NAB '99 Marks Sea Change for Broadcast Industry

The television-broadcasting industry is undergoing a metamorphosis. Some observers at last week's National Association of Broadcasters convention in Las Vegas called it a "generation change" embodied by a new group of energetic "digital content providers"---with a different concept of entertainment---gradually replacing older producers and executives. Other reporters have pointed to technological developments such as high-definition TV and the nascent trend toward interactivity as motive forces behind the 60-year-old industry's growing transformation.

But economics are probably the biggest factor of all. The Big Three networks---ABC, CBS, and NBC---ruled the television roost for most of the industry's first four decades. Independents (mostly low-power UHF stations) and public television stations always existed, but the networks' hegemony went largely unchallenged. That all began to change in the mid-1970s with the growth of cable. The networks' share of the viewing market has declined steadily for the past 20 years, as charted in a detailed report by Kyle Pope in the April 19 edition of the Wall Street Journal.

The Big Three have all been slashing costs and unloading assets in an attempt to remain competitive. Now, merging two or more of the networks is starting to be discussed in more than hypothetical terms---what was once unthinkable is now being considered as a survival tactic. The idea of consolidation has gathered enough momentum that Federal Communications Commission chairman William Kennard made it the subject of his address at NAB '99.

"Common-sense ownership relief," as Kennard described it, is high on the FCC's agenda. Noting that the recent merger of Yahoo! and resulted in a company valued at $40 billion---one-third larger than CBS---Kennard said his agency understands that Internet companies are "also broadcasters" who will be extremely competitive in the coming world of interactive streaming video. Kennard asked the industry to join him in bringing "more certainty to the marketplace . . . we need to revise our rules to give broadcasters more flexibility in an increasingly competitive world, without undermining our rightful reverence for outlet diversity."

Ownership rules won't disappear completely, Kennard noted. "Some say we should eliminate all our ownership rules. Just get rid of them all . . . I don't think that's the right answer. This is not the time to completely deregulate broadcast ownership." However, he acknowledged that the FCC can't "keep broadcasters in the dark ages of black-and-white-era rules. With the changing realities of today's marketplace," he told NAB attendees, "you need the flexibility to seize the opportunities and open the frontiers of the Information Age."

Mel Karmazin, the hard-charging CBS top executive, has been lobbying Washington to allow ownership of a second network. NBC has discussed mergers or partnerships with Time Warner and Sony Corporation. The networks are already scaling back production costs and looking to outsource news services from other providers such as Cable News Network.

As quoted in Pope's piece, Michael Goodman, senior analyst of the Yankee Group, states flatly, "The broadcast networks cannot survive as stand-alone entities." NBC President Bob Wright agrees. "There's a growing acceptance by everybody that the business model just doesn't make sense anymore. We're going to have to get the 1940s view of television kind of updated." A lot of folks at NAB '99 say the next generation is already there.