My 2 Cents

Recently, on a plane from Los Angeles to New York City I sat next to a graphic designer who proudly vented that, in the past few years, she had done away with her TV set, preferring instead to watch streaming videos on her computer. However, in order to watch movies and favorite TV series, she bought a video projector, because presumably, after a day of work staring at a 17-inch computer screen, she, like the rest of us, wants to enjoy some entertainment on a big screen. Indeed, television still means continuity, familiarity and, today, a big screen.

According to data from New York-based private equity investment firm Veronis Suhler Stevenson, in 2006, U.S. households spent more than eight hours a day watching TV, up from about six hours in 1975. So, while ratings for the big U.S. broadcast networks continue to fall –– collectively they lost 3.4 million viewers in the past TV season –– people watch more television than ever.

A similar development seems to be happening with the U.S. car industry: While consumers buy fewer cars and the cost of gasoline continues to increase, people spend more time on the roads driving. But I’m not surprised, considering that the U.S. car industry’s focus has changed from years ago, when it was able to produce exactly what consumers wanted.

And, like the U.S. TV industry, the American automobile sector is becoming more creative with cutting costs than with its products. It’s more adept at anticipating shareholders’ whims than those of the buying public.

Let’s make some comparisons. The U.S. automotive sector is a $675 billion a year industry (based on 2006 figures for cars and light trucks) and the big three automakers (Chrysler, Ford and General Motors) collectively spend an estimated $1 billion a year on prototypes, which constitutes 0.2 percent of their annual revenues of $465 billion (2006 figures). The U.S. broadcast TV sector is a $49 billion a year industry and spends $200 million a year on its car prototype equivalent, pilots, representing 0.4 percent of its annual intake. And those figures are on the low end. If one considers cable, satellite, VoD, DVDs and other ancillary, such as in-flight programming, the TV sector’s total annual revenue in the U.S. tops the $100 billion mark.

Years ago, in order to save money, car manufacturers in the U.S. tried to replace prototypes with clay models. That particular change marked the time in which Japanese cars started challenging American dominance. Today, the U.S. auto industry is making full use of what it calls Computer Aid Design, and the results are huge losses.

As ABC’s Steve McPherson said at his network’s upfronts in New York last May: “If I was running a car company and I decided I was going to produce 700,000 cars from a sketch, with no prototype, does it make sense?” According to McPherson, the pilot-based approach is “the R&D of our business.”

Keep in mind that each episode of a drama series could cost $3 million ($4.5 million for older shows with cast pay increases). Therefore, when a network invests $27 million in 13 episodes of a drama series (70 percent of the producers’ cost) to get some $70 million in ad revenues for 234 minutes of spots, wouldn’t it be better to risk just $5 million by first making a prototype of that show? Granted, no one else in the world finds the need, like the U.S., to produce TV pilots. But no one else in the world annually generates $49 billion in TV ad sales, then $27 billion in domestic TV program sales (2006 figures), followed by $5 billion in international TV program sales. If we take that argument, we’re comparing apple and oranges.

Now a few executives of the network divisions of studio conglomerates want to change the game in order to save $50 million each a year, but, in the process they risk making the whole studio-network concept of vertical integration crumble.

And not only that. A more risky outcome could be losses at the advertising revenue level, which is the only business model of TV networks, at least until IPTV takes hold.

At this point, I’d like to introduce a new concept, which has actually been in use since ancient Rome. Let’s view “progress” as a return to a golden age of television and not as a forced march into the future. After all, a deliberate break with the past is not potentially creative. At times, innovation can become subversive, especially with the risky business of doing away with pilots. For example, how can both programmers and advertisers be able to judge if there is going to be chemistry between key characters? Plus, a sketch can look funny in the script, but be a total dud on camera.

Don’t get me wrong. I’m not against unveiling new shows throughout the year so that they have better chance of picking up steam without the fierce competition often encountered in the fall. But it’s one thing to improve on an existing model. It’s another thing to change it completely for something unknown. Plus, I don’t like surprises!

Dom Serafini