US networks head for the red

The last two weeks in May are a hectic time for the US TV networks. The period is known as the sweeps', the time when they must put on t...

The last two weeks in May are a hectic time for the US TV networks. The period is known as the sweeps8217;, the time when they must put on their best fare and the seasonal finales of hit shows to establish good ratings and high advertising rates.

It is an annual routine for which the gloves come off. Amid the glitzy presentations and the assurances of a truly exciting line-up, the sniping between networks reaches fever pitch. NBC, the market share leader, depicted Fox network viewers as illiterate thugs and CBS8217;s as old ladies; CBS mocked NBC8217;s comedies and ridiculed last-placed ABC. But beneath the posturing it was impossible to avoid the desperation.

Audiences have been leaving ABC, CBS and NBC for years earlier this year cable ratings overtook the networks for the first time but it8217;s now that they are considering what has long been obvious: their business needs an overhaul. Weakened by competition, threatened by the media revolution, battered by production costs, squeezed by advertisers and criticisedfor dated programming, they are no longer able to ignore pressure from parent companies tired of watching their profits disappear. In the four years since Disney acquired ABC for 19 billion, the network has plunged from an annual profit of 400 million to a loss of 100m. Fox may lose 15m this fiscal year, NBC8217;s profits may sink by at least one-third, and CBS expects a small profit of 15m after deep cost-cutting.

The game as it was played before doesn8217;t work,8217; CBS President Leslie Moonves told the Wall Street Journal recently. 8220;The whole way we look at our business has to be drastically different.8221; There have been efforts to reform, but networks know that audience fragmentation is only likely to get worse. As digital TV begins to add hundreds of stations, and the marriage of the TV and computer is realised, smaller stations with niche audiences will grow stronger.

General Electric has made no secret of the fact that it is eager to find a partner for NBC in Sony or Time Warner, and its chief, BobWright, recently suggested that they might become a paid-for cable service. CBS is, quietly, for sale, and both networks have been talking to Time Warner8217;s CNN to contract out their newsgathering. Even News Corp8217;s Fox is looking for ways to stem losses.

At ABC, embattled CEO Michael Eisner trying to around the company8217;s fortunes. In the past two months, tensions between the networks and their affiliates 8212; the local stations that transmit the signals 8212; has erupted in warfare. Fox has moved to take away advertising time that had belonged to them. ABC, too, is overturning convention by pressing local stations into paying for expensive programming such as American football games.

8220;The world has changed,8221; Eisner said, after negotiations broke down. 8220;We can8217;t continue losing all this money.8221; These may be stop-gap measures. The consensus among industry watchers is that CBS, NBC and ABC might consolidate into two networks, or that one of the new Internet companies will purchase one. 8220;It8217;s perfectlyplausible that Yahoo!, AOL and NBC will be the top three TV networks as the term will evolve,8221; Reed Hundt, former chief of the Federal Communications Commission, said last month.

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A combined television and computer would allow audiences to watch shows where and when they want, print out the script and then buy the book or track. This may also usher in a consolidation of entertainment, technology and communications companies. As the networks remake themselves as more efficient businesses, however, they still retain the advantage of being able to reach millions of people at once. 8220;I think these networks will survive,8221; says NBC8217;s Wright. 8220;But I didn8217;t say it was going to be easy.8221;