The Wall Street Journal’s Brook Barnes has this excellent Page One scoop on NBC Universal’s decision to slash costs. The broadcast TV network plans to cut $750 million out of its budget by the end of 2007, largely by eliminating around 700 jobs in the coming months.
In an effort to perhaps make the bloodletting palatable to those left behind, NBC is calling this effort NBCU 2.0. Company Chairman Bob Wright says “We can’t have new digital expenses and the same analog expenses.”
To keep the network alive, the company has decided to stop scheduling expensive dramas and comedies in the 8 pm to 9 pm slot and will fill that hole instead with inexpensive game shows and other low-cost programming. News, of course, will carry the brunt of the burden initially — the company’s NBC, MSNBC, CNBC and Telemundo operations will consolidate facilities and feel the earliest sting of the staff layoffs.
As Barnes notes, NBC’s move is merely a sign of the times. The old model of “broadcast television” is simply not sustainable in a world with hundreds of cable channels and millions of Internet and mobile video competitors.
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.
Not every part of NBCU will experience cost cuts. The company plans to step up its spending on digital initiatives by $150 million over the next two years in an effort to keep pace with the rapidly changing reality of entertainment and video competition. NBC, like all broadcast networks, has already started to turn its attention to the new forms of distribution that are, at the same time, sinking the network.
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 (dotcomedy.com) and canceled TV shows (brilliantbutcancelled.com).
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.”
Another smart observation from Barnes: NBC’s move could spark similar efforts at ABC and CBS (Fox is already a thrifty competitor). These networks have no doubt been dying to slash costs but feared being trounced by their rivals. Now, the cost ceiling can be lowered across the broadcast network business and no one gets hurt.
Although the details of the cost-cutting are interesting, the bigger picture is this: broadcast network television as we know it is at an end. As was the case with radio when television came along, the old business models don’t work anymore. That doesn’t mean that ABC, CBS and NBC will soon be dead. Just like radio, broadcast networks have to find new, low-cost (think talk radio) programming formats to keep themselves alive.
Cynthia Brumfield at 8:03 AM|Comments(1)
Something doesn't add up here - save $750 million by cutting 700 jobs? Unless every one of those people was pulling 7 figure salaries, I don't see how it's possible that those jobs account for a large percentage of the cut.
Posted by: Eric at October 19, 2006 4:05 PM
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