NEW YORK -- Last week, the three major networks told the American public what it has presumably been waiting all summer to hear: Murphy is pregnant, Rebecca would like to be pregnant (but Sam's having problems), and power tools have become a male fixation worthy of a weekly series.
Ratings for these widely publicized programs, "Murphy Brown," "Cheers," and "Home Improvement," were as good as anyone could have expected. But these days, even the hottest show claims only one-third of the television audience. Remember when the entire country wondered who shot J. R?
Since 1980 (when J. R. bit the bullet), the major networks' share of the television audience has dropped from more than 90 percent to 63 percent. Cable television's revenues are nearly twice as large as the networks'. And for the first time since television's early days, the networks will cumulatively lose money, said Ken Auletta, author of a new book on the industry, "Three Blind Mice."
Pessimism abounds for 1992. Asked for a forecast, Alan Gottesman, a longtime industry analyst for PaineWebber, replied: "I don't do autopsies."
Could it be that bad?
"Used to be," he said. "Then it got worse."
To be sure, the networks remain big business. Each has revenues exceeding $3 billion. Their product -- news, entertainment and education -- goes out to 172 million television sets in 95 million U.S. homes. Because networks' costs are largely fixed, even small shifts in income could boost profits substantially.
But a two-season recession, combined with the decade-long dilution in viewership, has badly undermined the sole source of network sustenance: advertising. Overall broadcast revenues were down 4.9 percent in the first half of 1991, according to the Television Bureau of Advertising Inc.
If the networks are to rebound when the economy recovers, they must overcome non-traditional obstacles. To hawk products, companies have been shifting resources to junk mail, in-store promotions and -- tightly targeted cable audiences.
The heart of network profitability is the advertising run on prime-time shows. When all works according to script, prime time shows become part of the national psyche. Companies selling everything from diapers to beer pay hundreds of thousands of dollars to piggyback on that appeal.
Daily viewership declining
The last time any semblance of this normalcy occurred was in the mid-1980s. In 1984, combined network profits reached $800 million, Mr. Auletta says. The next year, average daily viewership by individuals topped out at seven hours, 10 minutes a day, according to Nielsen Media Research. The leading program, "The Cosby Show," was on the screen of more than half the TV sets turned on during its time slot.
The picture then became grim. Costs have risen and competition increased. Perhaps most remarkably of all, viewership has declined.
Nielsen reckons average daily viewership has shrunk by 15 minutes since 1985. The change is significant in terms of direction, if not in scope. People now have an increasing array of programs to watch, and are choosing to watch less.
Perversely, ebbing appeal has increased the price for successful programming. "Cheers" illustrates the new gloom. Though it was last season's hottest show, the rating was the lowest for any winner in the past 40 years. Cosby's share six years ago was 50 percent larger. Nonetheless, after intense negotiations last fall, NBC agreed to double the price it paid for a new season of "Cheers," to about $70 million. Hits -- at almost any price -- are critical.
"When I started researching my book six years ago, the heads of the networks were talking about their share stabilizing at about 65 percent," said Mr. Auletta. "Clearly we are going below 60, and no one has any idea how low it may go. When will the advertising community decide the networks don't reach a mass audience?"
Advertisers are hedging already. NBC may have agreed to pay more for "Cheers" but sponsors won't. Rates for a 30-second spot are down 9 percent, Nielsen says. Higher costs, lower revenues -- it's an awful combination. "If you can't make profits on your hits, where can you?" Mr. Auletta asks.
For lower-rated shows, the decline in advertising prices is even more precipitous. Rates for the cult hit "The Simpsons," whose viewership is limited by the Fox Network's small group of affiliated stations, are down by one-third.
Adjusting for inflation, network ad revenues have been almost flat since 1985. At the same time, ad revenues for cable have been growing at double digit rates and cable has been able to mine far larger amounts of money from its second source of income, subscriber fees. Total revenues for cable exceeded revenues for the networks in 1983 and should be approximately double by the end of this year.