Reality TV Fading, Forcing Networks to Make Higher-Costing Shows

Corrects in 12th paragraph the name of Brent Ridge's company. The name of the company is Beekman Media, not Beekman 1802, which is a subsidiary. 

NEW YORK (TheStreet) -- The party may be over for broadcast networks that rely on low-cost reality TV programming to bolster their quarterly earnings reports.

Amazon (AMZN) will no longer air Viacom's  (VIAB) Teen Moms and Mob Wives on its Instant Video platform, Bloomberg reported last week, adding that other reality shows may also be cut from the online retailer's streaming platform.

To make clear that reality TV's popularity is waning, FOX said it plans to cancel American Idol in 2016 -- not exactly unexpected news, but notable in the "how the mighty can fall" category. Idol was a ratings behemoth, regularly soaring past the 30 million-viewer mark while establishing a model for the entire genre.

The announcement of Idol's demise comes as other recent reality show have been canceled: The X-Factor and 21st Century Fox's (FOXA) spectacular $50 million flop Utopia. Even the old standby, Dancing With the Stars, from Disney's (DIS) ABC couldn't deliver when it returned to the airwaves this spring; its ratings have suffered a double-digit decline.

"Reality TV is on the decline right now, certainly," said Deana Myers, a media analyst at SNL Kagan, an industry monitoring group. "But there always needs to be the shiny object that folks are staring at. Right now, it's scripted TV."

Indeed, scripted TV is in its glory these days, with advertisers paying big money for 30-second spots on shows such as Netflix's (NFLXBreaking Bad (over $400,000) The Walking Dead, ($327,885) and CBS's (CBS) The Big Bang Theory ($413, 695) in 2014.

Reality TV only brought in a fraction of that for the networks. Advertisers paid just $127,617 for a spot on Dancing With The Stars and $115,105 for a spot on The Bachelor. Interestingly, Idol brought in the most advertising revenue for any reality show in 2014 -- $266,333 for a 30-second spot on Monday nights, and $249,566 on Thursday nights, with The Voice on Comcast's (CMCSA) NBC coming in a close second at $262,041 on Monday nights and $254,485 on Tuesdays.

So while reality TV can't hope to compete with the ad dollars scripted TV earns, because of its lower production costs it doesn't need to. American Idol, said Myers, is probably the most expensive reality series to produce, which is why it needed powerhouse ratings to justify its existence.

At the same time, Myers noted that some reality shows like Survivor, Amazing Race and The Voice are performing well.

Generally, the cost of unscripted programming is estimated to be about $10,000 a minute, as opposed to roughly $50,000 a minute for scripted shows. Unscripted TV also generates significant revenue from overseas markets, said Myers, making it a valuable commodity in the media landscape. Niche shows especially earn respectable ratings, she noted. "Shows focusing on Alaska, and competition shows on the Food Network, have a good following."

But some industry insiders counter that the genre may be in trouble. Reality TV personality Brent Ridge, who starred in The Fabulous Beekman Boys and The Amazing Race, said reality TV is unsustainable for networks in its present form.

"Advertising revenue have shifted to digital," explained Ridge, who now owns his own media production company, Beekman Media. "So the budgets for all these [cable and network] shows are getting tighter and tighter. Because they're unable to capture full-story arcs or all the real drama they need, they have to manufacture the drama. And ultimately the viewer sees through that. Viewers -- particularly the younger generation -- have a high BS radar."

Ridge added that reality TV as a concept has staying power but "the pendulum is going to swing back."

"Networks and cable companies are either going to have to be more digitally driven or focus on more high-quality programming," he said. "And people are willing to pay for high-quality programming. There are people who subscribe to Netflix just for House of Cards and Orange is the New Black."

As for the future of reality TV, Ridge predicts that it will migrate to a new home: YouTube.

"YouTube gives people their reality fix," he said. "Network TV and even digital are not going to be able to compete with YouTube because the budgets for YouTube are so small. But people will always want to watch reality TV because the culture has an insatiable curiosity for anything that's a little bit weird. It gives you this view into someone else's life. Basically, we're all voyeurs."

YouTube sports some of the most-popular shows on the Internet, including Smosh and PewDiePew. But the broadcast and cable-TV networks are likely to continue to roll out reality TV programming as long as the public is inclined to watch it, Meyers added. And while programs may not become as popular as American Idol, if they are moderately profitable, advertisers will support it, prompting networks to make more of it.

After all, there's always the chance that one of the networks will fine a low-costing hit capable of attracting a mass audience.

"You're probably not going to see these big flashy reality shows any more," she said. "But at the same time, I heard Fox is doing something with Simon Cowell again. Maybe that will be the next big reality show."

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