Out of the Box : The TV Networks May Be on the Brink of Extinction. So ABC and Disney Are Trying to Reinvent Television as 'Tele-Fusion.' Goodbye, Boob Tube. Hello, Oscar.com, Buddy Cams and Zoogs
Roberts, Johnnie L., Newsweek
The top executives at ABC had flown out to Aspen to meet with their boss, Disney CEO Michael Eisner. A key item on the agenda: reviewing their plans for the network in the world of new media. They told Eisner about how ABCnews.com had grown, and about how ESPN, ABC's cable-sports empire, had become a hot cyberspace destination. They talked about synchronizing the upcoming Oscars broadcast with Oscars activities on the Web. But while they didn't know it then, the most telling demonstration of the network's leap into cyberspace was taking place as they were eating dinner at Eisner's mountainside vacation home on March 3. As the participants plowed through a buffet, they watched Barbara Walters's interview with Monica Lewinsky, along with the 70 million other viewers who tuned in at one time or another. And of those viewers, 1.5 million also logged on to the ABC.com Web site to fish for more dish on the scandal, vote in a poll or demand to know the shade of Monica's lipstick. It all buoyed Eisner, leaving him encouraged about ABC's future. "This is fun," says Eisner. "This is more fun than I've had in 10 years."
If Eisner hasn't found television much fun in the past few years, who can blame him? As at all the other television networks, ABC's audience is shrinking, competitors are multiplying and programming costs are soaring. The upshot: in the four years since Disney acquired ABC, the network's annual results have plunged from an almost $400 million profit to a loss of $100 million or so. And the news is hardly encouraging at the other nets. Fox may lose $15 million this fiscal year. Profits at NBC, the No. 1 network, could by some estimates sink by at least one third. CBS expects a small profit--$15 million to $25 million--thanks to deep cost cuts.
Peter Jennings, the ABC News anchor, recently called television "the most transforming machine of the 20th century." But as that century draws to a close, it's television that's being transformed. The economics that undergirded the industry have been permanently altered. At the same time, the shift from Old to New Media is accelerating as the Internet spreads and "broad-band pipelines" offer warp-speed access to cyberspace. The networks--those Old Media titans that once loomed so large in American business, politics and culture--have been humbled, and now their very survival may be in doubt. "It's perfectly plausible that Yahoo, AOL and NBC will be the top three TV networks as the term will evolve," says Reed Hundt, former chief of the Federal Communications Commission.
Hyperbole? Don't bet on it. Not long ago, NBC chief Robert Wright suggested that the network might leave the air and become a pay-cable service. The media and online worlds buzz with the rumor that America Online will acquire CBS. And in the last two weeks simmering financial tensions between both ABC and Fox and their affiliates--the local stations that actually transmit the networks' signals to your TV set--have erupted into open warfare. Fox unilaterally moved to grab a reported $50 million to $100 million by taking away advertising time that had belonged to the local stations. And ABC is seeking to turn decades of broadcast economics upside down by, among other things, pressing affiliates to help pay for expensive programming. Early this month ABC abruptly ended months of talks with the affiliates. What's potentially at stake, Eisner says, is the survival of broadcast TV. "The world has changed," he says. "We can't continue losing all this money."
If the network business is to be reinvented for survival in the next century, ABC is arguably in the best position to do it. I t is part of one of the most vertically integrated media companies. The Magic Kingdom has vast resources along every step of the process of creating and distributing televised entertainment. The question is whether Eisner and Robert Iger, ABC's chairman and Walt Disney International president , will succeed in making all the parts come together in new ways. …