Blog Post

The Golden Age of Choice and Cannibalization in TV

(The following guest post was written by Mike Hudack, CEO of Blip.tv, who will be speaking at our fourth annual NewTeeVee Live conference on November 10 in San Francisco. To learn more about the show, click here.)

Television’s first hit, in 1948, was NBC’s (s GE) Texaco Star Theater. At its peak the show pulled in 80 percent of U.S. television households. The show shepherded in the golden age of television.

Television’s most recent hit is American Idol. At its peak three years ago it pulled in about 26 percent of U.S. television households. Of course, there are many more TV households today then there were in the 1950s. American Idol‘s total audience size is about five times that of Texaco Star Theater at its peak.

Other than live event programming like the Super Bowl, however, the days of a single television show pulling in the vast majority of American TV households are over. The broadcast networks are long past their peak. Their audience — in absolute numbers, not relative numbers — has been shrinking since the early 1980s.

Broadcast television was introduced, at scale, right along with Texaco Star Theater in 1948. Cable television subsequently scaled in the ‘80s. What television did to radio — an assault that led to lower audience share and ultimately much smaller audiences — cable has done to the broadcast networks.

The erosion of the broadcast television audience has not been driven by massive hits that happen to be on cable TV. Quite the contrary. Mad Men, a tremendously successful cable show, reached fewer than one million television households during its first season. The fourth season drew an average of about three million households. These ratings are enough to get a network television show canceled but are the stuff of transformational success for a cable network like AMC.

Because of opportunity cost, broadcast networks like Fox must program every second of airtime to reach the maximum possible audience. This is why fantastic shows like Arrested Development, which reached six million households in its first season and four million during its last, get canceled to make way for potentially larger shows. On a cable network Arrested Development would have been considered a huge, and profitable, success. It was, after all, consistently bigger than Mad Men.

People often say that the web video industry will not come into its own until it creates a hit. This thought is, quite frankly, wrong. The cable TV industry has clearly come into its own. And it’s done this without producing a single hit on the order of a network TV success. Yes, the network television business is meaningful, but it no longer produces the hits it did just a few years ago. This year’s slate of network series premieres was the first to pass without a clearly defined “hit” show. That’s no accident. The networks are lost.

Media naturally trends towards fragmentation. As capacity increases so does choice. As choice increases audiences fragment. When given a choice people generally prefer media that speaks to them as individuals over media that speaks to the “masses.” While American Idol remains strong, the trend is clear. Americans have been abandoning broadcast television in favor of cable’s niche shows for thirty years.

Historical trends like these do not disappear, they accelerate. Internet video is growing at a significant pace. It has not yet taken a chunk out of the broadcast and cable audiences, but the trend is there. Shows on the web are infinitely more targeted than the shows broadcast and cable companies deliver. There are shows for old Jews who like jokes. There are shows for every type of video game geek. There are shows for every audience you can imagine. There is, in fact, a web show made just for you (although you probably haven’t found it yet).

There will be “hit” shows on the web that have a profound influence on our culture. But they will not be the size of network television hits, or even cable television hits. You also won’t see a television show command 80 percent of the viewing audience as Texaco Star Theater did in the early ‘50s. But it doesn’t matter. Over time the Internet will steal share — small piece by small piece — from broadcast and cable just as cable stole from broadcast, which stole from radio before that.

Network television in the coming years will become more niche, but not niche enough. NBC’s 30 Rock is more targeted than almost anything carried on the network before. Its audience is only a couple million people larger than Mad Men‘s. But that’s not enough. Traditional broadcast and cable companies are not able to support shows under a certain size.

The broadcast distribution model, which dictates that only one show can air at any given time, makes it impossible for a niche show to thrive. The opportunity cost is too high. And the corporate structures, cost structures, business models and cultures of the network and cable companies make change far too difficult. Thus the Internet will do to broadcast and cable what cable did to broadcast. It’s inevitable. And it’s already beginning to happen.

Photo courtesy of (CC-BY-SA) Flickr user tnarik.

