TV Channel Usage Drops To New Low, But Networks Persevere

by Joe Mandese, Sep 24, 2003, 12:00 AM

• Comment
• Recommend
• Tweet
• 

Just as the 2003-04 TV season is getting under way, new research unveiled Wednesday at a MediaPost conference in New York shows that while the number of TV channels received by the average household is greater than ever before the percentage of those channels that are actually viewed has hit a new low.

The new Nielsen data, which was revealed by CBS Executive Vice President-Planning & Research Dave Poltrack during his keynote at MediaPost's Forecast 2004 conference, finds the average household now receives 102 channels but watches only 15 of them, or 14.7% of what's available to them.

That's down from 26% of the 19 channels available to the average household in 1985 and down from 16% of the 89 channels averaged as recently as 2001.

TV Channels Received Vs. Viewed

 
                      1985   2003 
Channels Receivable:    19    102 
Channels Viewed:         5     15 
Percentage Viewed:     26%    15% 

Source: CBS from Nielsen Media Research data.

The data suggests it will be more difficult than ever for networks to generate sampling this season, even as they begin launching their new fall season.

Despite this and other chaotic trends in TV viewing patterns, Poltrack said the major broadcast networks continue to enjoy a unique position among viewers and advertisers alike, which explains why broadcast network TV has managed to reap disproportionate ad price increases relative to other media, not to mention the overall growth of the U.S. economy.

Network CPM (cost-per-thousand) increases averaged 7% each year between 1970 and 1980, while the U.S. gross domestic product (GDP) expanded at an annual rate of 10%. Between 1980 and 2003, network CPMs again averaged an annual growth rate of 7%, but the U.S. GDP expanded only 6%.

"Why have network increases outpaced the growth in the [GDP] during this period? They have to buy more GRPs," said Poltrack referring to the need of advertisers to purchase more commercial advertising units to offset the decline in average TV ratings.

Additionally, he said an expansion in the number of advertisers, brands and services during this period exacerbated the supply and demand dynamics, but creating "more demand and lower supply." The result has been record network price increases, such as the 15% CPM hikes reaped by the broadcast networks during the 2003-04 network primetime upfront.

While those results prove the broadcast networks remain as economically vital as ever, Poltrack said too many executives on both the buying and sales side of the business tend to focus on the negative implications new media technologies might have on the network business model.

He recounted three such scenarios - the emergence of cable TV, the expansion of cable TV and the emergence of VCRs and the emergence of the Internet - that have led up the most recent doomsday scenario for network TV: the emergence of digital video recorders (DVRs) like TiVo.

While he predicted the broadcast networks would persevere over their latest technological rival, he did cite CBS research indicating the impact of DVRs would be profound on the network TV business.

Based on a 50% penetration of DVRs, Poltrack estimated the impact on TV commercial viewing would be a net loss of 14% commercial audience levels.

Additionally, he cited research show that advertising recall levels tend to be 12% lower for DVR households than for non-DVR households, indicating a loss of 6% in overall commercial advertising effectiveness if DVRs achieve a 50% penetration.

"Are we on the verge of chaos? My answer would be no," concluded Poltrack.

• Comment
• Recommend
• Tweet
• 

Be the first to comment on "TV Channel Usage Drops To New Low, But Networks Persevere"

Leave a Comment