is whether viewers will come back to the networks after a hiatus. The programs that stand to be affected the most are dramas, which do not repeat well. Comedy programs have a longer shelf life.
Much like the summer season, when networks run repeats of regular programming, we can expect cable shares to go up. Viewers tend to migrate to cable and sometimes they don't come back. Ratings expectations for cable are lower, because cable networks don't have to worry about "sweeps" or affiliate network stations.
At the onset, the strike will have virtually no impact on broadcast prime time. The work stoppage coincides with the beginning of the November "sweeps," a four-week period when the networks air exclusively original programs or top-rated specials and the ratings for all their affiliates in local TV markets are measured. These original shows have been "in the can" for some time and are ready to air as scheduled. In December, the networks generally air repeats of regularly scheduled shows or holiday specials. Hence, the impact on prime time will not be felt until first-quarter 2008 and could have an impact on the next sweeps period in February.
If the strike is still ongoing, the networks will rely on several alternative programming strategies. These include:
- The networks air (perhaps ahead of schedule) mid-season shows such as "Sarah Connor Chronicles" on Fox and "Jericho" on CBS. (Scenario: very likely)
- More unscripted reality and game shows. Fox could air even more hours of "American Idol." In recent years many mid-season shows have been unscripted reality or game shows. (Scenario: very likely)
- More repeat telecasts than networks had originally scheduled. This will result in some ratings erosion. (Scenario: very likely)
- The networks may also bring back some summer unscripted reality/game shows to the winter, such as "Big Brother" or "The Power of 10" on CBS or "Last Comic Standing" on NBC. (Scenario: likely)
- Schedule more theatrically released movies. Although the genre generally delivers sub-par ratings, all the major networks is a sibling to a major studio. (Scenario: likely).
- The networks air repeat episodes of original cable shows from their corporate siblings, such as NBC airing USA's "Law & Order: CI" and "Monk," or Fox airing "Damages" or "The Shield" from FX. (Scenario: an alternative depending on the length of the strike)
- Besides post-season football and Nascar's Daytona 500 (on Fox), there are not too many high-rated sporting events in the winter. ABC or CBS could air a top-rated college basketball game in prime time from time to time. Viewing for sports can be too male-dominated. (Scenario: not as likely)
- The networks could begin to air original shows originating from Great Britain or Australia. Most of these shows are too unfamiliar to viewers. (Scenario: not as likely)
Many viewers may migrate to cable, which already has a majority of viewing shares in prime time. While the strike will have a negative bearing on cable, the ratings expectations of an individual network are lower. Historically, the cable networks are far more likely to air repeat telecasts throughout their programming schedules.
Since Nielsen provides TV usage, ratings and share relatively quickly, marketers will know relatively soon what impact the strike is having on both TV usage and the ratings for each individual broadcast and cable network.
But viewers have more options with their leisure time than ever. Hence, instead of watching TV, people can go to more movies (although the work stoppage could eventually have an impact on the film industry). Consumers can also watch more video content on broadband video websites such as YouTube, watch content on cellphones or download shows for their iPods. DVD rentals and sales may also spike upward if the strike lingers. The impact of digital media and all of its platforms will also be known relatively fast, because many are measured relatively quickly. As NBC Universal chief Jeff Zucker warned this week, a strike could be a "watershed event" that "drives more people away from prime time."
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Bill Koenigsberg has more than 25 years of experience in media negotiation. He founded Horizon Media in 1989. Horizon represents 80 clients, and has offices in New York, Los Angeles, Atlanta, Orlando, Fla., and Amsterdam, the Netherlands.