Network TV increasingly is losing prime-time viewers to online video outlets such as Netflix (Nasdaq:NFLX) and Hulu, as Americans increasingly move away from appointment TV, choosing to watch their favorite shows when and where they want.
And, not surprisingly, the exodus has come from TV's most valuable audience, the 18-to-49 year-old demographic. The New York Times reports that over a four-week period starting March 19, NBC lost about 3 percent of its audience, CBS about 8 percent, ABC about 21 percent and Fox some-20 percent of its viewers.
"These numbers are going to affect the upfronts," Brad Adgate, senior vice president for research at Horizon Media, was quoted by the newspaper as saying. "These numbers represent billions of dollars in sales."
An array of shows hit their lowest ratings point of the season during the period measured, The Times reported.
Cable networks that usually benefit from viewers leaving network programming also saw declines--a less dramatic 2 percent slide during the four-week period.
TV executives attributed the decline to a change in viewer behavior.
"We are seeing the cumulative effect of nonlinear viewing," said Jeff Gaspin, a former head of entertainment at NBC. "I think we are at a tipping point in how people are going to watch shows."
Gaspin pointed to his own experience with AMC's Walking Dead, which he said he and his son watched on Netflix, Apple (Nasdaq:AAPL)'s iTunes and by recording it on a DVR until they caught up to the season finale, which they watched live.
"It was not nearly as good. The commercials broke the tension," he said. "We had watched the other episodes with blankets over our heads. I hate to say this to the AMC executives and everybody else in the business, but I will never watch Walking Dead live again."
Gaspin is not alone.
The former head of ABC Entertainment, Lloyd Braun, at this week's Digital Content NewFronts, said, "There is no reason anymore--for most of this kind of programming--to watch it live."
Nevertheless, he added, advertisers continue to pay top dollar for traditional network ad spots.
"What I think has been driving people crazy on the digital side, we've all seen these charts which show time spent on the Internet versus where the (ad) spend is going," said Braun, who now heads BermanBraun, an independent media company that develops television, feature film and digital programs. "There's this huge gap where the audience is spending time online and with tablets and smartphones, and the ad dollars are not commensurate with that."
Both points echo those made by Hulu CEO Jason Kilar more than a year ago in a blog posting titled "The Future of TV."
Kilar wrote that "traditional TV has too many ads," noting that "users have demonstrated that they will go to great lengths to avoid the advertising load."
He said that, aside from sports, viewers increasingly are turning to on-demand viewing to avoid commercials.
As for advertising, Kilar said the traditional model was dead.
"For over 60 years, video advertising could only be bought via a TV show's projected audience, which served as a blunt proxy for a certain target audience," Kilar wrote. "The result has been many wasted impressions and an often irrelevant experience for consumers. In the near to mid term, we anticipate being able to generate higher advertising returns than any traditional channel can from their advertising service, for any type of content."
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