Network Television Is Dying

As reported by the The AP, Johnson & Johnson (and possibly Coca-Cola) did not participate in the annual "upfront" fall season network television buying binge which typically accounts for 75% of fall ad sales. Further, total network upfront ad sales are projected to be down at least 3.4% from last year…and the damage may actually be worse due to the exclusion of Monday night football last year and the inclusion of Sunday night football this year.

Why are numbers down and major brands opting out of television advertising? Because television ads are becoming massively diluted, increasingly bypassed, and it is nearly impossible to track their impact. The average American household now gets 97 television channels (a 57% increase from 2000) and 16% of all households will have a DVR/TiVo type device by year end. Yet, in light of this changing landscape, only NBC cut ad prices this year, and they only did so by 5%…but only because they have been lagging in the ratings! The networks are not responding to market forces and advertisers are getting smarter and smarter. They realize that the once coveted primetime eyeballs they paid millions for back when Friends ruled the earth are either watching HBO or skipping ads with their TiVos.

Mainstream advertisers are starting to realize what an increasing number of e-tailers (the Buy.com guy excluded) and others have been picking up on since the boom/bust: nontraditional outlets can give you better and more measurable returns on your advertising dollars. Smart advertisers are channeling their budgets into search and other digital media where they can focus their campaigns at consumers they know are already interested in their products. They can then generate short-term, tangible results, link them to a specific piece of advertising spend, and use the results to optimize their budget going forward. The Economist described this trend in last week's "The Ultimate Marketing Machine" piece.

What does this all mean? Network television could be dying a slow death in a downward spiral of decreasing ad revenues. The continued dilution and reduction of dollars going to networks and their production companies will begat more low-cost reality-show knock-offs, which may pull more viewers that season, but in the long run will drive more away from network television…which will reduce ad revenue…rinse and repeat. Five years from now the line between sitcoms and movies will have all but completely disintegrated. We may all be purchasing shows and movies like we buy music on iTunes today, the only difference between the new episode of Lost and Pirates of the Carribean XI will be the length of the feature.

And where will advertising be then? On the net and other measurable formats, with companies like ClickShift there to optimize the complexity.

Related Tags: network television, advertising, online marketing