The Cost of Eyeballs

FBI Warning
What follows is a decidedly personal look at the relationship between advertising and television animation in the U.S. Where it is now, how it got there, some thoughts on where it's going, and how we can all thank Ronnie Reagan for where we are today, although not necessarily in that order. Advertising's relationship with TV animation is symbiotic; some may even call it a morbid dependency: love and hate equally mixed, but the need for each other approaching an addict's craving. You've been warned.

[1]

[1]

Where It Is Now
Television animation as we knew it has changed so completely that it is no longer recognizable as the medium it was as recently as earlier this decade. We've all seen the statistics, best summed up by one simple fact: available weekly national timeslots for TV animation have increased by a factor of nearly 10 since 1980. (Approximately 75 to over 600.) Remember though, that's for available timeslots, most of which are not filled with your latest production; in fact, the overwhelming majority of what's on is a repeat. Nevertheless, there is substantial production of new material to fill these timeslots.

Those of us who ceaselessly toil in the field of animation know all too well that the name of the game is TV. There may be big bucks over the fence in the feature pasture, but the total output pales in comparison to TV in all its forms: broadcast, cable, home video and - it really is TV to the audience - the 'net. And, with the exception of most home video, this veritable feast of cartoons is brought to the tube courtesy of advertisers - those whose appetite for young eyeballs seems insatiable, one bound to take animation to yet new heights of popularity.

[2]

[2]

Well, folks, it wasn't always this way, and it wasn't that long ago that those of us old enough to remember were bemoaning the slow, painful death of the animation industry. There are a few left from that lean generation of animation (myself included), those who were so crazy that we went headlong into the breach in the '70s while those around us fled to safer and more secure futures in book illustration, greeting card design, live action film, or, in at least one case, baggage handling at JFK. How did an industry left for dead in the '70s manage to fight its way back, to a scale of work unprecedented in its history? First, let's put aside all the deconstructivist theories about the audience changing - that an audience raised on cartoons somehow made it possible for animation to rise phoenix-like from the ashes and become acceptable as grown-up entertainment. The previous two generations were raised on the same diet, perhaps even richer, in the movie palaces of the '30's, '40s and '50s. Yet they fomented no renaissance. So, what happened this time?

[3]

[3]

History in a Nutshell
To understand better this phenomenon, we need to plunge deep into the past, at least as far back as the '60's. If you were born after 1960, you probably aren't aware that there was no large television animation industry in the '50's. Sure, there are a few old favorites and oddities, and Hanna-Barbera did start near the end, but there was no market in the sense of what developed over the following decades. The whole idea of the Saturday Morning animation ghetto was yet to be born, and it only came about because of a convergence of several forces.

Most importantly, Bill Hanna developed The System: a means by which great amounts of footage could be generated over a short period of time at a reasonable cost. TV cartoons could not have succeeded without The System, period. Say what you like about the quality of the product, but The System changed forever the manufacture of animation, and allowed a cottage industry to enter the larger market. The networks could order in one season more animation than had been made industrywide in the entire decade of the '30s, and have it delivered ready to air within months. Revolutionary.

[4]

[4]

The other factors pale by comparison, but deserve mention nonetheless. One was the inherent repeatability of animation at a time when videotape did not exist; live shows on film could and did repeat, but tired much sooner, and had none of the excitement of the then popular "live" kiddie TV. Another was the ease with which animation passed over the barrier between Black & White and Color TV: cartoons had a long history in color, and additional costs were minimal, mainly in the areas of film stock and lab work. (Live-action had to rethink itself completely for the change to Color TV; costs went through the roof.) And there was SAG: Ronnie Reagan (he was President there first and he'll be back in this story in a later role), residuals (and the lack thereof in animation), etc. It was just plain easier in the fringe area of kiddie TV not to deal with those actors, and cheaper too.

