The TV Networks’ Quixotic Quest For Viewers

As the television networks start a new television season, hope will spring again from Hollywood’s fertile loins.  This year, there is more hope than usual.

Walt Disney Co.’s ABC (NYSE:DIS),  CBS Inc.  (NYSE: CBS),  General Electric Co.’s  (NYSE:GE) NBC and News Corp’s (NYSE:NWS) Fox are launching 17 new shows over the next seven days, the most they have done in years, according to the Wall Street Journal.     It is as if they are partying like its 1999 — literally.  ABC, CBS, NBC and Fox are on a roll.

As Advertising Age recently noted, Neilson found that ratings for the broadcast networks rose 1 percent during the first 51 weeks of the broadcast year ending Sept. 19, the first such increase since 2000-2001. Ad-supported cable networks were down 1 percent, ending a 10-year-plus growth streak.   Broadcasters, though, may have difficulty keeping up their momentum, anemic as it may be.

Some of the networks’ biggest scripted hits in recent years, such as “24,” “Lost,” “Scrubs,” and “Ugly Betty,” have been canceled. “American Idol”, which has been the most popular show on television for years, will face a challenge attracting viewers after the departure of the show’s dark overlord Simon Cowell.   Though shows such as “Modern Family,” “Glee,” and “Big Bang Theory” have gained huge followings and Emmy awards, they lack the creative edge of their cable counterparts.  Cable shows won 52 Emmy Awards ahead of the 47 won by the networks.

Earlier this month, The Cabletelevision Advertising Bureau reported that advertisers had agreed to spend more than $8 billion for the upcoming season, up 19 percent from a year earlier.  The broadcast networks’ tally was expected to rise 20 percent to $8.26 billion, reversing recent double-digit declines.

Keep in mind that advertising budgets were set months ago when people were optimistic that the economy would improve at a more robust pace.  Advertisers will yank ads if they think the economy will tank further.  Upfronts are commitments to buy advertisements.  They are not sales.

For investors, television is a dual-edged sword.  For every hit, there are a billion misses.  Critical acclaim is nice, but viewership is nicer. Just ask the producers of cult favorite “Arrested Development,” whose devoted fans were unable to save it from cancellation.  TV shows that hang in there long enough reap millions in profits.  Some do better, such as “Seinfeld,” which reportedly has earned more than $2 billion since it was canceled 12 years ago.

“Seinfeld”-sized profits are the exception rather than the rule.  Given cable’s freedom from FCC regulations,  hit scripted television shows will be harder to create.  Cable shows tend to be edgier and — with the exception of the “Jersey Shore” — better than their broadcast counterparts.  Reality programs also  tend to be cheaper to produce.

Whether the networks’ newly found optimism is foolish will be apparent after the debut of “American Idol” in January 2011.  If viewers shy away from the tenth season of the talent competition, then shareholders of media companies will jump off the bandwagon almost as quickly.

–Jonathan Berr