[MUD-Dev] AS TECHNOLOGY SCATTERS VIEWERS, NETWORKS GO LOOKING FOR THEM

[Michael Tresca]

More data about the missing young prime-time audience and their
gaming habits.  Of note:

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  Sales of videogames played on the TV screen doubled between 1997
  and 2002 to 131 million.  The average age of gamers is 29. Young
  male fans of "Madden NFL 2004," which has sold five million copies
  so far this year, play it an average of 7.7 hours a week,
  according to the game's maker, Electronic Arts, more than they
  watch prime-time TV.
--<cut>--

Mike "Talien" Tresca
RetroMUD Administrator
http://michael.tresca.net


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AS TECHNOLOGY SCATTERS VIEWERS, NETWORKS GO LOOKING FOR THEM
By Emily Nelson and Martin Peers, The Wall Street Journal, 11/21/2003

The Fox television network is testing a video-on-demand service that
lets viewers watch some hit shows such as "The Shield" whenever they
like. The makers of "The West Wing" this week began selling the
complete first season on DVD. This fall the second videogame version
of "Law and Order" went on sale.

Why the new technology? To keep up with people such as Jon
Leatherberry. The TV show "24" is one of his favorites, but the
29-year-old doesn't watch it when it runs on the Fox network Tuesday
nights. Instead, he saw the entire last season on DVD and now
records new episodes on his TiVo.

"I rarely watch live television anymore," says the associate at a
Dallas law firm.

Mr. Leatherberry's defection is part of a broader trend that has
been creeping up on the networks for several years. Many of the
young-adult viewers most coveted by advertisers have been spurning
live TV. Instead, they're watching recorded shows on their own time,
often skipping over the commercials -- or not watching TV at
all. The young prime-time TV audience has been declining for the
past decade, typically by a percent or two a year. This fall, the
erosion appears to be accelerating, with the number of male viewers
age 18 to 34 falling 7% from a year ago, according to Nielsen Media
Research. Though the networks dispute the extent of the fall-off and
blame Nielsen's methodology, they admit that viewership is gradually
shrinking.

Now the TV industry is finally confronting the fact that new
technology is transforming its economic model. "It's pretty obvious
that, in the long run, the network broadcast business cannot rely on
the single stream of advertising revenue," says Sandy Grushow,
chairman of News Corp.'s Fox Television Entertainment
Group. "Networks have got to figure out a way to open up another
revenue stream."

The slide in viewership comes amid an explosion of gadgets that give
viewers other ways to use their TV. The number of U.S. homes with
DVD players has doubled in the past two years to 48 million, almost
half of all homes with TV sets. Devices such as TiVo that easily
record shows are now in a few million homes. Sales of videogames
played on the TV screen doubled between 1997 and 2002 to 131
million. The average age of gamers is 29. Young male fans of "Madden
NFL 2004," which has sold five million copies so far this year, play
it an average of 7.7 hours a week, according to the game's maker,
Electronic Arts, more than they watch prime-time TV.


Instead of standing by as their viewers defect, the networks are now
trying to harness those very same technologies for their own
advantage. The video-on-demand services the networks are testing,
for example, work like a virtual VCR, allowing viewers to click
their remote control to order a TV show and watch it for up to 24
hours, stopping or rewinding as they like.  Though no one believes
video on demand will supplant regular broadcasts, and promising
technologies have flamed out in the past, the networks think it
could be an appealing add-on.

Studios are also beginning to put TV shows on DVDs, generating extra
cash for the TV industry and often luring viewers to new episodes on
the networks. They are also developing videogames based on hit shows
such as "CSI" and "The Simpsons"; an "ER" game is planned for next
fall.

One Chance

All these moves represent a retreat from the broadcast networks'
long-held stance: The best way to draw a big audience and sell
advertising is to give viewers only one chance to see a show. They
also rewrite the advertising-driven economic model of broadcast TV,
which has been in place for half a century.

