A DECADE ago Australia's three commercial TV networks were described by one fund manager as ''fat bloated grubs'' supported by huge cash flows and huge margins.
The most protected sector in Australian business, television enjoys cheap access to broadband spectrum, tough anti-siphoning rules designed to prevent the pay TV industry from spoiling its exclusive control of sport, free spectrum to open up multichannels and juicy TV licence rebates.
Ten viewers must 'fight for us'
Former Ten News Director Shane Doherty tells 612ABC he "doesn't believe" Brisbane will lose its one hour news bulletin as 23 jobs are lost, but that viewers must "demand they are looked after".
But free-to-air television is approaching an evolutionary crossroads.
One commercial network - Nine - was taken to the brink of collapse this week and another - Ten - announced a result soaked in red ink and a program of job cuts.
Coupled with the looming shadow of dramatic structural ownership changes across the industry, audience fragmentation, TV piracy and dwindling advertising revenues are conspiring to crush the traditional business model.
Next year is expected to be a watershed for the broadcast industry. For the first time the amount of money spent on advertising over the internet will match the ad spend on free-to-air television.
Change is not just coming, it is coming fast. ''By 2014 online will overtake TV, which is the greatest change in the history of media,'' says media buyer Harold Mitchell. To survive, networks ''will have to get hold of the digital dollars''.
What is more, the media consultants Commercial Economic Advisory Service of Australia and Aegis Media forecast that by 2015 digital advertising expenditure will hit 31.2 per cent and TV will be 26.3 per cent.
The biggest threat TV faces is clearly the internet.
Besides appealing to advertisers because it produces detailed information of who is watching and, more importantly, what else they do, it also appeals to viewers due to its easy availability and portability.
It is this ease of availability that is wreaking havoc on the traditional business model. This was no better illustrated than the disappointing ratings of the six-time Emmy award winner Homeland, which began its second season on the Ten Network last Sunday night.
Although Ten fast-tracked Homeland from its home market, it wasn't enough. The US has just aired episode three in the second season and with the rapid spread of illegal downloading and file sharing of TV shows, hundreds of thousands fewer people were watching the premiere of the second season here. Last year, ratings averaged 1 million viewers, last Sunday 630,000 tuned in.
Viewers, it seems, had already caught up - ad free.
Mark Fennessy, chief executive of the production company Shine Australia, says traditional television's inability to see past demographic data has always been its Achilles heel. ''It doesn't know the consumer, it doesn't know the individual,'' he says.
As better analysis of the audience opens up in the digital arena, media buyers will start challenging the statistical rigour of TV ratings company OzTam, which bases its data on just 3135 households in metropolitan markets, plus another 1400 for pay television.
In the US, for example, cable companies have seen subscriber numbers fall as internet subscribers have increased. In the US most homes use ''cable'' to deliver both free and pay TV, so ''cutting the cable'' is, in effect, a comprehensive rejection of both in favour of non-traditional platforms.
In this scenario, Australia's proposed national broadband network - the ''NBN'' - becomes a game-changing, almost nuclear, event, delivering broadcast-grade internet services to Australian homes.
Historically the television pie was carved up along the demographic lines. Ten's audience was exclusively young. Nine's audience was broad and affluent. Seven's was broad, but focused on families.
Now, those demarcation lines are breaking open. Ten attempted, unsuccessfully, to chase the blue-chip sport historically associated with Seven and Nine for its One channel, and Go and Eleven have in turn cannibalised Ten's audience, as has Nine's deployment of The Voice and Big Brother.
The irony, says the ABC's head of innovation, Angela Clark, is that this storm of change is coming at a time when television is actually still very strong in creative and economic terms.
''What is happening is that consumer behaviour is changing and consumer behaviour will affect television like it affects everything else,'' she says. ''All media is being disrupted and television is not going to be immune to that.''
Clark believes we are going into a ''middle phase'' where traditional television, by virtue of its unmatched ability to draw large audiences, retains enormous power while the landscape changes around it.
''The predominant source of income is still with broadcast networks, and broadcasters as holders of good, quality content, will hold audiences around both their traditional broadcasting and their first steps into alternative distribution,'' Clark says.
And that cycle will also feed into itself: exclusive television content draws big audiences and big audiences attract revenue that can, in turn, fund more content.
''It works against fragmentation, for a period,'' she says.
The technology may be liberating, she adds, ''but the game is ultimately about the content''.
The three macro-drivers of free-to-air TV were historically news, sport and movies. The first is being gradually lost to the internet. The last has lost its momentum because of a coterie of ad-free platforms, including pay TV (with pay-per-view), DVD and online.
What is left in television's sights is exclusive sport. The reason is simple: live sport and live reality shows remain largely immune from ''time-shifted'' viewing and illegal downloading and they attract big audiences. But even premium sporting rights are proving to be a challenge.
Deals such as Nine's $1 billion NRL rights tie-up and future deals for the Olympics require non-traditional partners, such as Foxtel, to create the breadth of delivery needed to justify the cost and meet expectations of multichannel, multiplatform coverage.
Complicating that balance of power is the fact that many sports teams and bodies are developing their own media businesses, stretching the ''exclusivity'' of broadcast rights to generate content from which they can profit.
