Maybe this is obvious to some people, but it just occurred to me today.
When a television program doesn't have product placements in it, the television network is the one that sells advertisements during that program, and thus, the producers and creative people with an interest in that television show are beholden to some network for the money necessary to pay for the show. These shows are like new associates applying for jobs in law firms who have no special business development connections. Moreover, ultimately, the amount a network is willing to pay for a show is dependent upon what the marketing department thinks it can raise selling ads during the show. Their talents are needed, but the market is based upon bids made by the buyers.
A television program with product placements (the NBC series Heroes is among the most blatant in doing so), interferes with this system. The producers and creative people are dealing directly with the advertisers in a way that they can take with them regardless of the network that the show is aired upon. And, by bringing in revenue as well as costs as part of the package, they have more money available to produce the show and hence provide a superior package and get better pay for stakeholders in creating the show, without reducing the available advertising revenue from the show at all. Indeed, product placements line up easy prospective clients for regular ads for the marketing department, making their job of selling TV ads less valuable. These shows are like lawyers with an established book of business looking to affiliate with a law firm, who can receive compensation for both their talents and their business development contributions.
Creative people have always resisted more than nominal involvement from advertisers in their shows, in a parallel to the newsroom v. business side divide in the newspaper industry. But, somebody's products have to be used in any production with a contemporary setting, and not all of those choices are material to the story. Like Eddie Murphy playing a con man elected to Congress in one of his movies, who suddenly discovers that he can take any position he wants on any issues, and that either way, somebody will want to contribute to his campaign as a result, a television show can get some product placement money for almost any consistent choice of product and doesn't have to go with the highest bidder if it fouls the show.
For the creative people, product placement is much less threatening, when they are the ones in control of the process, rather than networks with whom they have an arms length relationship who see their shows as mere commodities to be bought and sold like different grades of diamonds, and no need to produce a good product day after day or strong incentive improve the quality of the shows that they already have in stock.
Will the next natural step in this process come to pass? Will we reach a point where producers simply buy air time on networks like an infomercial (the ultimately in product placement, of course) does, while generating their own revenues from commercials sold as a package deal with the show itself, cutting out the middle man of the network advertising sales departments? Will the networks themselves devolve into mere auction houses for airtime?
While cable television networks add value by putting together a coherent package of programing in a single place, broadcast television stations, the variety shows of the television industry, have never been coherent packages beyond an occasional evening with a few well paired programs. For the most part, the fact that a television show is on ABC, NBC, CBS, or Fox is simply a matter of business negotiations unrelated to the content, just as the fact that a product ends up getting distributed through CostCo rather than Sam's Club has little to do with the product or the identity of the stores themselves.
It isn't obvious that the business model of offering a mismash of programming on one channel makes sense anymore. Behind the drama of the transition from analog to digital television, the big story that had hidden behind that little story that has attracted media attention is that the switch is irrelevant to most television viewers, who either get cable or satellite television. Faced with a disrupted status quo, some percentage of late adopters of subscription based television won't bother to get converter boxes or new televisions and will simply sign up for cable or satellite TV. Only about 5% of television viewers will be impacted by the switch when it finally happens. Most have cable or satellite TV already. The rest either have newer televisions or have bought converter boxes. In a specialized subscription based television market where consumers have hundreds of channels to choose from, niche channels make more sense than one size fits all channels with no focus.
Wither Local TV News Programming?
Of course, networks do produce a little programming, mostly news, and especially local news. The quality is mostly abysmal, but that is still the primary news source for more people than any other source. And, television news informs (or misinforms) people who are less likely to receive additional information through newspapers, magazines, the Internet and public radio than other news sources, i.e. it has far more people who rely upon their broadcasts as their exclusive news source. This is a source of political influence that greatly exceeds the economic clout networks hold from their ordinary entertainment programming. It isn't obvious whether the local television news business will survive the general decline of broadcast television (a business model which collectively loses market share year after year), and if it does, where it will migrate.
Local news departments on commercial television stations already struggle to produce enough content to fill the time allotted to them (as do local news shows on public television and radio). Fluff, overhyped stories that are little more than headlines, and the never ending police blotters, fire department calls, and court room reports, all remarkably analysis and significance free, fill the modest number of minutes these news crews fill between copious advertising. The only parts of the operation brave enough to have opinions or consider issues at length are the sports reporters and the meteorologists. Much of it is repeated several times a day.
Were local news stations to cut the bloat they insert to fill their allotted show times, and a podcast format might be a good fit, while eliminating the need to pile the opportunity costs of expensive air time on top of the production costs that go into making the show in the first place. Broadcast TV creates an incentive to bloat news coverage to leave more time available for ads. Podcasting creates an incentive to deliver succinct messages and either internally placed or short advertisements, in order to capture surfers limited attention spans. Notably, some of the most popular bloggers, like Atrios, are also exceedingly terse. (Don't worry, I won't be following that trend any time soon.)
It simply must be a lot cheaper to produce only the few minutes of content that you actually have to report upon, and distribute it via the Internet, than it is to produce much longer shows that air in several versions a day, and distribute it via scarce broadcast television signals. Indeed, most broadcast TV stations already podcast their shows, one segment at a time, anyway. The dramatically declining cost of good quality digital video equipment should also make this less product, less money model more viable, because there is less of a need to scale up the size of the news department enterprise in order to cover the equipment costs involved.
Alternately, local news could become a niche of its own, and a single channel could, for example, offer what would historically been local news programming and not considered national stories, to larger audiences, such as the entire Rocky Mountain West, rather than simply a part of Colorado, thereby securing enough content to support an entire channel, or even half of dozen or so regional channels focused on local news.