Independent Exhibitors Film Bulletin (1959)

VALUE LINE SURVEY Foresees Further Growth Potential in TV a careful study of the broadcasting industry, feels that the Fortune article may have overstated the case against TV. We agree with Fortune that the quality of today's TV programs is far from satisfactory. The overabundance of Westerns and, until recently, quiz shows is a case in point. Moreover, some of the TV commercials are indeed in poor taste. However, we do not concur with Fortune that, because of this condition, television has "failed". In our opinion, today's programming shortcomings merely represent areas for future improvement. If all of today's broadcast time were filled with such excellent programs as "Wonderful Town" and "The Fred Astaire Show", with major sports events, and with special instantaneous news reporting, such as the Election Night coverage, television would than really have approached perfection and there would be little room for improvement. Growing Pains Is existence of a "buyers' market" trimming the broadcasters' profits as seriously as Fortune indicates? We think not. The icombined financial figures of the three major networks for the last two years have been distorted by the results of ABC-TV jalone. Actually, CBS-TV has been achieving wider profit margins with each passing year. Had NBC-TV not poured out millions of dollars to promote color television prematurely, it too would have done equally well. ABC-TV is probably the only major network that has experienced a profit squeeze. But this is attributable to a special factor. During these last two years, ABC has been pulling no punches in its efforts to catch up with the senior networks. (Recent trade results indicate that this determination is paying off). The expansion project has necessarily involved considerable extra costs. These expenses are nonrecurring, however. We believe that by I960, when the network ,is operating on a more normal basis, it too will enjoy a rising rate of profits. The "buyers' market" in the TV industry has been a unique one. Generally speaking, a buyers' market exists in an industry when demand for that industry's product weakens. During the last two years, however, the demand for TV time has shown no sign of softening. In 1957, as a matter of fact, advertising expenditures on TV increased 7% to $1.29 billion. Last year, even in the face of an economic recession, such outlays moved ahead further to $1.4 billion. (Another 8 to 10% increase is foreseen for 1959.) This buyers' market has been created by the rapid increase in available time brought about by the emergence of ABC-TV as a major network. Believing as we do that advertising expenditures on television will continue to advance, we suspect that before long the television industry will again enjoy a sellers' market. Greater program selectivity by both TV viewers and advertisers is an undeniable development. However, it has been anticipated by the television industry itself. A few years back, television was a novelty. People watched anything it had to offer; advertisers bought virtually any air time they could get hold of. The novelty of TV is now gradually wearing out. TV viewers begin to watch only the shows that suit their taste and advertisers pick only those programs that are tuned in by the right group of prospective customers. All this is no cause for alarm. Just as the refusal of auto manufacturers to buy space in a child's magazine never did foreshadow the collapse of the entire magazine industry, this trend toward program selectivity by no means suggests the doom of TV. True, the number of viewers and prospective sponsors per program may, as a result, tend to decline from the current high levels. However, it only takes one or two satisfied advertisers to support a TV show. Moreover, advertisers are well aware of the fact that even if their sales promotional messages reach but a small fraction of the total TV homes, their cost per unit impression will still be relatively low, the effectiveness of good TV commercials considered. A 10% share of the national TV homes is equal to more than 10 million people. (Immediately after "I Love Lucy" had been dropped by Philip Morris in 1955, is was signed up by other advertisers. Even in subsequent reruns, the show has had little trouble getting sponsors. Meanwhile, Philip Morris has continued to lay out increasing amounts of money for advertising over TV. Last year, such outlays amounted to an estimated $9 million, the highest in the company's history.) Growth Potential Remains Strong What about the fact that television already reaches some 90% of the American population? Doesn't this high level of saturation clearly imply that TV has about reached its maximum penetration? Granted, the number of people watching TV in the years ahead will increase only moderately, keyed probably to the secular gain in overall population. But the very fact that television has attained a 90% saturation of American homes is a plus factor. It strongly underscores the effectiveness of television as an advertising medium. With the exception of radio, no other medium can deliver such extensive "circulation. As we see it, over the years ahead, the television industry will grow not so much in terms of an increasing number of TV homes, but in the form of expanding revenues from advertisers on the one hand and improvement of program quality on the other. If our analysis is correct, then Hollywood, as a result of its recent entry into television, could indeed become a prime beneficiary. After acquiring half a century of experience, the motion picture industry has mastered the art of entertaining Americans en masse. Armed with sufficient studio facilities and showmanship, Hollywood is in an excellent position to meet the increasing demand for TV programmings, a demand soon to be magnified by the depletion of old movies, which now OCCUp) nearly one-third of air time. Against this backdrop, we feel that the accelerating television activities of the movie companies are not only timely undertakings but are also essential moves to insure Hollywood's dominance in the entertainment industry. (Highlights of the FORTUNE article on TVs future, and a summary of Value Line's analysis of the Major Film Companies appear on page 9) Film BULLETIN January 19, 1959 Paqe 7