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Fall Forecast: Unpredictable

Every year just before the new season begins, network executives embark on the annual ritual of waiting in agony to see if any of their new players can get out of the gate. But this fall those same executives have another reason to fret, as the rules of the game are changing drastically.

As the new season is about to kick off, DVR penetration is rising and poised to hit 20%, the ad marketplace is shifting to a commercial ratings system and the networks are now throwing most of their primetime lineup online for free. In other words, the entire landscape of broadcast television is being recalibrated on the fly.

“Nothing like this has ever occurred at one time in the past,” says David Poltrack, president of CBS Vision and chief research officer for the network. “It will be a very critical and interesting fall.”

And the sea changes come at a time when broadcast television is reeling from a ratings-challenged spring followed by a summer that went by without a single hit. The spring showed that repeats, especially for dramas, just aren't a tangible business–at least not anymore. Poor summer viewership meant promos for fall shows weren't seen by as many people.

With all of these factors, many network executives are quietly wondering if the viewers will come back en masse to network television this fall. And even if they do, will the new system ensure they will all be counted anyway?

Even bullish network programmers are looking at the new season in a sober new light. “It might net out that there is some overall decline,” says Preston Beckman, Fox executive VP, strategic program planning and research, of the five broadcast networks. “I think you always have to wonder when you hit some kind of turning point or critical mass.”

Vince Manze, NBC president of program planning scheduling and strategy, also says he is not taking audiences returning at the same levels for granted. “Overall, I think we all would be happy with flat,” he says. “That's a victory these days.”

Despite the modest predictions, broadcast's economic model is safe for another year at least, as the upfront market was booming to the tune of about $9.15 billion and the scatter market looks good so far.

But as viewers get used to watching shows when and how they want them, measurement is going to be increasingly tricky, and advertisers will be watching closely. The bottom line is the networks are feeling more pressure than ever to create strong content.

“Beyond the evolution of media metrics and the revolution in program dispersion, what still is important is if any of the programs have any specific resonance with the viewing public,” says John Rash, senior VP/director of media negotiations for media buyer Campbell Mithun. “Once again this summer, cable raised the bar in quality, if not necessarily in ratings.”

Apples to Oranges?

And scoring the network's results will be a challenge, as comparing this year's numbers to last could be apples to oranges with the metrics changing.

In addition to Nielsen moving from program to commercial ratings, the DVR effect will be closely monitored. The marketplace negotiated many deals on a live-plus-three-day metric, so the networks will get credit for playback in that time period, but not for the live-plus-seven it desires.

Also under close scrutiny: Will the networks' decision to throw most primetime shows online for free begin to eat away at ratings?

“Two years ago there were no shows on the Web, last year the networks were selective and few people knew they were there, but this year a significant percentage of viewers knows they can find shows on the Internet and more people are accessing that,” CBS's Poltrack says.

While networks to this point have trusted that online streaming doesn't cannibalize TV audiences because it drives more people to their sets in the long run, it remains to be seen if that is still the case as the strategy matures. But the genie is out of the bottle as viewers are getting used to the luxury, so Fox's Beckman says second-guessing for now is useless.

“We are personally encouraging more people to view our product in unconventional ways, so to worry about it and do it is a little Looney Tunes to me,” he says. “Either you accept this [is] how we are going to move forward or you don't expose your product as freely.”

The problem in the short run is the gap in ad revenues and how to monetize viewers fleeing to other platforms. Only a collective few hundred million ad dollars are flowing to digital platforms for the networks.

“If every viewer on the Internet means one less on television, the economics don't work,” Poltrack says. “But if every 100 Internet viewers means one less on television, the economics potentially offset the lower ratings. It's a little early to say how those economics are going to play out.”

So while the networks are waiting to see if their new pilots can get viewers to the small screen, they are increasingly paying attention to the big picture.

“The success of shows now can't be measured just by the ratings they get on television, because there are so many alternatives now,” says ABC Entertainment executive vice president Jeff Bader. “Now we are all re-examining how we define success and how we monetize the new spectrum.”