For those interested in the Network TV industry

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For those interested in the Network TV industry

Postby -Papa Gino » Wed Oct 18, 2006 7:27 pm

This was on the front page of today's Wall Street Journal. Most of it is self-explanatory/self-evident; I will mention, however, that I think I know where they get their estimate of $1 billion in Internet revenues by 2009, and I happen to think that source/methodology is completely divorced from any and all reality.

Beyond that, enjoy.

NBC Universal to Slash Costs In News, Prime-Time Programs

NBC Universal is slashing its news budget and abandoning high-cost dramas in the 8 p.m. hour, paring expenses in traditional television as viewers and advertisers flock to new kinds of media.

The steps, to be announced today, are part of an overhaul that also affects movie production and other operations at the entertainment conglomerate owned by General Electric Co. NBC Universal aims to cut operating expenses by $750 million by the end of next year, in large part by eliminating 5% of its global work force, or about 700 jobs, in coming months.

NBC Universal Chairman Bob Wright said the streamlining, known internally as NBCU 2.0, will return the unit to double-digit growth in 2007. "As we reprioritize ourselves toward digital, we've got to be as efficient in our current businesses as possible," Mr. Wright said in an interview. "We can't have new digital expenses and the same analog expenses."

The plan marks the starkest recognition yet that established TV networks can't keep carrying the high costs they were accustomed to in earlier decades, when they faced less competition for viewers' attention. Although the networks have been discussing radical prescriptions for years, they have often hesitated to take steps that would disrupt not only their own employees but also longtime business partners in Hollywood such as programming studios, talent agencies and syndicators of reruns.

The rise of video-laden Web sites such as YouTube and portable devices is threatening the networks' longtime business model of putting out programs with advertisements that people sit before a television set at home to watch. The networks are trying to ensure that people looking at a computer screen or carrying a video iPod from Apple Computer Inc. will still watch their programming.

While the trends affect all traditional media companies, NBC Universal has had a particularly rough couple of years after the popular sitcoms "Friends" and "Frasier" ended their runs. With a slumping prime-time lineup, NBC Universal has seen its operating profit fall 10% in each of the past three quarters, dragging down GE earnings. NBC Universal expects to post operating profit of $3 billion in 2006 on revenue of $16.5 billion.

Among NBC Universal's most significant moves is its decision to stop scheduling expensive dramas and comedies during the 8 p.m. to 9 p.m. slot. That is the first of three prime-time hours that NBC's affiliate stations must carry before their 11 p.m. local newscasts. Jeff Zucker, chief executive of NBC Universal's television group, said NBC won't give back the 8 p.m. hour to affiliate stations, but it will concentrate on lower-cost programming. Mr. Zucker said advertiser interest isn't high enough to justify spending on scripted shows.

For instance, viewers in coming seasons might see a game show such as "Deal or No Deal" at 8 p.m. on Tuesday instead of "Friday Night Lights," a drama that currently occupies the slot. The financial payoff could be significant for the network: Mr. Zucker said "Deal or No Deal" costs $1.1 million an episode, while "Friday Night Lights" costs $2.6 million an episode.

NBC's restructuring plan also makes it the first major TV company to say that it sees limited growth potential in the news business. Most of the initial layoffs will come in the company's 11 news divisions, and they will include on-air talent. Operations for the cable-news channel MSNBC in Secaucus, N.J., will be shuttered and moved to Rockefeller Center in Manhattan and another facility in New Jersey.

"We will aggressively protect all of our brands," Mr. Zucker said, but he added that the company has to acknowledge news isn't an area of high growth. NBC Universal, which runs the No. 1-rated network news operation, currently spends about $1.5 billion annually on news gathering.

The company said it will abolish redundancies in its news operation that crept in as it made acquisitions such as Telemundo, a Spanish-language broadcaster, and developed MSNBC and the financial-news channel CNBC. For example, it will create a regional "hub" in Los Angeles to serve NBC, MSNBC, CNBC and three local stations in the area. Mr. Zucker said reviews are under way in cities such as Washington, D.C., and London to do the same thing. Dow Jones & Co., publisher of The Wall Street Journal, provides news content to CNBC.

