US broadcast networks: Pocket change
- Article 1 of 3
- Total Content + Media, March 2007
US broadcasters plan to use the Internet to supplement other revenue streams, but so far the contribution is minimal
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Anne Sweeney, co-chair of Disney Media Networks, speaking at a recent investor conference, said ABC.com sold all the video advertising slots for its streamed TV shows in Q4 2006 and Q1 2007. That is a sign that US networks are starting to embrace the Internet as a new revenue opportunity.
But the painful truth for broadcasters is that revenues from new media are still small relative to other business.
“We still believe that TV is the superior form of advertising,” Mike Shaw, president of advertising for Disney-owned network ABC, told an audience of media executives in London in November. “With $3.5 billion of ad sales annually, TV is still our core business.”
Revenues are starting to come in. The networks’ first profitable Internet venture was through Apple’s iTunes Store, which has now sold over 50 million episodes of 350 TV shows from 57 networks. Although all parties involved refuse to provide data on how this breaks down, Forrester Research estimates Apple gets only 10 cents out of the $1.99 charged per show; that means $89.5 million has gone to the networks and production companies since the venture began.
Compared with broadcast television, this is pocket change: the average $260,000 earned over 18 months by each series typically wouldn’t even cover the production of a single episode. Shaw points out that an episode of a highly produced show, like Lost, can cost between $4.5m and $5m per show.
Broadcast networks are used to being the traditional gatekeepers of content, so it’s no surprise that they’ve tried to take back control. All four main networks as well as many of the smaller networks now offer streaming services from their own sites. Viewers are typically able to watch episodes of shows up to a week after they’ve aired for free.
“Our research has shown that the main reason people are viewing online is because they missed an episode on-air or forgot to record it,” says Karen Hobson, vice president of digital media and corporate communications at ABC. “It is expanding the audience beyond what we would be able to reach with just the linear network.”
At first glance, this strategy would appear to be paying off. For ads running alongside primetime shows streamed from their sites, the networks are able to command rates of $40 CPM (cost per thousand impressions), compared with roughly $26 during broadcasts. In part, this is due to the more targeted demographics online services can produce. Since NBC launched its Rewind service in October 2006, 6.9 million unique users have streamed nearly 42 million full-episode videos, according to research company Insight Express, with audiences skewed towards younger, higher educated males compared with average television and Internet audiences.
Shaw at ABC says the average viewing age for its Internet TV service is 29, compared to 46 for traditional TV.
As the Insight Express figures show, ratings for the service remain low compared to NBC’s broadcast programming. The networks’ own sites, including pages that contain no video streams, are similarly low-rated compared to their programming. ComScore’s Media Metrix shows that CBS’s site was the most popular of the networks online in January, with 22.5 million visitors in total, including both regular site pages and those containing video streams. This figure is still small compared with AOL, Yahoo! and MSN’s TV services, and comparable to just a single episode of one of the network’s highest rated programmes in the same period—Nielsen ratings for ‘CSI’ in January were approximately 21 million viewers.
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