Report Details How the Television Industry has Weathered the Digital Storm

By Dennis Kuba
June 26, 2012

Needham & Co. released a report on Friday — “The Future of TV: the Invisible Hand” — that helps explain how the television industry has so far weathered the digital storm that has affected other media segments.
“TV offers one of the best price/value ratios of any consumer product,” note media analysts Laura Martin and Dan Medina in the report.
For the average U.S. monthly cable bill of $75 a month for 135 TV channels, “consumers pay about 30 cents for every hour of TV they watch. Compared with other forms of leisure time, this looks inexpensive.”
“Today, the Internet content creators cannot create perfect substitutes for TV content, owing to the enormous content costs,” write Martin and Medina. “For example, broadcast networks — ABC, CBS, Fox and NBC — typically spend $2 billion to $3 billion each year, equating to about $2 million to $5 million per hour of prime-time programming.”
“The primary reason that TV networks can commit to these enormous production budgets is because the business model of the ecosystem raises money before anyone knows which channels and shows will be hits,” adds the report.
More than three-quarters of network revenues is derived from the upfront advertising market. “Advertisers this month agreed to shell out $9 billion for prime-time commercials on the major television networks,” reports the Los Angeles Times.

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