TV networks could lose fifth of viewers amid strike

By Paul Thomasch - Analysis

NEW YORK (Reuters) - NBC, CBS, ABC and Fox could soon see their audiences dwindle by as much as a fifth from a year ago as the screenwriters strike wears on, dealing a blow to the networks and advertisers who bought commercial time.

The strike, in its seventh week, comes at a time when the networks have seen their live audience ratings drop by 10 percent. Now, with the networks short of original TV dramas and sitcoms heading into January, advertising executives are forecasting additional ratings drops of 2 percent to 10 percent.

"I wouldn't be surprised to see ratings for prime time down a total of 20 percent," Steve Lanzano, chief operating officer for the U.S division of Havas SA's (EURC.PA) MPG, told Reuters in an interview. "It'll be big."

"The issue will be where people go? The bottom line is this will be very much a media lab for what the future will look like," Lanzano said.

The Writers Guild of America went on strike on November 5 in a contract dispute with the major film and television studios, shattering 20 years of labor peace in Hollywood.

At issue are writers' demands for a greater share of revenue from the Internet, widely seen as a key distribution channel for most entertainment in the future.

Even before the strike, audience ratings were down because of digital video recorders, a lack of breakout hits and competition from new entertainment choices.

Because of those ratings declines, several networks have had to compensate advertisers with extra commercial time, or even cash back, in what are known as "make-goods."

"Advertisers don't want money back, they want and need their ratings points and advertising weight, unless they are in some financial problems," said David Scardino, the entertainment specialist with media buying firm RPA.

Scardino predicted additional audience declines of 5 percent to 6 percent in the first quarter of 2008, bringing total losses from a year ago to about 15 or 16 percent. "I'd add a caveat, however: I do think there is potential for even more downside."

Brad Adgate, director of research at Horizon Media, a media services company, also sees first-quarter drops of about 5 percent, with more declines likely if the strike goes into February or March.

"What's going to happen when this strike is over and they are putting on their shows again? Are the viewers going to come back?" Adgate said.

LOYAL VIEWERS STILL OUT THERE

Even those who forecast big audience declines point out that prime-time network TV still has a loyal following and remains deeply ingrained in American culture.

"I don't see it falling off the cliff," said Baba Shetty, chief media officer for Interpublic Group (IPG.N) agency Hill Holliday, who predicted declines of another 2 to 4 percent.