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7 Responses to “The Golden Age of Choice and Cannibalization in TV”

  1. The premise on the so called ‘caniballization’ rests on believing that all ‘content’ is fungible. It isn’t. Big corporate conglomerate media may treat it that way (as they are especially driven to maximize the salaries of a few key executives who are usually not the creative people making the shows and to a slightly lesser extent shareholder value where the company making the ‘content’ is a publically held company), but frankly fans (your most important hardcore base of consistent viewers) don’t consider every person & element infinitely & equally substitutable the way big corporations (and people who trained at business school to make easily fungible widgets) do.

    Fans fall in love with the particular combination of all the elements (cast members, writing, direction, the look & feel, the tone, etc). For every element you change in a show (or franchise etc), you risk alienating the fans who are in love with a particular alchemical mix that is the initial version (and therefore the initially established audience expectations of) a given piece of ‘content’. You may gain more casual viewers in exchange for the fans, but 1) the fans are never going to come back once you’ve messed up ‘their’ show or your relationship to them and 2) someone else will come along to steal the casual viewer who doesn’t really care what they do with their time, attention, and energy (watch broadcast or cable TV, watch webseries, choose some other form of entertainment or even choose some other activity).

    So I beg to differ with the premise that I’d watch most of what is shown on broadcast or cable TV over webseries. I watch what entertains me, what I find useful or valuable or has some level of emotional or intellectual resonance with me. If broadcast or cable doesn’t provide me with what I’d ‘pay’ for with my time, attention and/or money, then you can’t call that cannibalization, because I’d never be the ‘market’ or more correctly the audience for that ‘content’ in the first place.

    Making entertainment has always been a ‘niche’ business, it’s just prior to know the consequences of alienating the niche didn’t hurt the financial bottom line so obviously.

  2. Great article.
    In addition to audience fragmentation, another factor to consider is the media consumption habits of Millenials. As this generation grows older, their TV Everywhere viewing behaviors will have to be accommodated, which will ensue in Madison Ave’s interest, as Millenials will be in the core target market big brands will market to.

  3. Great article and fascinating subject. Thanks Mike!

    Niche programs and hits ultimately satisfy very different needs. We like niche shows because they are extremely targeted and we like hits because of the shared experiences they bring.

    If we continue to desire both experiences and are willing to pay for them with our time and/or wallets, we will continue to have both.

    Exactly how these two kinds of experiences are delivered, what they look like and what they are worth in terms of revenue is in major flux right now, but these core desires are unlikely to change.

    -George

  4. TheFineBros

    There are a handful of shows/content on YouTube that already have sustainable cable size viewership numbers but no one has fully embraced or accepted it in a large enough way to make a dent in the perception of this content which already is reaching the giant numbers that should be constituting several “big hits” as millions of people already are watching it. The engaged, direct and personal audience those small handful have should be more valuable than most content, especially online with no series outside of YouTube have anywhere close to the views. Advertisers should be jumping at it and not having such low rates against it.

    It’s slowly coming around but the community at large has devalued those creators and views mostly for not standing up to what they consider “well produced” or “narrative” when we’d argue some (not all) are well produced and being narrative or not should mean nothing, how much of big TV is reality based which you could put a lot of these channels into? Not to mention most of them are sketch or narrative based with aspects of their content.

    It’s time to stop that practice and start heralding our successes as successes to bring attention in the right way to the content creators that use YouTube for primary distribution that are shaping this budding industry that can spill over to all aspects of web entertainment.

    • TheFineBros

      So kudos to this article. It speaks the truth as this will all impact audiences and TV, our above was showcasing that the dents are already here larger than most realize.

  5. Audience fragmentation is undeniable, and of course you’re right on that.
    I love the historic perspective you give, learned a lot.

    However I think that the Internet will not prevent big smash-hits from occurring in the future. It will just prevent Hollywood or TV network execs form being the ones to make them occur.

    Phenomena like the StarWars video kid on YouTube are tiny compared to what we’ll see in the future…
    So alongside all the niche stuff that you rightfully point to, there will be room for hits, because some things just are better, funnier, prettier, cleverer, sexier – or whatever suits the spirit of the times – than most.