The plight of the broadcast networks is in the news, and like the newspaper industry, their fate is all about the loss of monopoly power. Newspaper monopoly power was all about the sole ability to deliver advertising to an entire local market on a daily basis. Craigslist, monster.com and other web sites do that more effectively today. Newspaper business models will have to change or they will expire.
Likewise, broadcast television networks have lost their monopoly power over the television sets of the nation. A little over a generation ago, the three commercial broadcast networks controlled over 90% of the primetime television audience. Today, the share of the 11 different commercial broadcast networks is less than 40% and falling.
But let's clear up a few misconceptions:
- The threat isn't DVRs. Yet. The median broadcast primetime show still only has about 12% of its viewing via DVR, and DVRs are only in about 25% of the nation's households (projected to rise to 44% in 2014). And because of the new way advertising is priced, measurements may have been propped up a bit in the short term by DVR viewing.
- The threat *today* is advertising supported cable networks. Today's threat to the broadcast television industry comes from a lot closer to home, its cable network rivals.Ad supported cable now commands 50% of the primetime audience and rising.
They threaten the advertising pricing premium of broadcast networks. Even with audience losses, broadcast networks had been able to increase ad pricing to largely offset them. Broadcast primetime still commands a premium for the same numbers of viewer eyeballs, but top cable networks are now pushing to equalize their pricing. A variety of things will keep that from happening instantly, but that disparity cannot exist forever. Particularly when the top cable network last week (USA) averaged nearly three times the average viewership of the CW and more than half the average viewership of NBC.
Cable network success has reduced one of the channels for syndication of broadcast network shows. With more original shows being produced for cable networks there are fewer opportunities for broadcast syndication.
The very business model for advertising supported cable, which relies partially on fees from cable MSOs threatens the wholly advertising supported business model for broadcast networks.
The major English broadcast networks aren't going away (like some newspapers are), but their business models will have to change more in the next 5 years than they have in the last 25.