TV Ratings Are Way Down, But Does It Even Matter Anymore?

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Man With a Plan. Photo: Monty Brinton

Just a few years ago, a series such as CBS’s freshman comedy Man With a Plan (the one with Matt LeBlanc) would either be fighting for its life right now, or long dead. Its overall average audience (7.5 million viewers, including DVR replays) is smaller than any regularly scheduled scripted series the Eye network aired during the 2014–15 season. What’s more, compared to the show it replaced on Monday — the since-flown-to-CW Supergirl Man With a Plan has driven down CBS’s overall audience by more than 20 percent in its 8:30 p.m. time slot and reduced the network’s ratings among adults under 50 by a third. But not only is MWAP coming back for a second season, the network was so unconcerned with the aforementioned ratings, it renewed the show all the way back in March, along with similarly so-so performer Superior Donuts. CBS didn’t pick up these shows because they’re critically adored gems it hopes will find bigger audiences in years to come. Nor were the renewals symptomatic of some sort of underlying weakness at the network, since CBS remains TV’s most-watched network (by a lot). Instead, Man With a Plan and Superior Donuts — along with a slew of other similarly meh-rated shows across multiple networks — will return because of a much more fundamental shift in the TV landscape: In 2017, how a show does in the ratings is often no longer the deciding factor in determining whether it lives or dies.

This is not the same thing as saying, “Ratings don’t matter anymore.” We’re not in a post-ratings world — at least not yet. As long as revenue from advertisers remains part of the network TV business model, ratings will matter. Broadcasters aren’t Netflix or HBO. They still want to live up to their name and find shows with a broad appeal, like This Is Us or The Big Bang Theory. But after a decade of audience erosion, including double-digit declines for the vast majority of shows this season, networks have finally accepted reality: People aren’t watching TV the way they used to, and selling commercials isn’t enough to pay the bills (and make a big profit). Even as media conglomerates such as CBS and NBCUniversal prepare to wow big advertisers at this week’s Upfront presentations in New York, execs at those companies now concede less than half of their overall revenue comes from those latter-day Don Drapers. Counting both broadcast and cable, ad spending on television fell behind digital platforms for the first time ever in 2016, according to a PricewaterhouseCoopers report released last month. Advertisers will still pay plenty to get their spots on a successful show — they spent over $7 billion on TV last year — but with network (and cable) TV delivering dramatically smaller audiences, ad revenue is now just one part of the profit equation for most shows. But since the whole reason ratings exist is to help networks determine how much to charge for ad time, it only follows that the less important ad money becomes, the less all-important those Nielsen numbers are.

This new reality played out again and again last week as networks started announcing which of their so-called “bubble” shows would be back. NBC, for instance, decided to order another season of action-thriller Taken (season-to-date rating among adults under 50: 1.4) even as it (briefly) pulled the plug on the dramatically more popular newbie Timeless (2.1 rating). It ultimately ordered new seasons of both, but the fact that Taken had no problem getting renewed, while Timeless literally had to turn back time to get a second season says a lot about the primacy of economics versus ratings. Both shows shared the same time slot (Mondays at 10 p.m., following The Voice) and neither could be considered a breakout success. But as noted, Timeless drew consistently better ratings; it also had a more loyal and active fan base and felt like the kind of show that, in past eras, could live for five or six years on a Friday night (think Grimm or Hawaii Five-O).

So why was Taken initially seen as a better bet than Timeless? According to two people familiar with the situation, NBC was able to cut a financial deal with its co-production partner on Taken guaranteeing the network’s bottom line would be far better off, at least in the short term, than making more Timeless. While our sources wouldn’t get into the details of the agreement, typically such arrangements involve revenue from things such as international sales of a show, or profits from selling off the streaming rights. A bigger slice of those other revenue streams means millions more in profit. (It didn’t hurt that Taken was already cheaper to produce than Timeless.) In other words, when NBC execs were deciding between the two shows, the decision had very little do with ratings or ad revenue.