There was also a need, a need that will be a recurrent theme through what follows: advertisers wanted those young eyeballs, they wanted them on a national basis, they wanted them without dilution (no adult viewership or interference), and they wanted them all at the same time (or at least day-and-date). As other audiences dominated weekday dayparts at a time when most houses had only one TV, there was only one time that need could be met: Saturday morning. (And Sunday, too, until news took over.)

[5]

[5]

So, throughout the later '60s, animation came to dominate the airwaves on Saturday morning. Advertisers were happy, as they could and did dictate (informally if not directly) what cartoons got on the air, and soon they began to recognize the real power of TV in selling to kids. And the networks were happy, too; the (then) three networks shared over 90% of the kiddie audience, and even third place made money, lots of it, as the scarcity of available national commercial slots (only Saturday and Sunday mornings, for the most part) lifted prices on a consistent basis.

[6]

[6]

Before we get lost in the haze of nostalgia, let's remember that the '60s/early '70s was a mixed bag of TV cartoons. Some of what was made then is now cherished, but much is forgotten, including one show especially, although it made its mark on the industry for the next 15 years: Hot Wheels. The advertisers had come to dominate kiddie TV content to such an extent that the FCC finally took notice, and this show was to the FCC the last straw: "program-length commercials" were forced off the air. But not forever.

This FCC pressure was just one of several forces which pushed animation into decline in the early '70s. The premiere of Sesame Street brought more pressure on the networks to clean-up kids TV, to make it more "educational" and "real." As networks always want to have peace on the political front, orders came down from on high, and the industry entered the great pabulum era. More live action, more social relevance, more lessons, more BS&P strictures, more boredom. (Please understand that I am not taking sides on the content argument; these are just the facts.)

[7]

[7]

And, to make matters worse, the networks dropped their orders by nearly 20% (from 16 episodes to the still current 13); this was caused partially by the network-wide cutbacks brought about by the substantial loss of income from the cessation of cigarette advertising. (Until recently, this was the only time three-network advertising income had ever dropped on a year-to-year basis.) TV animation was in a steady decline; in L.A., year-round work was history, as studios were now in production at most 8 months of the year. And, last but not least, overseas production became a factor for the first time; between 1972 and 1980, below-the-line production jobs migrated overseas with lightning speed: the crafts from Animator on down suffered considerably, with the last Ink & Paint jobs finally disappearing completely in the early '80s (except maybe for Filmation).

Salvation
On Wednesday, November 5, 1980, I had lunch with a network children's programming executive, one of the brightest people I know in this business. In a scene that made me feel like I was Watson to her Holmes ("There's an east wind coming, Watson, and a stronger land will lie in the sunshine when the storm has cleared."), she said something I will never forget: "After yesterday's results [the '80 election], this industry will go through major changes. It will never be the same again." How right she was; I only wonder if she really saw the future we've come to.

[8]

[8]

Ronnie Reagan probably never gave kids TV a thought while he was in the White House, but what he did led to changes that reverberate still, and most of where we are today can be traced back to those years. In short, the FCC did three things: indirectly loosened the constraints on advertiser-controlled kids TV (and program-length commercials); made it far easier to quickly buy and sell TV stations; and re-balanced the playing field to favor the growth of cable. Now how did each of these affect the relationship between advertisers and animation, or animation in general?

We're Back
The first two combined to start the resurgence in TV animation. Advertisers could now fashion shows to suit their specific needs, and tie them to products without fear of penalty. As stations were traded fast and furious, purchase deals became more and more leveraged, and owners were looking around to find programs that cost little or less. Add these together, and you've got - you guessed it, He-Man and the Masters of the Universe.

Barter syndication, which gave the show free to the station in return for a portion of the advertising time contained within the show, was perfect for the parties at the dance: the advertiser got day-and-date nearly national broadcast of its commercials and product-supporting show; the stations got a free first run show with a few spot slots left open for sale; and the producers got new shows made, as well as the chance to cash in if the product was a hit. Another revolution, and lots of work too - 65 episodes for one single series. That was a single series order which almost equaled the total yearly order for each of the then 3 networks.

