Cbs Corp. (NYSE:CBS.WD)
Historical Stock Chart
6 Months : From Apr 2018 to Oct 2018
By Joe Flint and Alexandra Bruell
When TV networks decided which shows to put on their fall TV schedules this year, ratings and appeal to advertisers were major considerations, as always.
But other factors are increasingly at play, including whether shows can generate revenue as reruns on streaming services and other digital platforms, or from international sales.
Networks are also favoring shows they own -- meaning those produced by their parent companies' in-house studios -- because the owner of a show can tap into those nonadvertising revenues.
Those dynamics were on display this week as the big broadcast networks unveiled their lineups for the new TV season. Jockeying for the $70 billion marketers are expected to spend on TV commercials this year remains hugely important.
But in many cases, the shows that made the cut -- or staved off cancellation -- didn't have ratings that would impress Madison Avenue.
Take CBS Corp.'s Sherlock Holmes-inspired drama "Elementary." The show has been on for six seasons, and its ratings appear to be in an irreversible decline. It is the least-watched of all the network's dramas.
But revenue from a deal with Hulu plus the show's success overseas has made "Elementary" a very profitable show for CBS, and it will be back next season.
"The factors that go into renewing a show are much more complicated and numerous than they were just a few years ago," said Kelly Kahl, president of CBS Entertainment.
It is a similar story at Walt Disney Co.'s ABC, which is bringing back the low-rated Marvel show "Agents of S.H.I.E.L.D." The show never lived up to expectations on ABC, but it does well on Netflix Inc. and has international appeal that justifies keeping it around, a senior ABC executive said. Marvel is also owned by Disney.
Media companies now see "the global content market as a driver of their businesses," RBC Capital analyst Steven Cahall said in a recent report.
Still, ABC didn't want "Agents of S.H.I.E.L.D." to be a drag on its fall schedule anymore: The next and final season is scheduled next year for summer, when television consumption tends to decline.
At NBC, the decision to pick up the comedy "Brooklyn Nine-Nine," which Fox discarded after five seasons, was also a no-brainer. The show is made by NBC's sister studio, Universal Television, and additional episodes will boost the show's value in the rerun market. NBC is a unit of Comcast Corp.
Conversely, a show that lacks a significant economic interest by a network faces a tougher challenge of sticking around or landing a plum spot on the schedule.
Last spring, ABC surprised viewers and advertisers by canceling the family sitcom "Last Man Standing," The network didn't own the show, and it couldn't come to terms on a new deal with producer Twentieth Century Fox Television. Now, in a twist, Twentieth Century Fox has struck a deal with its sister network Fox to bring the show back this fall.
Both Twentieth Century Fox and Fox are units of 21st Century Fox, which shares common ownership with Wall Street Journal parent News Corp.
The greater weight given to nontraditional measurements of success in deciding whether shows live or die comes as traditional television struggles to maintain its place in the pecking order with advertisers. Marketers increasingly have other options for where they'll put their money, and their outlays on digital platforms like Alphabet Inc.'s Google and Facebook Inc. have grown steadily.
TV networks are hardly giving up on advertising as a major source of revenue. They are changing up their approach by launching new ad products and reducing the number commercials in episodes, to avoid irritating consumers who are tired of ad interruptions.
Fox is introducing a commercial break that will feature only two 30-second commercials, so both are adjacent to programming, as well as a "Fox Block" -- a three- to six-minute ad that's meant to be entertaining.
Fox initially told ad buyers it won't guarantee how many viewers the new ad pods will reach. Networks generally offer guarantees, and if they aren't met, they give advertisers make-goods, or extra ad units, as compensation.
Cutting down on commercials has forced networks to raise ad prices. In cases where ad time is reduced or there are new ad formats, Comcast's NBCUniversal is charging around 50% more, according to ad buyers. Turner in some cases is asking for up to 20% increases to reflect reduced ad load and revamped programming, according to buyers.
"Consumers want fewer, more relevant commercials and advertisers want to enhance their 'ownable' opportunities with the most powerful marketing vehicle they have: prime time television," said Linda Yaccarino, chairman of advertising and client partnerships at NBCUniversal, in a statement provided by an NBC spokesman.
"I do think the reasoning behind lowering commercial load is a genuine effort to improve the product, ratings, the viewer experience," said David Campanelli, Horizon Media's executive vice president and co-chief investment officer. "The challenge is the economics of it. They've lost revenue by taking out commercials. How do you make that up?"
Write to Joe Flint at email@example.com and Alexandra Bruell at firstname.lastname@example.org
(END) Dow Jones Newswires
May 18, 2018 07:14 ET (11:14 GMT)
Copyright (c) 2018 Dow Jones & Company, Inc.