Television is in a state of transition across all major markets. New devices, services, acquisitions, and content offerings are being announced seemingly every day. Some of these have clear user benefits. Others are more puzzling.
In Japan, many TV viewers question why the networks are broadcasting more variety programs. What’s the appeal of watching a panel of “talent” dropping witty one-liners? Or of the increased number infomercials selling everything from vacuum cleaners to vitamin supplements?
In fact, these changes are merely symptoms of bigger trouble in Japan’s traditional TV business model. We are all watching the collapse the TV industry as we know it. Live.
The Trouble with Traditional TV
The basic free-to-air broadcast television model is advertisement driven. Networks create and air programs that attract viewers whom advertisers want to reach. The advertisers then make fifteen-second commercials called TV spots and pay broadcasters to air them—at a price that covers production costs and makes a profit.
Simple enough. So why are these TV spot revenues down across all five national terrestrial broadcast networks?
For the fiscal year that ran through March 2019, Fuji TV’s TV spot revenue declined 5%. TV Tokyo was just behind them at 4%, and TV Asahi at 3.1%. Nippon TV was down 0.7%, and TBS 0.11%—a modest drop, but a drop nonetheless.
What’s causing these losses? Actually, it’s rather simple: advertisers are spending less on TV as a direct result of fewer viewers tuning in. Marketing budgets are being spent on other media.
According to the NHK National Life and Time Survey completed once every five years, time spent in front of the TV from 1995 to 2015 fell for every demographic in Japan except those 70 and older. For people under 30, TV viewing was down a massive 28%.
Adjusting to a Changing Demographic
While the majority may be asking, “What’s happening to my TV?” younger people are increasingly responding, “What TV?” A Cabinet Consumer Confidence report in 2019 reported TV ownership for people under 30 declined from 97% in 2005 to 88% this year.
Broadcasters are responding in three ways:
1. Starting new businesses
The networks, through their parent holding companies, have launched a variety of new businesses, including event operations and real estate. Fuji Media Holdings has had enormous success in a category it calls “Urban Development, Hotels, and Resorts.” Driven by office leasing and the Granvista Hotels and Resorts subsidiary, this category grew 26% in the fiscal year ending March 2019, making up 21% of total revenue and 52% of operating income.
2. Accepting more non-TV spot commercials
Audiences are seeing more infomercials because traditional advertisers, including cosmetics, beer, and car makers, are placing fewer TV spots. Broadcasters have shored up this lost revenue with non-traditional TV advertisers hawking those annoying “buy-now” offers for TV shopping.
3. Lowering production costs
The networks are also boosting their bottom line by cutting one of their largest expenses: program production. In the fiscal year ended March 2019, TV Tokyo erased 6.2% (641 million yen), Fuji slashed 3.7% (3 billion yen), Nippon TV and TV Asahi shrank 0.8% (760 million yen and 740 million yen), and TBS nipped 0.4% (394 million yen). To fill up their hours of programing, the networks are churning out more low-cost programs—variety shows.
The problem? Variety shows don’t drive the ratings broadcasters need to attract more advertisers.
Though the decisions may look financially sound, the networks are actually turning audiences away. After all, the core value of any visual entertainment service is compelling programing, meaning a strategy of reduced investment in program production is fundamentally flawed.
The Impact of Digitization
Also challenging the networks is the audience shift to new media. The same NHK National Life and Time Survey that marked the fall in TV viewership reported that time spent on the internet, including online video and gaming, doubled from 1995 to 2015. That’s an average of about 30 minutes per day. This is still much lower than TV’s daily average across the board, but for those under 30, the internet is becoming a bigger part of daily life—only 30 minutes less than TV.
This rapidly growing trend poses the greatest challenge to the traditional TV business model.