LOS ANGELES (Reuters Life!) - "American Idol" reaches its climax this week, still ruling the roost on U.S. television after eight seasons, but the battle of the songsters faces declining audiences and limits to its viewer-driven format.
The finale showdown on Tuesday pits musical theater star Adam Lambert, whom Entertainment Weekly magazine called "the most exciting 'American Idol' contestant in years," against college student Kris Allen, a favorite among teenage girls.
What started as a cheesy summer show in 2002 has mushroomed into a cultural phenomenon and an estimated $1 billion-plus brand spanning everything from ice-cream and trading cards to an attraction at Walt Disney World Resort.
"As a reality show, it's unique in that regard," said Brad Adgate, a vice president at advertising buyer Horizon Media.
"Idol" has partnerships with phone company AT&T for fan voting, with iTunes for contestant song downloads, and record company RCA and its sister labels, where Kelly Clarkson, Carrie Underwood and other past winners have cut albums.
But clouds are gathering on the horizon.
Co-producer 19 Entertainment reported its revenue from "American Idol" declined $4.1 million to $24.7 million in the first quarter of 2009 compared to the same period in 2008, as the recession dented sponsorship deals.
The show, which pits aspiring singers in a series of competitions focused on a musical theme each week, has seen a 7 percent viewership drop this season on the Fox network, part of Rupert Murdoch's News Corp media conglomerate.
Fox officials believe the show has a winning formula that could still rule U.S. television for years, even if viewership declines substantially below the current 26.3 million viewers an episode. It is the most-watched TV show in the United States.
Despite a tough advertising environment, the cost of an average 30-second commercial on the finale will be in line with last year's $1.4 million average, advertising experts said.
Last year, "Idol" generated a total of $903 million in commercial ad revenue for Fox, not including product placements, according to TNS Media Intelligence.
Robert Sillerman, chairman and CEO of CKX Inc, the parent company of 19 Entertainment, said plans were afoot to extend the brand, including an Internet product to allow people to play the role of talent judges.
"People have accepted that it is part of American culture, and the deals that we're talking about are long-term," Sillerman said in an interview.
Yet rival TV networks have sensed a chance to compete with "Idol" this season where previously they steered away.
CBS programmed the military drama "NCIS" opposite "Idol," and struggling NBC countered with reality show "The Biggest Loser." ABC's "Dancing with the Stars," America's second-highest rated show, is drawing more than 20 million viewers.
"Idol" added a fourth judge in Kara DioGuardi this year and introduced a new rule that saved one contestant from elimination. But with viewer fatigue appearing to set in, there are only so many ways "Idol" can retool, Adgate said.
"They've done some things to tweak it as best they can, but I don't know how much you can tweak it without alienating the core viewer," he said.
Added to the concerns is the possibility British judge Simon Cowell could bolt the show when his contract expires in a year. His exit would be one of the biggest from television since Jerry Seinfeld quit his NBC comedy series in 1998.
"You can actually chart some of NBC's decline from their failure to get Seinfeld to renew," said Larry Gerbrandt, a principal at Media Valuation Partners.
Yet CKX's Sillerman said the appeal of the "Idol" brand remains strong and compared it to successful sports leagues.
"There are people who want to be associated with 'American Idol' the same way people want to be associated with the NBA (National Basketball Association)," he said.
"American Idol" is a joint production of 19 Entertainment, a unit of CKX Inc, and FremantleMedia, a division of British-based RTL Group, which is controlled by media giant Bertelsmann AG.
Editing by Jill Serjeant and Paul Simao