Network newscasts, not just newspapers, feeling Web's impact, too

The situation CBS (NYSE: CBS), NBC (NYSE: GE), and ABC (NYSE: DIS) face is roughly analogous to what afternoon daily newspapers faced when television news viewership mushroomed in the 1970s and 1980s. People read the morning paper at breakfast, and then after the workday watched the nightly network newscast to update them on latest developments, and to learn about other nation/international news. As part of this shift, households dropped subscriptions to their afternoon daily newspapers, many of which later converted to morning dailies; many others simply went out of business.

A changing nightly newscast

But give the broadcast networks credit: they've been much quicker to implement changes to address viewership declines than their print compadres of the twentieth century, and the changes encompass both the form and content of the nightly news broadcast. Viewers now are invited to log-on to the network's web site to post their comments, view/read side-bar stories, download the broadcast to their iPod or view it on another mobile device. In many cases, the broadcast networks have allocated air talent to create a nightly newscast tailored for and distributed on the web, above and beyond the bonus coverage that's so often available on news stories broadcast on television.

Does all this mean that nightly newscasts on TV will end any time soon? Hardly. There is this thing called "reach." For all their attrition, particularly among viewers ages 18-34, the network newscast still reaches more than 20 million households on a typical night. Second, as for June 2008, 57% of the 113.3 million U.S. television households have cable television, but 43% do not, according to National Cable Television Association data, and these cable-less viewers rely more on TV than on the Internet for news. Hence, it appears, at least for the next decade, the network newscast will retain a sizable audience.

Nevertheless, moving forward, an increasing chunk of viewers will have already learned about the day's top news and events by the time the nightly newscast starts, which is why the networks, like newspapers and magazines, will have to offer analysis and things the web can't offer or isn't good at, in order to remain profitable ventures in the Internet age.

Sector Analysis: The impact of the above on investors? Clearly, network news' share of advertising revenue will continue to decline, and the revenue decreases will not be offset by revenue gains at their respective news web sites. One advertising executive I spoke with described it this way: "We're going from 5 or 6 major generators of television newscast ad revenue, to more than 100 generators of ad revenue on television and the web. The advertising revenue pie from news is being chopped into a hundred small pieces," he said. The major networks will continue to be strong providers of news content, he added, but the door is now wide open for younger players, such as HuffingtonPost.com and dozens of others, to grab a slice of those formerly network newscast viewers.


Financial Editor Joseph Lazzaro is based in New York.