Desperate TV Networks "Doomed" Without New Business Model

By Ryan McGreal
Published April 23, 2009

The Star reports that Ivan Fecan, head of CTV, told Parliament the Canadian network TV industry will "cease to exist" without being allowed to develop a new business model.

Fecan insisted CTV is not seeking a bailout. However, he said broadcasters must be able to charge cable TV providers for the right to carry their over-the-air signals - known as fee-for-carriage.

Alternatively, he said, networks should be relieved of their obligation to provide specified amounts of local news and Canadian content. That would be a less desirable solution, Fecan added, since there's not much point in providing local television stations if there's little local content on it.

The failure of the network TV business model has nothing to do with whether networks receive enough public subsidies or are allowed to carry more American shows, and has everything to do with the collapse in advertising as a revenue stream.

People have always hated interruption ads, but for the first time it's trivially easy to avoid watching them. That's why advertising revenue on TV is way down - the economic crisis has just aggravated a trend already in play.

The ideal answer is for TV viewers, rather than advertisers, to pay for the TV they watch.

Every business model has a seller, a buyer, and a product being sold. Under today's business model, the seller is the TV network, the buyer is the advertiser, and the product being sold is viewer eyeballs.

As a result, TV is tailored to suit what the buyer (the advertiser) wants, rather than what the product being sold wants. One result of this is an overabundance of bland, goofy TV shows that appeal to the lowest common denominator and are careful not to threaten the interests of advertisers.

If we switched to, say, a BBC-style viewing licence model, the market incentive would be for TV stations to produce shows that viewers want to see.

Shows could be smarter, edgier and more idiosyncratic, while news and investigative programs would be bolder and more controversial (no more could advertisers censor embarrassing exposes by threatening to withhold revenue).

At the same time, viewers would no longer have to sit through (or, increasingly, fast-forward through) interruption ads.

The model doesn't have to be a BBC-style licence. It may make more sense to sell TV on a pay-per-view basis, or via subscription to fairly fine-grained streams. TV networks could take a cue from online technologies and employ some form of Bayesian logic to develop a personalized program recommendation engine, a la Amazon's highly successful "Customers Who Bought This Item Also Bought..." feature.

The point is that a shift to having viewers pay for the TV they watch would improve the quality of TV by more closely linking what people want to watch with how much revenue the TV networks receive.

Today's advertising-based business model has run its course. The solution not to borrow from the future to prop up yet another failed business model, but to help the networks transition to a forward-compatible model.

Since TV is delivered over publicly owned radio frequencies, lawmakers have a critical role to play in supporting this transition in a way that results in better TV with sustainable funding.

Ryan McGreal, the editor of Raise the Hammer, lives in Hamilton with his family and works as a programmer, writer and consultant. Ryan volunteers with Hamilton Light Rail, a citizen group dedicated to bringing light rail transit to Hamilton. Ryan wrote a city affairs column in Hamilton Magazine, and several of his articles have been published in the Hamilton Spectator. His articles have also been published in The Walrus, HuffPost and Behind the Numbers. He maintains a personal website, has been known to share passing thoughts on Twitter and Facebook, and posts the occasional cat photo on Instagram.


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By jason (registered) | Posted April 23, 2009 at 10:16:24

I can only speak for myself, but I watch TVO and Cable 14 more than any other station on the dial.
In fact, it's not even close. Granted, every so often I tune into The National if I happen to be home then, and in the mood for news, but TVO is the only station that I consistently see upcoming shows and films that I really want to watch. Maybe someday I'll appreciate the wonder that is E! Hollywood Story, but I doubt it.

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By JonC (registered) | Posted April 23, 2009 at 10:31:50

The other drop off in advertising revenue is due to cut budgets from regular sponsors (and less competition to pay top dollar). It'll have a huge impact in the sports world in the near future too (sponsorship deals are usually worked out a year or two in the future).

Other than tailoring shows to advertisers wants, the other issue is that as networks raced for the advertising dollars, they continually up their budgets for producing prime time shows (I believe ER cost 13 Million per episode). However, with income levels down, the previous winners are going now loss leaders. Perhaps CTV's problem is that they are broadcasting 9 of the currently top 10 rated shows (all except NCIS)

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By Basketballfan (anonymous) | Posted April 23, 2009 at 10:57:59

"It'll have a huge impact in the sports world in the near future too (sponsorship deals are usually worked out a year or two in the future)."

No guff! They're calling the NBA the "No Benjamins Association" because a bunch of teams don't know if they'll even survive this downturn.

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By Melville (anonymous) | Posted April 24, 2009 at 01:52:28

Yeah, great, another money sink for the poor. Charge us for watching our own damn TVs, thanks! We need more poor tax!

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By Hawthorne (anonymous) | Posted April 24, 2009 at 08:53:40

Dude you can watch your own damn TV all you want, but if you want actual shows to appear on your TV someone's gotta pay for that.

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By Potato (anonymous) | Posted April 24, 2009 at 13:38:28

I won't miss the network broadcasters. They are part of the matured industrial era economy that depended upon delivering mass audiences to mass advertisers to support mass production. The disappointment of it all was that the shows themselves, not just the advertising, were created to shape as much as entertain mass consumer culture. Fortunately this is being fractured into smaller and smaller areas of interest by the proliferation of media in the current information age. How to pay for this is still under development, however.

Advertisers are slowly learning how to make use of focused, targeted media to promote their goods, but many still suffer from their own industrial era woes and have not learned how to produce for increasingly individualized tastes at affordable prices, just as big broadcasters wax nostalgic about the days they shaped, rather than reflected, public opinion. True, some media have turned to combinations of audience fees, public subsidies and fundraising. But I don't see the need for additional government supported channels, and I don't see myself voluntarily paying for CTV anytime soon. If I want to see serialized drama I'd rather buy the DVDs than subsidize the entirety of network TV.

I'm looking forward though, to the growth of sports broadcasting that does not pay players hundreds of thousands of dollars to play each game. I don't begrudge them the money they get from the current system, but I don't think that's essential to good sport either. Similarly, I don't think television stars are worth hundreds of thousands per performance. The technology for recording and broadcasting these events has become far more economical too, so I think television as we know it could carry on a while yet, and perhaps even become more connected to local communities and talents without the big advertising rates that allowed national media conglomerates to buy up their smaller, community-oriented competitors in the first place. But if CTV and Global disappear I can't think of anything I'll miss, knowing something more connected to me and my interests is, and will replace them probably through the internet.

If the big American networks disappeared too then we wouldn't have the joys of reporters "embedded" in the military either. Gosh. And whither the super-bowl commercials, the great tit-slipping incident and their like? How will I survive?

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By Crln (registered) | Posted April 25, 2009 at 12:36:35

I read an interview with a TV guy (Peter Berg, creator of Friday Night Lights & Wonderland) who suggested that, as well as shifting towards television-on-demand, the TV industry might be going back to the "old days of television" when a company would sponsor a show directly. He gave the examples of Applebee's sponsoring FNL and Staples sponsoring The Office, in return for product placement. This was in response to the whole internet/Tivo commercial-skipping issue, and the problems with the current ratings system, not to the economy. He seemed to think this might lead to a positive shift in terms of freedom to be creative/edgy. I don't know what that'd mean for the networks, though.

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By JonC (registered) | Posted April 25, 2009 at 15:44:52

As long as the motivating factor is profit, the networks don't bring anything of value (compared to a by-demand system).

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