June 24, 2008 / 1:19 AM / 9 years ago

Tough economy might be good for broadcast TV

LOS ANGELES (Hollywood Reporter) - Broadcast TV has had a hard time catching a break this past year.

<p>A Georgian family watches President Saakashvili's interview on television in their apartment in Tbilisi November 4, 2007. REUTERS/Irakli Gedenidze</p>

What was supposed to be a rebound 2007-08 season after the ratings slump of 2006-07 was derailed by the Hollywood writers strike and ended with a whimper in May. And, as if dealing with the 100-day stoppage and viewer erosion was not enough, the networks were hit by a slowing economy.

In the first quarter, when the effect from the strike was the worst, ad spending on network TV was down 3% vs. last year.

But then, in the past few weeks, amid recession fears and worries about a possible actors strike, there finally was some good news: The five broadcast networks bagged a better than expected $9.23 billion in “upfront” commitments for ad slots during the 2008-09 season.

“When times are tough and each marketing dollar has to work as hard as it can, (advertisers) go to what works, and television absolutely benefited from that,” ABC ad sales chief Mike Shaw recently said.

Meanwhile, the Conference Board’s most recent survey painted a bleak picture of consumers’ buying intentions for the next six months. For instance, only 2.1% are planning to purchase a house, the lowest percentage in more than a quarter-century.

In contrast, the share of consumers planning to buy a TV set in the next six months hit an all-time high of 12.2 percent in May.

For those putting their dreams for a new home and car on hold, a flat-screen TV seems like a comforting alternative. It is also practical, with gas prices hovering above $4 a gallon.

“Households now seem bent on cocooning by staying at home to watch television rather than drive to the local theater and shell out more than $11 to watch a film (and an extra $5 on gas to get there),” Merrill Lynch economist David Rosenberg wrote recently. “Travel plans have sunk to their lowest in 30 years, so what else is there to do but stay home and watch TV?”

In other words, in uncertain times, Americans cling to their TVs.

During the Great Depression, at 27 cents a ticket, everyone was going to the movies to escape the harsh economic realities. These days, the price of going to the movies is part of the harsh economic reality.

<p>Television monitors in a file photo. What was supposed to be a rebound 2007-08 television season after the ratings slump of 2006-07 was derailed by the Hollywood writers strike and ended with a whimper in May. REUTERS/File</p>

So, people will sit down to turn on their cool new TVs. But will they go to broadcast television?

For the past few years, TV audiences have slowly gravitated to cable, a migration accelerated by the writers strike. In the first quarter, while broadcast was down, cable ad spending was up 13 percent.

During the May sweep, when local stations use ratings data to set their ad rates, there was great news for the TV industry: 4 percent more viewers in the coveted adults 18-49 demographic watched TV than last year. But they largely went to ad-supported cable, which collectively was up 12 percent in the key demo while the broadcast networks were down 13 percent.

Also responsible for the broadcast networks’ continuing rating woes: the increasing penetration of digital video recorders, now at 25 percent. With more people turning to TV for entertainment in a sluggish economy, that percentage will continue to rise. A couple of weeks ago, DVR maker TiVo surprised Wall Street with an unexpected first-quarter profit driven by higher sales of HD boxes.

The transition to digital television in February creates even more competition for broadcast as many people who had watched only free over-the-air analog channels are switching to cable. Time Warner Cable recently beat first-quarter expectations with 55,000 new subscribers.

Still, for now, broadcast TV remains the top dog, bringing families together for major sporting and entertaining events.

In August, many proud owners of fancy new TV sets will give them a test drive with the HD telecasts of the Olympics. While there will be wall-to-wall coverage on all NBC Universal cable networks, the main attractions will be on NBC.

That is good for everybody. During the Athens Summer Olympics in 2004, overall TV viewing rose 10 percent allowing all networks to pick up some of the viewers drawn to broadcast TV by the Games.

Such a bump will be a godsend for broadcasters as they head into the make-or-break 2008-09 season.

With no relief in sight for the country’s economic woes and skyrocketing oil prices, families, popcorn in hand, are gathering around the TV looking to be entertained.

And that might be just the break broadcast TV has been waiting for.

Reuters/Hollywood Reporter

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