NBC and Sony execs say privately that Sony, the network’s production partner for Timeless, didn’t make any massive new financial concessions in order to bring the show back from the dead. But that may be because NBC had already extracted those concessions a year ago when it first picked up Timeless. While the series was developed in-house at Sony, the Peacock demanded, and got, a financial interest in the show once it was ordered to series.

NBC wasn’t being a bully by asking for a cut of Timeless: Having such an ownership stake — or simply owning a show outright — has just become essential to making the economics of a TV show work. In past years, networks were more than happy to minimize the risks involved in making a new series work by letting outside studios shoulder the cost of production. Networks would pay a per-episode fee to the studios and, in almost all cases — even with flops — they’d make enough money selling ads to cover that so-called license fee. The better the show performed in the ratings, the more the networks could charge advertisers, and the more money they’d make. (Studios, in turn, would make money by selling reruns of a show into syndication.) But in an era of depressed ratings — and DVRs, which make it oh-so-easy to skip over commercials — few shows can make monster profits from ad sales alone.

Instead, the path to profitability now comes through a combination of revenue streams. Rather than waiting four or five years to put reruns of shows on cable networks, networks now cut deals with Netflix, Hulu, or Amazon to stream full seasons of shows immediately after the first season airs. The international TV marketplace has also become dramatically more important, with content-hungry overseas broadcasters (and streaming services) paying top dollar for American-made shows. (Folks in the United Kingdom are already enjoying the comedy of Kevin Can Wait.) And in the long term, owning their own content will position linear networks to better compete with the big three streamers in the not-so-distant future. As much as NBC loves the millions Netflix pays for The Office reruns, it would make much more sense if the series lived digitally on an NBCUniversal-branded subscription streaming service offering up a couple decades’ worth of past and current Peacock programming from all genres. Just as Netflix insists on owning all distribution rights to shows it programs, whether it produces the series or not, broadcasters (and cable channels) now realize they need to take a long tail approach to content. Ad revenue is still hugely important: If it weren’t, ABC might have kept American Crime — a show it produces— going another year, despite its minuscule audience and annual ratings declines. But in addition to shows that can attract at least a modest audience via linear TV, networks now need shows that can perform over the long haul, in multiple countries and across multiple platforms.

When TV’s new math extends the life of critically despised shows such as Taken or Man With a Plan, even as more beloved shows get whacked, it’s easy to start thinking networks are moving to a future of cheaply produced filler fare that sells well internationally. But in fact, it’s quite possible the declining importance of linear ratings will have the opposite effect. A world where ratings aren’t everything won’t turn networks into HBO-like programming utopias, but they might make them more like an AMC or FX, where there’s a much healthier balance between crowd pleasers and critical darlings. Remember, the very same network that renewed Taken also opted to give another season to the Tina Fey–produced Great News, which hasn’t shown much life in the overnight ratings. And yet, NBC execs smartly seem to be betting that the half-hour will have long-term value once it gets to Netflix (home to Fey’s 30 Rock and Unbreakable Kimmy Schmidt) or another streamer. They believe in it so much, they’re sandwiching the series between the Will & Grace revival and the newly relocated This Is Us, ensuring many more people will at least know the show exists.

Doubling down on Great News, despite its modest early numbers, might not work out in the long term. But unlike the world of even five years ago, NBC and its studio arm don’t need to worry about Great News becoming a smash hit and making it to the once-magical 100-episode mark, which used to be needed for significant syndication profits. Even if Great News lasts just a couple of years, it has a chance at turning a profit (or at least breaking even) via non-linear platforms. One reason ABC was able to keep American Crime running for three years — before finally killing the show last week — was because the Disney-owned network knew it would eventually be able to break even on the show (and maybe make money) by selling it to Netflix. In both cases, the diminished importance of linear ratings made it possible for good shows to stick around longer, and for both networks to spiff up their respective brands just a bit.

As the networks begin rolling out a whole new crop of comedies and dramas, there’ll still be plenty of talk about ratings and lots of hope among execs that they’ve found the next Empire or This Is Us. And some of the newbies could absolutely break out in a big way, even in the age of Nielsen carnage. But if they don’t? The odds have never been better that those shows will still be alive when the networks repeat the whole process a year from now.

TV Ratings Are Way Down, But Does It Even Matter?