Can CBS And Broadcast TV Solve Its Aging Problem?
The tables are turning on the traditional TV landscape. Broadcasters, who have long chased after younger viewers that advertisers supposedly crave, are in a losing battle. Young people have more entertainment options than ever these days as Netflix and other video streamers making home entertainment cheap and easily available on multiple devices. Not only do millennials often forgo pay-TV, many of them don't own TV at all, choosing instead to watch shows and movies on their computer or mobile device.
That shift has made baby boomers the primary audience for broadcast TV. The median viewer now qualifies for AARP, and is likely worried about retirement and paying for their kids to go to college, or helping them get on their feet after graduating. At 54, the average TV watcher is older than ever been before. 20 years ago, it was just 41.
But as millennials, buried in high student loan payments, delay important decisions like buying a home, boomers' wallets have become more appealing. Consumers over 50 spend $90 billion a year on cars, and are estimated to control 70% of the nation's disposable income by 2017.
CBS now has the oldest audience in all of broadcast television with a median age of 58, but has been the nation's most-watched network for most of the last ten years. Its aging viewership hasn't proven to a be a problem for its investors as the stock has soared since the recession as the chart below shows.
CBS Corporation, which includes several other assets in addition to the broadcast network, raked in nearly $2 billion in profit last year with an operating margin above 20%. While the network and its lineup lack the cool factor of Netflix and its original programming, the company's strategy has paid off. NCIS, the most popular scripted show on television in the U.S., last year became the most popular show in the world with 57.6 million viewers in 66 countries. While it may not drive the advertising dollars that younger-skewing shows do, it also delivers revenue in the form of retransmission from cable and satellite TV providers. And what started as a single show turned into a franchise, with several additions including the latest, NCIS: New Orleans.
How advertisers are adapting
Though TV viewers are fading, television is still king with advertisers, who spend close to $66 billion on the medium annually, compared to $42 billion on Internet-based advertising.
Advertisers remain focused on the 18-49 or 25-54 demographic, but ads targeting older consumers have gained sway. The trend began during the recession, which hurt older consumers much less than younger ones, and has grown alongside an overall aging of the population, and as boomers, all 78 million of them, hit retirement age. Stereotypes about older consumers, such as that they don't have disposable income or are unwilling to switch brands are also proving untrue.
And unlike millennials, baby boomers are easy to advertise to, as traditional techniques through print media and television still deliver results. Advertisers are still struggling to find the best strategies for reaching young people in the digital age, and ironically, advertisers pay up for young audiences because they're so hard to reach.
So can broadcasters make the sale?
Traditionally, advertisers have gone after younger viewers because they have more buying years ahead of them and are believed to be more impressionable. But often brands that appeal to younger customers don't advertise at all. Companies like Chipotle, Whole Foods, and Lululemon Athletica have eschewed traditional advertising whereas there older counterparts McDonald's, Wal-Mart, and Gap all heavily embrace it.
While an aging audience may eventually doom the broadcast networks, CBS has found some ways to make it work. The network has traditionally targeted an older crowd, which has made it a favorite of luxury car, financial-services, and pharmaceutical companies. Many advertisers have shifted their focus from 18-49 year-olds to 25-54 year-olds, but that may not be enough. In the first six months of this year, CBS's operating profits in its broadcast division are down nearly 10%. Earnings for the corporation as a whole were down 7% in the most recent quarter due to "softness in the advertising marketplace."
Broadcast ratings thus far this fall season are flat, and the cord-cutting only looks set to grow as HBO recently announced it would launch its own stand-alone streaming service to compete with Netflix. The legacy networks aren't quite off the air, but the credits may start rolling soon.
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The article Can CBS And Broadcast TV Solve Its Aging Problem? originally appeared on Fool.com.John Mackey, co-CEO of Whole Foods Market, is a member of The Motley Fool's board of directors. Jeremy Bowman owns shares of Chipotle Mexican Grill. The Motley Fool recommends Chipotle Mexican Grill, Lululemon Athletica, McDonald's, and Whole Foods Market. The Motley Fool owns shares of Chipotle Mexican Grill and Whole Foods Market. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
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