NBC’s Cost Cutting, Including 700 Jobs, Shows The Problems That Newspapers Are Experiencing Are Also At Play At Broadcasting Giants Who Are Also Desperately Trying To Get More Digitally Involved

Philip M. Stone October 22, 2006

US television network NBC saw its advertising revenues drop by $800 million two years ago and that money has not come running back, so the network has decided that relying on being just a traditional media analog player is no longer its future – digital is the name of the game and it has embarked on a massive reorganization including huge cost cuts to free up investment funds.

The network is slashing expenses by $750 million, including cutting five per cent of its workforce (700 jobs). One example of the cost cutting – it will no longer offer expensive to produce drama programming in the 8 – 9 pm time slot, instead relying on cheaper to produce reality programming and game shows.

And it looks as though the network is going to take yet another savage knife to its news operations. The company says it is reviewing its news bureaus and operations around the world, not that it has that many international bureaus left any more. It recently added operations in Beijing, Beirut, and Bangkok, but has no staff, for instance, in its Moscow bureau. Besides the main NBC news activities there are also news operations for CNBC (business news) and MSNBC (24-hour news). The thought is that there should be more backroom cooperation and more cross reporting – for instance on a major business story use a CNBC correspondent on NBC’s Nightly News

NBC News president Steve Capus admits there will be cuts in on-air talent. Nightly News anchor Brian Williams says that if the cuts are bad enough to affect quality coverage then he will yell long and loud, but anybody who looks at US network television staffing around the world as it was, say, 20 years ago and what it is today, knows that whatever yelling there was fell on deaf accountants’ ears.

Former ABC anchor Ted Koppel summed up news cuts best. “Much as they will make it sound as though the product is going to be as good as it ever was — no, it won't," And since the most expensive reporting is by the international correspondents he expects that is where the knife will penetrate the deepest.

NBC has not had a good couple of years. Once the kingpin in ratings it has been last in the all-important adults 18-49 demographics. That resulted in advertising revenue down $800 million two years ago and it has stayed pretty much at that level. Major advertisers like Johnson & Johnson have figured out that instead of investing in the “up-fronts” where they commit to their buys for the new season  that they can actually make better deals by waiting and making spot advertising deals.

And the fact NBC lost some $60 million on this year’s Winter Olympic Games certainly didn’t help the bottom line. They talk about the prestige of the Olympics, but that and $3 just buys a cup of coffee at Starbucks. All in all its profit this year is expected to be flat.

The truth is that US network advertising has been in doldrums for some time, and according to PricewaterhouseCoopers network TV ads overall grew just 1.1% last year to $18 billion. Like their newspaper cousins, the networks have been hit hard by an overall advertising spend that is growing very little, but in which there has been big shifts in that spend from traditional media to digital products, mostly the Internet but also mobile phones and the like.

And it’s not that NBC hasn’t made some big investments in digital, even though it wasn’t in the play for YouTube or MySpace.  It recently spent $600 million for the female-oriented iVillage website.

Bob Wright, chief executive of NBC Universal, said the company wants to take the analog savings and invest in higher growth digital properties. “This initiative is designed to help us exploit technology and focus our resources, as we continue our transformation into a digital media company for the 21st century.”

NBC’s digital revenues are expected to top $1 billion by 2009, the company said.

US television networks have been actively streaming many of their programs on the web for the past month for free, via advertising support. NBC said it has streamed some 5 million individual episodes of its shows. And while that number may pale with the 23 million people that watched the most popular US television show last week (Gray’s Anatomy) it is obvious that the Internet is becoming a secondary way for people to watch TV. Most Internet watching, according to research, is by people catching up on an episode of their favorite show that they had missed at home.

Just as newspapers are trying to push the idea that their readership should include those who access their web site, so the television networks are working on the same theory for their programming. Nielsen Media Research says, however, a third-party system for measuring TV viewing online won’t be available for at least another 18 months.

But NBC, ABC and CBS all are reporting triple digit percentage increases to their video streaming sites. There is no doubt this traffic will continue to grow.

And even though NBC is talking about news cutbacks, its MSNBC unit reported that September saw its largest number of news video downloads – 88 million – and there was no lone major news event in the month. So it had better not cut back too far – there’s also a very active digital video news market out there, too.

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