The AFL, for example, has launched its own media content unit, following a trend started by NBA basketball in the US, which plans to allow audiences to download games directly. In Britain, football teams operate their own pay TV channels such as Manchester United's MUTV.
Fennessy believes that model will eventually roll out in Australia.
''Every football club, every sports organisation, is looking to interact with a community,'' he says. ''They want to know what your experience is, and what you prefer it to be.''
Negotiation for the 2014 and 2016 Olympics begin soon, and Nine's $300 million cricket deal expires next March. With Seven keen to retain the ratings crown and Nine, effectively given a second chance with a debt-free balance sheet, the industry anticipates a bloody fight.
In the meantime, the past decade has seen a rapid decline in the value of US content on Australian TV screens.
Australian commercial networks have, historically, been big spenders on international content and most US content is locked into ''output deals'' that align whole studio libraries to specific channels.
But the collapse of traditional distribution has begun to realign the value of that content away from broadcasters and, in a model that more closely replicates the distribution of music, returns revenue to the source. TV programs sold on iTunes, for example, deliver revenue straight to the studio, not the local channel.
''Over time, US content will leach away from free-to-air and consumers will be able to get it direct from the US. So the days of Nine or Seven making a motza out of some US show are coming to a slow end,'' said one industry source. ''It will take time but the trend is clear.''
To counteract that, free-to-air networks have more heavily invested in program content that fits more comfortably into their future vision - live and exclusive, locally produced programs such as The Block and My Restaurant Rules, and local versions of foreign formats, such as The Voice, The X Factor and MasterChef.
''The internet has turned the entertainment industry upside down,'' said another industry source. ''The music industry has been gutted, print journalism is hanging on by a thread and the movie industry has tried to reinvent itself with 3-D. The last of the Mohicans has been TV and it is now under attack with illegal downloads of US content.''
In all of this, internet TV - also known as IPTV, is the elephant in the room. For many years it has been sidelined in the debate as broadband-grade content that was unable to match the production value of ''traditional'' television.
But major studios worldwide are investing in IPTV because most have, accurately, predicted it will allow them to launch channels into what will quickly become a crowded multichannel space.
These channels would be largely niche, but they would have television-like content and, through a raft of emerging content platforms such as the X-Box, the T-Box and IPTV-capable televisions, be able to reach increasing audiences.
So rather than a fourth free-to-air licence crashing the oligopolists party, it has been IPTV and to a lesser extent pay TV, according to David Kingston, who foresaw a decline of free-to-air a decade ago and sold his regional South Australian free-to-air Spencer Gulf Telecasters for a tidy profit. ''Viewers now have so many alternative choices to get their entertainment or information,'' Kingston says.
In Australia, Fennessy believes the tipping point will be the switch-off of analog television. At that point, the five ''big'' channels become the equal of the ''small'' digital channels in terms of footprint. Everyone, good or bad, is equal, he says.
That will accelerate with the NBN's rollout , and IPTV businesses begin that process.
TV networks will ''take their place on the grid with a lot of other content providers, as opposed to being in pole position'', Fennessy says.
At stake is a pot of gold. Australia's advertising industry is, per capita, the richest in the world. That cash flow, says Mitchell, has helped turned Australia's media owners into titans. ''If content is king, then cash is even more so,'' he said.
There is little doubt that free-to-air television will survive in some form. ''It is still very wealthy,'' says Fennessy. ''And you cannot deny the home entertainment experience.''
But the issue is what proportion of viewing time will be focused on free-to-air and how much it can charge, either for advertising or paid brand integration.
To give that some context, back in 2001 Ten commanded a profit margin of 30.4 per cent, Seven 26.9 per cent and Nine 33.7 per cent. Today, Seven sits at about 26 per cent, while Ten in 2011 slipped to 15.9 per cent and in 2012 posted an earnings margin below 10 per cent. The privately held Nine, which does not disclose its numbers, is believed to have margins of around 22 per cent.
The margin shrinkage reflects rising costs and falling revenue.
''A few years ago it was commonplace for TV networks to put up ad rates by 5 per cent to 7 per cent. That isn't the case any longer as changes in advertising spending shifts away from traditional media to pay TV and digital,'' says BBY media analyst Mark McDonnell.
He argues that the shift in audiences is also gathering momentum.
''A few years ago if a prime-time TV program attracted less than 1 million viewers it wasn't good. Now I get emails from Ten crowing about getting 500,000 audiences,'' he says.
Historically, Australian free-to-air TV has attracted higher rates than international counterparts because the industry - in effect an oligopoly - stifled evolution, blocked new players and held hostage the eyeballs of their audience.
As people spend more time on smartphones, tablets and computers, and as natural force compels the industry to evolve, those controls have been loosened.
According to figures from Commonwealth Securities, audience growth over the past three years has actually reversed, with 2012 prime time audiences falling 2 per cent. ''We expect the trend to continue,'' CommSec media analyst Alice Bennett warns.
Despite rapid evolution and the spectre of tectonic change, commercial TV is still cocooned in economic swaddling cloth. But fund manager Paul Jenkins, who labelled the traditional broadcasters ''fat bloated grubs'', now refers to them as grubs feeding on themselves.
''They still have margins most industries would drool over, but the financial engineering and debt loading some of them have participated in over the past few years is nothing short of horrendous,'' he said.
A new television landscape indeed.