Markets

Are U.S. TV Networks Headed for the Same Fate as Newspapers?

By Catharine Taylor

Updated on: June 29, 2009 / 1:27 PM EDT / MoneyWatch

Looking at new data from London-based Screen Digest concerning the ad haul for U.S. broadcast networks echos another industry that has found the transition to an online world not all it's cracked up to be: the newspaper industry.

First, the good news -- ABC, CBS, Fox, NBC and Hulu (which is jointly-owned by all of the above except CBS), now account for more than half of the online video advertising spent, which the company estimates at being $448 million last year, and will reach $1.45 billion by 2013. (Conspicuously absent? YouTube, of course, which, as has been repeated here, well, ad nauseum, still struggles with monetizing its sometimes dicey content.)
Now for the bad news -- Screen Digest expects the overall ad market for TV networks to decline by $2 billion between now and 2013, from $69 billion to $67 billion by 2013.

So let's do some math. The market for online ad video is going to increase by roughly $1 billion in the next five years, so even if the networks took in every dime of additional online video ad revenue that will come into the market over the next five years, (which they won't), there's still a shortfall of $1 billion.

As my headline suggests, the thing that first jumped to mind when I saw these stats was the newspaper industry, which dutifully followed its audience online and now finds that the gold that was supposed to be at the end of the Internet rainbow isn't quite what it was cracked up to be. Of course, the Screen Digest reports are only focusing on advertising revenue, not taking into account things like TV Everywhere, which aims to preserve the cable subscription revenue stream by making online cable content free only to subscribers. But, when it comes to the broadcast nets, there are no subscription revenue streams (other than the ones generated by their sister cable networks), which makes predictions like Screen Digest's troubling.

As TV is trying to learn from the mistakes made by the music and print industries in regards to online, here's a thought: don't undermonetize online content, as you're doing now, and communicate to your customers the incredible value there is in being able to watch a show where and when they want. That value exchange should be worth it enough to consumers that they can stand to watch another commercial or two while they stream. If not? Let's not go there.

Previous coverage of the online video market at BNET Media: