< The Real Deal


Friday, October 27, 2006

BROOKE GLADSTONE: This is On the Media. I'm Brooke Gladstone.

BOB GARFIELD: And I'm Bob Garfield. Last week, NBC announced a radical cost-cutting measure they've branded NBC Universal 2.0. The plan will eliminate about 700 jobs and nearly all scripted programming between eight and nine in the evening. NBC's CEO Jeff Zucker says the changes pave the way for a digital future and reflect changing viewing habits. Sit-coms and dramas, costly to produce, aren't being watched as much in that first hour of NBC prime time. Most of the hits in that hour have been less expensive game shows, like Deal or No Deal and The Apprentice. But not only does the network have to convince analysts and advertisers that it's still viable, it has to reassure them that the model of ad-supported broadcast TV itself still works. John Higgins is the business editor for Broadcasting and Cable magazine. He says that NBC has drawn attention to itself, but publicizing cost-cutting may be another misstep.

JOHN HIGGINS: This is hysterical. It's the first time I've ever seen a company try to brand a layoff. [BOB LAUGHS] NBC is in a very bleak situation. They dropped from first place to fourth with absolutely incredible speed. They're trying to pick up the slack by putting on NFL games on Sunday nights, which is really doing great things for their ratings but it's doing horrible things for their profits. NFL games are so expensive -- ten million dollars an hour, basically -- that, you know, they don't really get any profits. GE and GE's investors want them to bolster the bottom line, and they've proven they can't do it through smart programming. They need to make cuts.

BOB GARFIELD: The argument that Jeffrey Zucker made for putting reality only from this point forward in the first hour of prime time is that it costs something like 40 cents on the dollar compared to scripted shows. I guess under the circumstances, they just can't afford to pay the huge dollars to do a scripted drama or a sit-com.

JOHN HIGGINS: They can't afford it because they don't have the ratings. ABC's got Ugly Betty at 8 o'clock on Thursdays. They seem pretty happy. Lost seemed to do pretty well at 8 o'clock when it debuted two seasons ago. I don't think J.J. Abrams, the producer, is complaining about that scheduling move.

BOB GARFIELD: Obviously, they're going budget for the first hour of prime time, but another big victim here will apparently be the various news operations that NBC runs, both on broadcast and cable.

JOHN HIGGINS: The thing to recognize in this layoff is that the news division is taking the biggest hit. News has traditionally produced half the profits on NBC broadcast. That was when prime time was actually profitable. Right now, about the only thing that's profitable on NBC broadcast is The Today Show and The Evening News. The problem is, that's where the bodies are. I mean, two-thirds of the people at NBC's television operation are at the news division. You know, news is pretty labor-intensive, so if you're going to cut, if you're looking to boost profits, you don't have many other places to turn.

BOB GARFIELD: Apart from the general wisdom of cutting off the leg of your cash cow, what do you suppose the effect will be on the quality of the news operation, you know, 700 layoffs later?

JOHN HIGGINS: You will see fewer reporters in the field. You'll see fewer people going overseas. You'll see smaller crews. You'll see more consolidation in the operations of the various news outlets. The folks at CNBC are going to want much different shots of an event than Access Hollywood will, but under this plan, there will only be maybe one crew. And, you know, they'll all kind of have the same shots, the same edits for the same story, which kind of threatens like the individual personalities of the outlets, although probably only astute viewers will really see a lot of difference.

BOB GARFIELD: Part of this NBC 2.0 thing is to pave the way for the increasingly digital future and to find ways to distribute NBC content over the Internet, which raises the question of who gets skipped in that process? Isn't it the local affiliates, the local broadcast stations? What happens when they get cut out of the distribution loop, and what effect will that have on networks as we know them?

JOHN HIGGINS: The affiliates, and even NBC's own local stations, are going to get crushed in this. The prime time programming is so important for them to promote themselves and to promote their local newscasts -- you know, you want to feed into 11 o'clock on the East Coast for your newscast -- that's really tough when NBC's best programming is available on the Internet. They're going to have to figure out how to make money locally where they're not relying on the prime time programming to drive that traffic. Some stations will be very, very good at it. Every town probably has two stations that do a pretty good newscast but it’s the guys that don't have good newscasts. You know, those are the folks that are in real trouble, because if all you've got are Seinfeld reruns, you don't have a lot to offer when viewers increasingly turn to the Internet for their video.

BOB GARFIELD: All right, John. Thank you once again for joining us.

JOHN HIGGINS: Hey, appreciate the time.

BOB GARFIELD: John Higgins is the business editor for Broadcasting and Cable magazine.