NBC’s coverage of Arnold Palmer’s tournament at Bay Hill last week was presented as “The Golf Channel on NBC,” something that would have been unthinkable just a few years ago. ABC’s sporting events are now billed as ESPN on ABC, another sign that cable brands are where it’s at. These are signs of the obvious decline of the network brands, and it’s both sad and inevitable. Disney (ABC), of course, owns ESPN, as Comcast owns both NBC and The Golf Channel, and the piggybacking isn’t so much to boost the cable brands as it is to use the cable brands to boost the old motherships.
Through roughly three quarters of the 2010–2011 season, the broadcast networks are down double digits in viewing compared to slight growth for cable channels. According to data from Turner Research and Nielsen and reported in Media Daily News, Fox is averaging around 4.6 million adult 18–49 viewers, down 6%; CBS is at 3.9 million, off 10%; ABC is at 3.202 also, losing 10%; and NBC is right behind ABC at 3.198, off 17%.
And there are no signs whatsoever that those lost viewers are ever coming back.
Season-to-date, the big four networks are down 11% in 18–49 viewers (to 13.5 million) and off 16% in the first quarter 2011 (to 13.4 million).
Meanwhile, ad-supported cable is up 3% to a collective 18.5 rating among 18–49 viewers during the period. A year ago — for the season — ad-supported cable was down 1% at a 17.7 combined 18–49 viewer rating versus 2009 for the season.
This is not good news under anybody’s magnifying glass, and it speaks volumes about the entire television industry and where it’s headed. The day of the “all things to everybody” approach to programming is clearly on the wane, and that’s the very essence of “broadcasting.” We’re witnessing the rise of the niche, and that ought to send a clear message to broadcasters who are struggling with trying to find a viable business model for the future.
Niche channels are easy to understand. They promise more of the same, instead of the hit-or-miss randomness of the networks. In my house, Lifetime is a big hit, but even more so the Lifetime Movie Channel. As Lifetime diversifies to try and grow, it becomes more like a network, but the Lifetime Movie Channel provides only one thing: movies for women. That’s what my house wants, and that’s what we get. For me, it’s all about sports, and that’s where I hang out. I also like crime dramas and especially shows like Forensic Files, and those are easy to locate via digital cable as well. My house is fairly typical. We’re into genre, not channel, and we can also find those things through video on demand, the ultimate “watch what I want when I want.”
If I’m a local television company, I’m plenty worried about this for two reasons. One, the ratings declines impact everything I do and support my advertising rates. As those go down, it gets tougher and tougher to sustain any kind of upward growth, and make no mistake, business is about growth. Two, the continued erosion of the broadcast model makes it harder to fight those in Washington who are after our spectrum. This is a bigger threat than most people realize, and I’m waiting for Google or Facebook to come up with a civil defense strategic plan that will put broadcasters further on the defensive. It’s coming. Trust me. And when it does, it’s going to be tough to justify those airwaves for anything other than broadband.
High on my list of strategic questions for local media are these:
- What niches really matter to this community? I’d begin my search with local sports franchises. Do we have a college sports franchise here? Even if I had to purchase an existing franchise, that might be smarter than starting my own, even though I could drive the brand with my legacy media brand. What makes this community unique? What businesses sustain it? What natural attributes draw people here and keep them here?
- What can I create to capture eyeballs and loyalty pertaining to those niches? Make it participatory and don’t forget social media. This is about things near and dear to my neighbors, and I must remember that. I must have a “take no prisoners” approach to owning these niches, because they will determine, in large part, my future in the community.
- Are there television programs I can produce about these niches? The answer, of course, is yes, and these programs could be more important than we think. Instead of simply reinventing news for the 21st Century, perhaps some of that energy should go towards producing niche-oriented programs that tie us to the community.
- What must I do to become THE go-to brand for those niches? Serve the niche well. The essence of ESPN, for example, is if it happened in the sports world today, you’ll see it on ESPN. That’s a big, big mission but one they fulfill every day. We need that kind of commitment — ownership, if you will — if we’re going to be top dog in any niche.
Niche verticals seem like an easy no-brainer for local media, but few people have dedicated the resources necessary to really own a niche. That’s likely because the return on investment requires a longer runway than most people are willing to abide. Meanwhile, however, we run the risk of anybody in the community creating such a service (many already have_, so the window of opportunity here won’t be open forever.
The slice of land held by the “pureplays” has stopped growing. For the past ten years, we’ve watched the pureplays’ slice of the revenue pie locally grow and, like Pacman, devour everything in its path. For the third year in-a-row, the share of revenue going to pureplays has stayed the same. In terms of actual dollars, it grew, because the overall pie grew, but this is an important stemming of the tide for local media companies, because their efforts appear to have stopped the growth of their biggest competition, pureplay Web companies like Google, Yahoo, Groupon, etc.
A battle is brewing between cable companies and program owners over the use of streaming television via iPads, and it threatens to sidestep the value proposition of Mobile Digital Television (
One of the themes often expressed here is that media companies are not in the content or information business; we’re in the advertising business. This rankles media company executives who often respond, “You’re not going to get very far with that around here, Terry.” I appreciate that and realize it’s not popular, but it is, however, the truth. That which generates revenue for media is advertising, not content, and efforts to reform media without this fundamental understanding will go nowhere. When observers shout the need for a new business model, what they’re really referencing is a different way to do advertising, because that is the business of media.
In our newsletter this week, auto industry outlier Ben Boles wrote 
There is no subject that terrifies traditional media company executives more than the ubergeeky word, “data.” Who knew, they ask themselves when the lights go out, that math and analytics would become the go-to revenue generator for those in the content business? And yet, that’s exactly what’s happening, and efforts to understand the value of user data will be rewarded downstream. Instead of focusing on making media money the old fashioned way, we need to focus on gathering data and figuring out how to use it for profit.
