Tuesday, December 21, 1999
INVESTOR'S BUSINESS DAILY
BUSINESS & THE ECONOMY
AD-VERSE CONDITION

TV ADVERTISING HITS SNAGS AS CABLE, TECHNOLOGY TAKE TOLL

These are shaky days for broadcast television advertising. Ratings are slipping. In 1987, the highest rated show, " The Cosby Show" averaged a 35 rating, which means it got slightly more than a third of the viewing audience. By 1997, that number shrank to 21 for top-ranked "E.R." Now, an 18 rating means a higher as rate.

There are a number of culprits. Tops on the list has to be cable, which outpaced broadcast in number of viewers for the first time last year. Cable networks also saw their ad revenue double to $8 billion from 1992 to 1997.

And now technology vows to make more trouble for broadcast networks. New devices such as personal video recorders can record TV programs on a hard disk. These allow viewers to create their own schedule by recording and watching only the shows in which they're interested. They also can skip over commercials. Two devices - TiVo and Replay - are on the market.

"These devices will undermine the business model for free television," said John Bernoff, analyst with Forrester Research. Bernoff, who has been using the recorders, admits he skips most of the ads. He estimates that within 10 years, four out of five homes will have them, which will cut commercial viewing in half.

Leaning On Rivals

The rise of another technology, interactive TV, may mean broadcast will have to lean on the cable networks if it wants to join the party. With interactive TV, commercials are linked to web sites, which can be delivered through only cable satellite boxes. That means broadcasters have to team up with cable if they don't want to be left out.

The Big Four networks can blame themselves in part for this mess. Fox, CBS, ABC, and NBC all participated in the development of personal video recorders. Now they've had to do an about-face and have allied to fight them.

To keep as revenue coming, networks have offset the slipping ratings with higher rates. It costs up to $3 million a minute for the Super Bowl. On top of that, more ads are crowded into each program.

Since 1989, two minutes of commercials have been added to each hour of programming, bringing the hourly total to nearly 16 minutes in prime time. In daytime, three minutes have been added bringing the hourly total to 20 minutes, the American Association of Advertising Agencies says.

Cause For Concern

Experts worry about the effect networks are having on viewers by bringing more commercials into the picture. The abundance of commercials can annoy as well as destroy the ad message itself, says John Forde, creator and host of " Mental Engineering." A PBS talk show that focuses on TV advertising.

"People grade the message, comparing it to other ads, rather than listening to it," Forde said.

Howard Hass, senior vice president and executive director of local broadcast at ad agency TN Media, thinks that may be a bit alarmist, He points out television still trails print media. Advertising comprises 85% of all newspaper pages and 50% of magazines. Radio is roughly the same as television with 24-30%.
 

Still, to get noticed in the crowd of commercials, companies are trying different tactics. A new one is featuring programs such as "BUSINESS WORLD NEWS" that airs on local stations and cable networks.

Firms Profiled

In the 30-minute long " documercials," or "newsomercials," reporters profile five to six firms, says Jeffery Goddard, executive producer.

After buying an entire edition of "BUSINESS WORLD NEWS" and seeing the effect, SCAN, a healthcare company, canceled most of the traditional advertising it had planned, Goddard says.

Despite problems, broadcast networks think things will get better.

"In the year 2000, the problems will be concealed, " Bernoff said. Personal video recorders will just be breaking ground. Next year's Olympics and elections will help rake in more as dollars, Bernoff says.

TN Media's Hass agrees. He projects 10% growth in national and 5% in local TV advertising this year.

"Broadcast television is not going to disappear," Hass said " Its leading position in ratings is going to diminish over time, but for the next half-dozen years, I don?t see them playing a second fiddle to anybody else."

Bernoff is not sure.

"Wait until 2001 ," he said. "That's when you'll begin to see networks really hurting as a result of new sources of competition."
 


Company Press Release - "BUSINESS WORLD NEWS" Commences Production of TV Special, "Spotlight on Success" Airing on CBS Stations Nationwide
 
 
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