The Big Picture for TV

Major changes in network television--shrinking audiences, rising production costs, money-losing sports deals and the growing threat of digital video recorders that allow viewers to skip commercials--are forcing TV executives to hunt for new ways to make money.

What those solutions might be is still up for debate. But it’s too early to write an obituary for the networks, CBS President and Chief Executive Leslie Moonves told reporters and members of the Television Critics Assn. on Sunday at the Ritz-Carlton in Pasadena.

“It’s a changing world, but broadcast television is still the best game in town,” Moonves said.

Although cable networks have drawn millions of viewers from broadcast networks, the six major networks--NBC, CBS, ABC, Fox Broadcasting, UPN and the WB--all managed to boost their advertising rates this year. The major networks still account for more than 55% of all television viewing.

Millions more viewers turn to broadcast networks than the top-rated cable networks, Moonves said, adding that evening network news programs on CBS, NBC and ABC draw an average of 30 million viewers a night while prime-time cable news programs pull in about 3 million viewers.

Still, the television critics’ annual summer event--in which the networks trot out their new fall lineups, stars and producers--is unfolding this year against a backdrop of economic uncertainty. Only two broadcast networks--NBC and CBS--are expected to turn a profit this year. General Electric’s NBC, which finished the season in first place in the ratings, expects more than $500 million in profit from the network; CBS, owned by Viacom Inc., expects network profit this year to top $150 million.

The outlook is more gloomy for ABC and Fox Broadcasting. News Corp., which owns Fox, was forced in February to write off $909 million in losses from its Fox broadcasts of professional football, Major League Baseball and NASCAR racing. Fox will start the season in September without the help of two of its longtime favorites, “The X-Files” and “Ally McBeal.” The network plans to air 10 new prime-time programs.

ABC, owned by Walt Disney Co., also is rebuilding its schedule after a humiliating season in which the previous powerhouse network finished fourth in prime time among viewers ages 18 to 49--the demographic most valued by advertisers. ABC is launching nine new prime-time shows.

The two youngest networks--the WB network and Viacom-owned UPN--have not made any money for their parent companies. Moonves, who took over the UPN network earlier this year, would not say when UPN is expected to turn a profit. The WB network should make money this year, said Jamie Kellner, chairman of the Turner Broadcasting System. The WB network is 75% owned by AOL Time Warner, with the remainder owned by Tribune Co., which publishes the Los Angeles Times.

Beginning this fall, the WB will experiment with “multi-plays.” The network plans to broadcast two shows twice a week, initially on weeknights during prime time and again on Sunday evening. Broadcasting shows more than once a week has worked for HBO, which often airs its hit shows, such as “The Sopranos,” more than once a week, Kellner said.

“This industry needs to be rejiggered,” Kellner told the television critics on Saturday, adding that networks are “trapped” by a decades-old system and schedule. Pilots are shot in the spring to show advertisers in May in New York, and the year is punctuated by periods of frenzied competition among networks during the so-called “sweeps” weeks in November, February, May and July.

“I hate sweeps,” Moonves said Sunday during the UPN session. “I think sweeps are ridiculous. The whole system is an anomaly. It’s more of a station thing,” since television stations rely on ratings measured during the sweeps periods to set their advertising rates.

Kellner also predicted that free commercial TV will become extinct within five to 10 years because of digital recording devices such as TiVo. Advertisers would balk at paying high network rates if millions of viewers automatically zap the commercials. And without advertisers, the economic underpinnings of network television would collapse.

CBS’ Moonves was more upbeat, saying digital video recorders will not spell “the death of television.” A recent report showed that digital recorders are in about 1% of U.S. homes, and, of those, 70% are used to bypass commercials.

“The penetration [of digital recorders] is so minor that it is not affecting us one iota,” Moonves said.

Moonves acknowledged that new technologies and higher production costs are forcing networks to explore new revenue streams, such as product placement in shows. Moonves said that though he enjoyed one of this summer’s hit movies--”Minority Report,” starring Tom Cruise--”it was like a commercial every 30 seconds....

“We don’t want Buffy [Sarah Michelle Gellar of ‘Buffy the Vampire Slayer’] to be eating M&Ms.; We think that would be wrong.”