Ben Silverman's Comments on Margins vs. Ratings Signal the End of Broadcast Television

In case you haven't noticed, the business of broadcast television is in trouble. Ratings have been trending down year over year for more than 30 years and there's no end in sight. Most pundits blame this audience fragmentation on outside forces like the proliferation of cable channels, DVDs, video gaming, DVR's and most recently online video, personal video and wireless offerings.

People who should know better constantly parrot misinterpreted data about the deleterious effect of TiVo (the noun describing the entire genus of DVR's) on commercial advertising and how the 30 second spot is dead. Others like to call the medium a vapid wasteland of unwatchable programs. All of the professional explanations for the decline of broadcast television ratings seem to agree that the problem comes from outside forces and an unavoidable changing landscape. I disagree.

Yes, the business is not what it once was, and yes, there is a bit of empirical data to support the idea that enhanced consumer control over media consumption has had a significant impact on viewing habits since the introduction of the "included with purchase" electronic remote control in the mid-80's. But, none of this has had even a slight impact when compared to the business culture and business rules that have evolved over the same 30 year time period.

According to the New York Post, Ben Silverman, co-head of programming for the NBC Television Network said the following: "We're managing for margin and not for ratings." There is nothing technology can do to help or hurt this strategy. It is truly the end of broadcast television.

If you want to see TV ratings improve, the business improve and the ROI improve, try investing in programming, not margins. It will be a refreshing twist for the 21st century. And, it is really the only thing that will turn the business around. The recipe for profitable broadcast television is pretty simple: Develop large audiences that you can accurately measure and sell them to advertisers who need to reach them. The shows that do this even have a name: "hits." If, on the other-hand, you want to sunset an organization and squeeze every last dime out of it before it gives up the ghost, manage for margins.

By the way, Ben Silverman is a personal friend of mine and I both respect and admire him. His success is laudable and he is a great guy. In fact, what I love about Ben is that he actually had the guts to come out and say something that no one else in his position would ever have the guts to say. This is not an NBC problem; it's an industry problem. Ben just held up the mirror. The title of the Post's article was, "Silverman Channeling Jack Welch." Not only is this is not a compliment for a television programming executive, it portends a dismal and disturbing future.

Winston Churchill once said, "The farther you look back, the further you can see into the future." So, let's look back a few years to the "golden age" of radio. Back then, disc jockeys ruled. They became the stations' program directors because they had their fingers on the pulse of the audience. As the business evolved, very successful program directors were promoted to station management. It was easy to spot a station with a GM who came from programming. Talent was treated with respect, content was king and audiences came first.

As the business of radio matured, professional business people started to look closely at the cash cow and you could see the focus of management turn to sales. Radio became extremely competitive from a commercial point of view (it was always creatively competitive). The new superstars of the business were the sales guys and you saw a shift in senior management to sales-oriented executives. It was easy to spot a radio station that was run by a former GSM, it was all about sales and promotion. These execs knew where the money came from and managed the stations differently than their programming predecessors. But the industry kept growing because sales and programming had always been in a surrealistic paso doble that, when properly managed, produced excellent financial results.

Ultimately, sales-oriented station management caught the attention of pure money people from the outside world. If a well programmed station was a cash cow, a fully sold out, well run station was a cash machine and pure money people like that kind of ROI.

What happened next was inevitable, but unfortunate. Management evolved once again. This time, accountants, bankers, lawyers and professional P&L managers from outside the radio business took over. They looked for efficiencies, consolidated divisions, rolled up station groups and turned the entire enterprise into a mass of M&A deals. The term "exit strategy" was the new goal and everything else was secondary.

Ben Franklin, who, among other things, is the great, great grandfather of mass media in America, once said, "Those who are unwilling to study history are doomed to repeat its mistakes." If you look at the radio business today, it is hard to find a station that has made any meaningful investment in programming in the recent memory of man or beast. The business is about consolidated sticks, pre-canned, pre-formatted programming, sales of aggregated, de minimis audiences and margin. The industry is not about growth, it's about holding on to what's left.

The television industry has always followed the fortunes of the radio business. A quick rule of thumb is that changes in the video business are usually about 10 years behind similar changes in the audio business. I think this arm-chair research and the associated aphorism is supported with enough historical evidence to be taken seriously. "There's nothing to watch on Saturday night." says the viewer. "There's no audience on Saturday night, so there's no reason to invest in it..." says the margin-oriented television programming executive. This is a vortex of logical rhetoric. It is almost impossible to break free and stop the cycle. What can be done?

The answer is very clear. Super Bowl XLII (February 3, 2008) was the most-watched sporting event on record and the second most-watched TV program in history. Nielsen says an average of 97.5 million viewers watched the Giants-Pats contest. (The most-watched program is still the M*A*S*H finale, which drew 106 million viewers in 1983.) The big game also broke a record for total viewership, with 148.3 million viewers (persons age 2+ watching all or part of the game). The previous record stood at 144.4 million for Super Bowl XXXVIII in 2004. What this tells us is that if you put on a compelling piece of content, there actually is a television audience to watch it.