The overhaul is particularly important for Mr. Zucker. While Mr. Wright, 63 years old, hasn't announced any plans to leave, GE is preparing for his retirement. Mr. Zucker is the heir apparent, but a further fall at NBC could thwart his bid. People familiar with the matter say that GE Chief Executive Jeffrey Immelt has informally talked with potential outside candidates in case Mr. Zucker doesn't revive NBC.

Several TV companies have been moving in similar directions, but they have implemented moves quietly and incrementally. Messrs. Zucker and Wright want to send a message to Wall Street that they are developing a new model. NBC Universal says the $750 million in cuts will come equally from news, entertainment and film.

The new prime-time strategy moves NBC closer to News Corp.'s Fox, which has programmed two hours in prime time since it started broadcasting in 1989. The CW Network, a joint venture of CBS Corp. and Time Warner Inc., also puts on two hours each weekday night. "This is going to be a slow evolution, but there's a reason that two of the five broadcast networks program two hours of prime time each night instead of three," Mr. Zucker said.

NBC Universal's move could spark similar initiatives by CBS and Walt Disney Co.'s ABC. In July, Walt Disney said it would revamp its movie studio, eliminating 650 jobs and limiting the number of movies it makes to 12 or 13 a year from as many as 20.

NBC Universal has been working on the streamlining for the past 15 months and has used the recent restructuring of the British Broadcasting Corp. as a model. "If we're going to improve our profit and position ourselves for growth in a digital world, we've got to change and we've got to do it now," said Mr. Zucker. The BBC is in the midst of an overhaul that includes thousands of job cuts and a greater focus on distributing its television and radio programs via the Internet.

Twenty years ago, the big broadcast networks dominated television. On any given night, the majority of U.S. households with televisions were tuned in to programming on ABC, CBS or NBC. Each network paid for gold-plated TV news operations -- not only to meet government requirements but also because news conferred power and prestige.

Then came competition from Fox and an explosion of cable networks. More recently, video games, broadband Internet access and cellphone services such as text messaging have further eroded the networks' hold.

NBC, like its rivals, has tried to rein in costs over the years. In the late 1990s networks largely stopped offering original drama or comedy programs on Saturday night, once home to popular shows such as "Golden Girls" and "Diff'rent Strokes," as viewership on that night plummeted. For the same reason, the networks, rather than programming their own cartoon shows on Saturday morning, arrange with other companies to fill the slots.

Producers and owners of television shows, including networks, used to make most of their money on reruns. Today, many of the most popular shows don't lend themselves to repeat airings. These include intricate character dramas such as "Lost" and reality shows such as "Survivor."

As networks desperately try to hang on to their audiences, production and marketing costs are spiraling out of control. Networks are hiring marquee stars, building lavish sets and carrying out megawatt marketing campaigns. The typical drama now includes about 60 scenes, up from 35 to 40 three years ago, Mr. Zucker said. NBC's new hit series "Heroes" -- a first-year show with no name stars -- costs $2.7 million an episode.

Because of its prime-time troubles, NBC fell to last place in 2004 among the major broadcasters. The ratings collapse led to an $800 million decline in ad sales in 2005.

More recently, NBC's fortunes in prime time have improved. Viewership on the network is up 15% over last year among adults ages 18 to 49, the group advertisers pay a premium to reach, and is up 17% in adults 18 to 34. NBC's costly purchase of rights for Sunday night National Football League games has helped, but new shows have contributed too, including "Heroes," a drama about ordinary people with supernatural powers, and the game show "Deal or No Deal."

Restructuring isn't just about cost-cutting, say Messrs. Wright and Zucker. They are planning to boost spending in some departments and invest $150 million over the next two years in new digital projects.