Any experimentation promises to be a wrenching experience for the
networks, requiring them to win over executives internally and
change how they work with TV studios, cable operators, advertisers
and TV stations. "It's a jump ball right now," says David Zaslav,
president of NBC cable networks. The challenge for the industry, he
says: "How do we deal with technology in a meaningful way?"

The networks may face pressure to change from advertisers, who last
year spent $17 billion buying commercial time on television. Though
rates hit a record high last year, some advertisers are becoming
frustrated with audience declines. "I have to step back and question
the absurdity of paying double-digit increases for a dwindling
audience," C.J. Fraleigh, executive director of advertising and
marketing at General Motors Corp., the country's biggest advertiser,
told a conference of advertisers in June. In an interview,
Mr. Fraleigh adds that he has instructed his marketers and
advertising agencies to find big advertising outlets beyond
television. No one has yet, he says, adding, "I just wish everybody
was looking more aggressively at new ways to reach consumers."

Fox's Foray

Fox's first foray into video on demand began two years ago, in a
test with Cablevision Systems Corp., which operates cable systems in
the New York area. Subscribers could order, free of charge, episodes
of two critically acclaimed shows: "24," the Fox drama whose
episodes chronicle each hour in the day of a government
counterterrorism agent, or "The Shield," the cop drama from
Fox-owned cable channel FX. Last year, Cablevision again offered the
shows but charged either $1.95 per episode or $19.95 for the entire
season.

Fox found that people who bought the entire subscription were fans
of the show who couldn't make time for the live broadcasts. Those
who purchased individual episodes were mostly watching it live but
filled in with video on demand when they missed an episode. Fox
calls the test promising but cautions that the technology is in its
infancy. Cablevision says it is talking with Fox about offering the
on-demand feature again this year.  Future tests could also try
putting extra material on video on demand, much as DVDs include
directors' cuts and outtakes.

Video-on-demand services, which started only a couple of years ago,
are now in roughly 10 million homes, estimates In Demand, a
cable-industry-owned video-on-demand concern. While the services
offer recently released movies for $3 to $4 an order, operators such
as Comcast Corp. also provide some cable programs free of charge. In
Philadelphia, Comcast has about 800,000 customers with the service
and about half use it each month, says Steve Burke, president of
Comcast's cable operations. Users tend to order on-demand
programming eight to 10 times a month, Mr. Burke says.

Viewers are growing increasingly accustomed to controlling what they
watch.  Thirty-somethings are the first generation of TV watchers
raised on videos and computers. They're not used to adjusting their
lives around a network's schedule. Prime time starts at 8 p.m. (7
p.m. in the Midwest), but NBC research found that its younger
affluent viewers aren't settled down on the couch at home to watch
TV that early.

"Consumers want more control over their viewing habits," says
Anthony Zuiker, the creator and executive producer of "CSI,"
currently television's most-watched show. "As I look at my own
watching habits, personally, I find myself watching no more than
four or five minutes at a time as I flip for hours. ... If I'm 34
and doing that, if you're 18, 22, you must be doing that. Our
attention span is not there right now."

The networks' effort to offer shows at any time can get caught in
another snag: the tangle of agreements between studios, TV stations
and advertisers that govern how a show is made, sold and
broadcast. Fox's Mr. Grushow is currently in talks with Bruce
Rosenblum, executive vice president of Warner Bros. Television
Group, the Time Warner Inc. studio that makes several hit Fox
shows. Mr. Grushow wants to get the rights from the studio to offer
shows on a video-on-demand service that would charge viewers a
subscription fee. Mr. Rosenblum wants to sell DVDs next year of "The
O.C.," the hit drama about rich teens in Orange County,
Calif. Warner Bros. makes the show, which runs on Fox. Fox argues
the studio has to wait several years. The two men didn't hammer out
these rights when they originally agreed on the show because there
was no market for video on demand or television shows on DVD until
recently.