Is it unfair to use an annual emergent sporting event as an example? Perhaps. The job of television is to inform, enlighten and entertain. So, I will simply point to the last episode of M*A*S*H as the appropriate benchmark. You will immediately argue that every show is not M*A*S*H and that most entertainment shows will never find an audience of that size. I agree. Most shows will not ever attain that kind of rating. But I can also assure you that M*A*S*H, Friends, Seinfeld, etc. were not programmed for margin. They were programmed for ratings to the exclusion of every other benchmark.

Remember, people don't have Internet rooms in their houses, they don't have video game rooms in their houses, most don't even have reading rooms -- but most households in America do have TV rooms. And, in most of the 112.8 million television households, there is a TV in more than one room. TV technology is everywhere; it's the programming that's nowhere!

Shelly Palmer is the host of MediaBytes a daily news show featuring news you can use about technology, media & entertainment, Managing Director of Advanced Media Ventures Group LLC and the author of Television Disrupted: The Transition from Network to Networked TV (2006, Focal Press). Shelly is also President of the National Academy of Television Arts & Sciences, NY (the organization that bestows the coveted Emmy® Awards). He is the Vice-Chairman of the National Academy of Media Arts & Sciences an organization dedicated to education and leadership in the areas of technology, media and entertainment. Palmer also oversees the Advanced Media Technology Emmy® Awards which honors outstanding achievements in the science and technology of advanced media. You can read Shelly's blog here. Shelly can be reached at [e-mail]

Comments

[mediamancolo]

"Channeling Jack Welch"? I don't think so, because if Jack Welch was still CEO of GE, NBC would be long-gone by now. His directive was always to be #1 or #2 in your market, fix it or be sold. Seeing Silverman's "explanation" makes me understand the whole Zucker thing. Take a guy who "broke" a company and promote him to the top job... I guess it IS all about margins!

Remember, M*A*S*H was doomed for cancellation after the first season, but Paley's wife loved the show and convinced him to keep it on the air... the show found its stride and the rest is TV history! If today's programmers would give a new show more than one or two airings, or keep it in a timeslot for more than a week, maybe an audience would find it, enjoy it and MAKE it a hit!

There is SO much wrong with today's TV model, at both the network and local levels, that responding here can noit do justice to the arguments!

[mediaobserver]

Mr. Palmer is dead on. The world that was dominated by the Big Three Networks is dead and gone. It is a game of diminishing returns for vertically integrated corporations that are concerned with profits in all areas, not just television.
But, Mr. Palmer neglected some other issues. The biggest story of the week was NBC's decision to debut the new Late Night with Jimmy Fallon show online and not on the network. This is part of their previously announced intention to invest $9 billion in digital delivery and expand their reach into new media. It was also stated that they would no longer run scripted dramas or sitcoms in the 8-9 pm hour and would use that time period to program the much cheaper reality and game shows. The ever changing media paradigm is aimed at the 18-34 demographic that watches shows when they want, where they want and how they want. This audience can not be dictated to because the technology has set them free. Desperate Housewives can be viewed on Sundays at 9 pm on the old, stilted ABC network or on Monday afternoon at ABC.com. Heroes can be TIVOd on Monday at 9 pm and viewed anytime in whatever time period from 6 to 60 minutes. And, parts and parcels of shows can be downloaded to Ipods or cell phones and enjoyed at home, at school and even on the subway.

[RedDogBear]

"Remember, people don't have Internet rooms in their houses, they don't have video game rooms in their houses, most don't even have reading rooms -- but most households in America do have TV rooms. And, in most of the 112.8 million television households, there is a TV in more than one room. TV technology is everywhere; it's the programming that's nowhere!"

Well, I agree the content is garbage. I stopped my cable subscription over a year ago and never missed it. But you are behind the times in your description of what technology is pervasive. I and most of my friends have stereos and big screens connected to our computers. We have a LAN in my home which my daughter and I are both on. We have a TV but its used only as a monitor, and not even the primary monitor, to view DVD's and the occasional VHS tape. We regularly sit down to watch stuff on youtube and sidereel in front of the large flat panel computer screen.

[BigCheese]

Me too. I got rid of cable a year ago and don't miss it at all. My computer is now the centerpiece of my living room and Netflix, iTunes and the internet provide all the (commercial free!) entertainment I need. TV is dead. The younger generations have already moved on without it.

[JamesAndre]

Nice work. Couldn't agree more.

Maybe, if they keep trying, we will eventually believe it is all the fault of the internet and content pirates...

[jemiltd]

Perhaps at some point Networks will get a clue: The lazy, non-creative choice of continuing to force-feed the watching audience these ridiculous "reality" shows is not working. I am not entertained by this nonsense and I have heard and seen the same complaint for some time. I watch the good shows that are actual entertainment on alternative stations. Perhaps if you actually listened to your audiences the apprentice, bachelors, big brothers and all such ilk will finally go away.

[BlackJAC]

Actually, they really are listening to the audience...in the form of focus groups. And who makes up focus groups? The unemployed, specifically either shut-ins there for the free food or out-of-work writers and directors who, as Jordan McDeere said, are unemployed for a reason and will remain so. And then there's the problem of how Standards & Practices lives in complete fear of the religious right and its obsession with boycotts over pretty much anything entertaining.

[KHAAANNN]

I've said it before and I'll say it again;
The moment you let MBA's into any creative industry, they destroy it.
Hell, the moment you let them into ANY industry they destroy it.
The best description of an MBA is; "An accountant with no talent for or understanding of numbers"