[9]

[9]

Advertisers loved barter syndication, as did stations, syndicators, producers, and animation artists. It took off like a rocket; within a few years, over 10 series (650 episodes) per year were vying for timeslots and kids. For the first time in decades, jobs went begging for artists. The drought of work faded from memory. And kids even seemed to like some of the shows.

Directly or indirectly out of barter syndication came the genesis of the Disney Afternoon, the Fox Kids Network, Kids' WB!, and UPN Kids, which all led eventually to the destruction of barter syndication itself. Disney, Fox, the WB and UPN fought (still fight, in some cases) over outlets and timeslots.

Stations discovered that open timeslots were even more valuable than they thought, and independent distributors soon found that barter had a new wrinkle: timeslots were rare, so clearance payments to the stations soon became the norm, and the profitability of these shows withered. Major advertisers could avoid the clearance payments, but the number of barter shows inevitably declined in the '90's as the new networks lined up affiliates and locked up the choice timeslots.

[10]

[10]

The New Kid on the Block
We all know that Cable broke out in the '80's, and Nickelodeon burst through the cable clutter to grab kids in the early '90's, soon to be followed by the Cartoon Network, both of which are shortly to be joined by Fox. In such a rapidly changing audience as kids (a generational turnover every 5 years for the main portion of the demographic), the power of these new players cannot be overestimated.

Currently, according to the trade press, Nick gets 56% of kids viewership, and Cartoon another 18%. That leaves just 26% for the others: broadcast (ABC, CBS, Fox, NBC, UPN, the WB) and syndication. Once Fox jumps in on cable, and if Disney Channel changes to ad-supported (rumored), it won't be long before cable controls 90% of the market. Remember that just 15 years ago the (then) 3 broadcast networks controlled 90%; the phenomenal upheaval in the advertising end of the business is moving so fast that many advertisers have not yet caught up to the news.

Of course, these new cable players require hundreds of program timeslots to be filled each week with animation: Cartoon alone has to fill 336 half-hours every 7 days; the others need fewer, as they also run live shows as well as sharing channel space nearly half the day with an older demographic doppelganger. Nick has announced a commitment to spend $350 million over the next few years making new animated shows; the others have not made their plans public, but they have indicated that new animation production will be a high priority. Even if Cartoon and Fox each spend only 25% of what Nick plans, then we're looking at over $500 million being invested in TV animation over the next few years. This is very good for job prospects.

Econ 101
If 90% of kid viewership goes to cable, what does this mean for the non-cable folks? How much new production will they need? Aye, matey, there's the rub. The broadcast networks can't leave the kids business; under current law, each broadcast station is required to air 3 hours a week of kids "educational" material, and affiliates of the networks will look to those networks to take this headache off their hands. But will it be animated? And will any of these broadcast networks be able to retain a critical mass in kids for advertisers?

[11]

[11]

More importantly, where will the advertisers be buying? In the mid-'80s, with ad spending at roughly $400 million, there were approximately 100,000 national commercial spot slots available to advertisers per year, mainly barter syndication on weekdays and Saturday morning on the three networks. By 1999, with ad spending expected to top $1 billion, there will be over 500,000 national commercial spot slots available to advertisers per year, at least 85% on cable, with the other players sharing the rest.

Advertisers rarely lag too far behind current market conditions. For those of you who took economics in college, remember the Law of Supply and Demand. And don't forget Gresham's Law. For those of you who didn't take economics, look up both of them. They're the best tools we have to forecast the future of the advertisers' relationship to TV animation.

Buzz Potamkin is an award-winning independent producer, best known for The Berenstain Bears and Dr. Seuss. Before he escaped L.A. for New York, he had been President of Southern Star Prods and then Executive Vice President of Hanna-Barbera Cartoons.