Similarly, General Electric Co.'s NBC couldn't even consider
offering hit comedies such as "Friends" in its video-on-demand test
that started a year ago. Sorting out the rights was too
involved. Warner Bros. Television studio makes the show, NBC
affiliate stations broadcast it, and other TV stations pay Warner
Bros. to broadcast reruns.

Instead, NBC chose a simpler route. It is testing its flagship
nightly news programs, as well as local news, on Comcast's
video-on-demand service available in the Philadelphia market and
parts of New Jersey. So far, early results indicate that video on
demand brought in extra viewers to the NBC shows.

Video on demand "has the potential to be a serious killer
application," says Alan Wurtzel, NBC president of research, though
he warns results are just preliminary. "The ability to time-shift is
obviously very valuable to people. We're very anxious to test this
out."

Before video on demand becomes viable, the industry needs to resolve
a major issue: finding a way to include commercials. Fox didn't
include ads in its test because its audience was too small to make
it worthwhile. Fox plans to include ads in its 2004 test. The
networks don't know if people will use the service to skip ads,
though they are experimenting with technology that would block
ad-skipping, much as movie DVDs prevent viewers from fast-forwarding
through the previews.

Slowly and Carefully

Another key issue is ensuring that Nielsen, the ratings agency, will
be able to measure how many people watch these services, or whether
they skip over the ads, says Fred Dressler, executive vice president
of Time Warner Cable, which is involved in industry discussions on
extending video on demand to TV shows. "We are going slowly and very
carefully, trying to make sure you don't upset existing financial
models," Mr. Dressler says.

The cable industry is already experimenting with new ways to
advertise on video-on-demand services. Comcast, for instance, plans
to launch in the next few months a special "marketplace" section of
its on-demand service that will run five to 10 minute advertisements
on subjects that require lengthy explanations. Consumers interested
in buying a new car, for example, could click on a video showing a
test drive of the car, says Charlie Thurston, Comcast's president of
advertising sales.

Among big advertisers, "there is a pent-up demand for alternative
approaches" to reach viewers, says Nick Brien, president of
corporate business development at Starcom Mediavest Group, the
Publicis Groupe unit which buys TV advertising time for such clients
as Procter & Gamble Co., Coca-Cola Co., and Kellogg Co. "We either
face the onslaught of TiVo and DVD ... paralyzed with an inability
to evolve. Or we learn it, we test it, we apply it, and we evolve."
He points out that the music industry ignored the threat of
technological change, the new services that let people get music
free, and now is reeling financially.

TV studios are also moving more quickly to take advantage of DVDs,
whose introduction in 1997 proved a goldmine for the film
industry. In part, because DVDs of new movies sell for only about
$20, households are buying on average more than 15 discs a year,
almost three times the number of videotapes that were purchased at
the peak of the video revolution, according to Adams Media
Research. The number of DVDs sold annually has jumped to 490.9
million last year from virtually nothing in 1997, according to
Adams.

So far, DVDs may have hurt more than helped TV-viewing as viewers
dissatisfied with the evening's programs pop in their favorite movie
on DVD.  But TV studios are beginning to introduce DVDs of their
shows, both old and new. Industry executives say Fox's release of
the first season of "24" on DVD just before the start of the show's
second season drove viewers to the network for new episodes. ABC's
"Alias" also attracted more viewers to its broadcasts after a DVD
version hit retail shelves.

DVDs can propel a show even after network executives think viewers
don't want it. That's what happened with "Family Guy." Fox canceled
the animated comedy two years ago because of poor ratings. But the
DVD release has made the show more popular than when it was on the
network. To coincide with and promote the DVD launch, The Cartoon
Network broadcast episodes. The animated show's creator, Seth
MacFarlane, says he is recognized for his voice often now, something
that never happened while the show was actually on. Now Fox is in
talks with Mr. MacFarlane about bringing back the show.
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