Trouble in TV Land

It's written by eggheads, for eggheads, and it's fun to see what truly numbers-crunching, cubicle-dwelling, pantyhose-wearing, corporate types think is going to happen to the Juicy couture clad and Balenciega-bag toting Hollywood set.

For example, Sam Stovall's "Sector Watch" column this week in today's edition of the mag hints that something odd is afoot with broadcasters.

"This industry, along with the advertising group, has shown surprising strength during this most recent market meltdown. Usually these industries - both found in the consumer-discretionary sector - would mirror the weakness seen in the overall market. The reason? Advertising spending, the primary economic driver, would likely be adversely affected by a forecasted slowdown in economic growth due to the prospects of higher interest rates as central bankers endeavor to keep ahead of inflationary trends."

Indeed, the networks appear to be hurting already. As both the Wall Street Journal and the trades point out today, the upfront advertising market - the commercials purchased by advertisers before the TV season kicks off in the fall - has been flaccid at best. Fox, of course, has sold the bulk of its time, but then again, it doesn't program a ten o'clock hour of primetime.

As Brian Steinberg and Suzanne Vranica write in today's WSJ, "Neither ABC nor CBS has finalized anywhere near as much business as Fox, however. CBS, home to long-running hits such as "CSI" and "Survivor," is holding firm in a push for price increases. Despite the network's stable lineup, media buyers say they are pressuring the
network to keep prices flat or even roll them back. One media buyer says CBS recently walked away from an upfront deal that called for pricing to remain flat ... ABC is taking a similarly tough stance. The network is asking for price increases as high as 6%, according to one media buyer. Advertisers might be willing to go as high as 4%, another buyer said."

In other words, when the economy slows, media stocks usually tank, because its TV that bears the brunt of consumers not buying beer and Buicks. But that hasn't happened.

Why?

Because, as the saying goes, a rising tide lifts all televisions, even those that aren't TVs.

Um, by that I mean that while the TV ad market isn't as efficient as it used to be in reaching those who could be parted with their cash in order to sell a new Camry, it doesn't mean that broadcasting isn't expanding to include other weird businesses that weren't ever really broadcasting, but soon will be.

As Business Week's Stovall points out, "The battle of the bundles should intensify" - i.e. Baby Bells will launch broadband video that will become just like TV. Already, AT&T has hired Endeavor, one of Hollywood's largest talent agencies, to advise it on how to develop "shows" for its new, soon-to-be video-enabled pipeline, and Microsoft has hired legendary reality TV guru Ben Silverman (who imported "Survivor" to the US) to develop a slate of program for its site.

Simultaneously, as phone companies become TV companies, your cable company is becoming a phone company: Thanks to offering new digital-phone service, the nation's largest cable operators "posted record first-quarter subscriber growth."