Intro

The networks face the classic dilemma of a legacy industry.

They have enormous fixed costs, declining revenues, and nimble new competition, all of which suggest a gloomy future.

At the same time, they have an invaluable brand, a reputation for quality and a huge customer base. If handled right, those assets give them a big head start in becoming new businesses that lack the legacy costs. If handled wrong, they will destroy an institution that could never be rebuilt or duplicated.

The question is one of transition. To what degree do the networks squeeze the last profits out of the old legacy business model even at the risk of eroding the brand name? To what degree do they accept smaller profits to invest for the future in new businesses?

In 2004, the transition had begun. CBS News suffered the humiliation of "Memogate," an example to some critics of the kind of brand erosion that comes from too much cost-cutting. The three networks also scaled back on their coverage of the political conventions to such an extent that they were outdrawn by a cable channel on the last night of the Republican gathering, another sign of brand erosion.

As the year ended, ABC's legendary Nightline program appeared to be fighting for its survival. Its Prime Time Live, which was dabbling in musical numbers and lighter fare, was also in turmoil amid a ratings collapse. CBS's 60 Minutes Wednesday, which like its Sunday forebear did long-form pieces, often on serious topics, including the stunning expose of the Abu Ghraib prison abuses, appeared to be in trouble because of low ratings. Meanwhile, ABC News launched ABC News Now, a digital version, and posted its convention coverage online as a webcast, a clear investment in the future.

Some transitions could break either way. The retirement of Tom Brokaw at the end of 2004 and Dan Rather in March 2005 could speed the decline in the audiences of the nightly newscasts or be a spur, as CBS hinted, to revitalizing them.

Nightly news audiences continued to decline. Morning news audiences remained stable. There was no sign of much new investment in the newsroom, even online.

The news divisions continued to be profitable, which could be a sign of health or a result of lack of investment. A close look at the content, moreover, shows the continued strength of network evening newscasts - and how much they stand out in the general TV landscape. The signals from inside newsrooms in 2004 were that no dramatic new cutbacks were in place. Yet the year was marked, too, by the retirement of some of the networks' most esteemed correspondents. Some of them, such as CBS's Tom Fenton, departed with chilling stories to tell of how far network news, or at least his network, had strayed from the courage of following the story wherever it would go. For all that, in January of 2005 all three networks sent their nightly anchors to Baghdad for the Iraqi elections (as CBS and NBC did to Thailand and Indonesia after the Tsunami) and offered, if only for a few days, the kind of extended reporting too rarely seen anywhere on television anymore.

The sector was on the brink in 2005 of probably the highest level of change in a generation.

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