The following is an excerpt from Claire Atkinson’s interesting piece over at Broadcasting & Cable that continues the latest television discussion regarding rising production costs and declining ad revenues.
Recently minted News Corp. COO Chase Carey didn’t waste any time publicly re-entering the News Corp. fray last week when he identified the industry’s biggest problem: The free-TV model is broken and someone needs to fix it, and fast.
Carey joined a growing group of industry bigs now openly admitting that the broadcast model no longer functions for huge media conglomerates. “We have an ad-supported business model that doesn’t work. We need to get value for our great event product like the NFL and American Idol,” he said, echoing comments by his boss Rupert Murdoch and previous statements from NBC Universal chief Jeff Zucker. “We need to build new distribution models in a digital world that generate real value for our product.”
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For the past three years, the networks have been under siege from numerous quarters including the emergence of the digital pipeline (thanks in part to their own Hulu) and the writers’ strike. Then last year, the Great Depression Part II hit like a meteor.
It’s not that broadcast networks can’t make money. They still make boatloads; in fact, the lion’s share of all TV dollars are still spent in network. It’s just that sitting next to cable’s dual revenue stream, the equation doesn’t seem to make sense anymore. And things look much worse than they really are because last year media companies had low programming costs (thanks to the scribe standoff) and a stable ad environment.
This year, it’s the opposite. Higher programming costs sit across the ledger from ad revenue that might be down as much as 10% across TV. And those ad dollars don’t look like they’re coming back to pre-recession levels for many years.
Payout Perspective:
These are very interesting times for the television industry as a watershed moment appears to be on the horizon. It’s about time, too: despite all the technological turnover we have endured – particularly in the last 10-15 years – television distribution has largely remained unchanged over the last 60. Even the CEO’s of major industry players are admitting that the current business model must “evolve” in order to continue revenue growth and ultimatley sustain profit levels.
Where does MMA fit into all of this? As I discussed last week, MMA programming addresses the two-main problems that network television is currently facing: rising production costs and declining advertising revenue. MMA is unscripted and, in general, less costly to produce relative to the scripted shows that network TV has run with since the beginning of television. MMA also commands a very important demographic which advertisers covet.
Additionally, there also seems to be the prevailing opinion within the television industry that sports add more value from an advertising perspective because they are more or less DVR-proof. The idea being that most sporting events are watched live and therefore immune to the advertisement skipping that comes part and parcel with recording devices.
So, in evaluating the television industry as it stands, MMA content would appear to be an excellent stop-gap for any one of these networks looking to cut production costs and boost advertising revenues until they can find a better business model to operate under. By that time, hopefully, MMA will have done enough to earn itself a permanent place with the networks, regardless of their new business model.
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