The company says revenue from digital initiatives such as new Internet offerings will exceed $1 billion by 2009, up from $400 million this year. Over the last year, Telemundo has joined with Yahoo Inc. to develop a Hispanic Internet destination, and NBC started streaming episodes of popular programs on its Web site. The cable channel Bravo has rolled out broadband sites that are dedicated to comedy ( and canceled TV shows (

Virtually all of NBC's shows, from "Days of Our Lives" to "Law & Order," now come equipped with digital add-ons such as blogs written by actors and Internet-only "webisodes."

In another change, Mr. Zucker said NBC, along with cable siblings USA, Sci Fi and Bravo, will rely more heavily on programming supplied by NBC Universal's in-house studio. Owning shows outright -- as opposed to buying programming from a competitor such as Time Warner's Warner Bros. -- would allow NBC Universal to reap the full benefits of distributing them on the Internet and cellphones.

"The entire way that we are distributing our content is going to change in a fundamental way," Mr. Zucker said.

The changes are less dramatic at Universal Pictures, the company's movie-studio arm. Ron Meyer, president and chief operating officer of Universal Studios, said he will consolidate the groups that market movies in theaters and movies sold on DVD. He noted that the typical movie now goes from the theater to DVD in just a few months. Layoffs will be minimal, he said.

Mr. Meyer said he is also planning a few cost-saving steps in Universal Pictures' overseas operation. The studio used to distribute its movies overseas via a joint venture with Viacom Inc.'s Paramount Pictures but is now going it alone.

Plans are still in flux for Universal Parks & Resorts. That division owns a theme park and an adjoining shopping complex north of Los Angeles and has significant interests in parks in Orlando, Fla., and elsewhere. The company may trim off-season hours at the theme parks.

Last year, Mr. Immelt, the GE chief executive, floated the idea of selling part or all of the parks to help finance a possible acquisition of DreamWorks SKG, according to several people with knowledge of the matter. But a sale would be difficult because NBC Universal doesn't fully own all its parks, and another studio ended up buying DreamWorks.

-Papa Gino
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Re: For those interested in the Network TV industry

Postby Bauhaus » Wed Oct 18, 2006 8:40 pm

I'd like to make $3BB on $16BB in revenue.

NBC seems to be acknowledging that its in a class with Fox and CW rather than CBS and ABC. It will be interesting if those two follow suit.

It may not be long before the number of TV shows plummet and the networks mostly broadcast game shows. I was watching Smith before it got canceled. It only had 9.5MM viewers, not enough for a network broadcast. Too bad, I was actually enjoying something a little psychopathic on TV.

Many of my favorite shows were canceled from last year. Besides Lost (still on of course), I was enjoying Invasion and Deadwood. Oh, well, nothing unusual these days.
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Re: For those interested in the Network TV industry

Postby mattbird » Wed Oct 18, 2006 8:48 pm

deadwood was only dropped because the writer/creator wanted to do something else. fyi.

so gene, what does you crystal ball predict the future will be for cable networks such as A&E and HBO
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Re: For those interested in the Network TV industry

Postby -NightGoblinHordeLeader » Thu Oct 19, 2006 1:47 am

Is it the viewership's fault for not watching, which leads to cancelled shows and lower revenue?

Or is it the network's fault for showing 10 minute long commercial breaks, cancelling shows before they can develop, being financial misers, and worse, that leads to lower viewership?

I recently got cable television again, and I'm amazed at how bad the shows are on tv. I flip through 70 channels and usually I can't find anything interesting at all. And this is during primetime!

Acting didn't suddenly lose its mystique. Writing didn't suddenly lose its power. However, big corporations are known for kneejerk reactions to big trends.

F NBC and the rest of the broadcast giants. They've been cutting their own throats slowly for decades with ever increasing commercial times, and ever decreasing commitment to the "art" of visual media. All it takes is one good show, like My Name is Earl or Lost, to remind the morons in charge that people like good programs they can sit and watch.
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Re: For those interested in the Network TV industry

Postby Slyde » Thu Oct 19, 2006 2:27 am

Deadwood is gone? Noooooooooooooooooooooooooo! :x
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