Ok, I’m putting words into Mr. Moonves’ mouth, but the point of his words very clearly seemed to be, there’s not a problem with broadcast network television just because NBC is having problems.
From Broadcasting & Cable:
“I’m here to tell you that the model ain’t broken,” said Moonves, speaking Wednesday at the UBS Global Media & Communications Conference in New York. “You can still make a lot of money in network TV.”
Moonves’ remarks came two days after NBC Universal president/CEO Jeff Zucker spoke at the UBS confab, stressing the need to “rethink what a broadcast network is today.”
In a pointed reference, Moonves added, “certain people are having audience erosion, some are not. We are not.”
Moonves also isn’t unhappy NBC is moving to five nights a week of Jay Leno between 10p-11p:
“We view it as a plus for us. It’s taking the third competitor out of the marketplace and that will make us stronger.”
The lone unsettling remark in the story applies to all advertiser supported networks — broadcast and cable, and that was around the need for (the American) auto makers to come back. In other words, TV wants them strong enough to spend hundreds of millions of dollars a year advertising on television. But on the other hand, perhaps misuse of television advertising was among the many inefficiencies that seem to plague the American auto makers.
Re: auto industry advertising dollars
I agree with you, Mr. Seidman, that automakers misused TV ads. My evidence is purely anecdotal, but here it is anyway: In recent years I’ve felt inundated with ads for things I’d never buy – like Cadillacs. Yet I cannot recall ever seeing an ad for a Chevy Malibu – a pretty decent car all-around. Not all of us can afford Caddies, and some of us wouldn’t want them even if we could afford them. I have no need for a Hummer, or any SUV for that matter.
The first Cobalt ad I saw was when gas hit $4 per gallon. I have never seen a Chevy Malibu ad; I don’t remember any Pontiac ads. Yet I’ve seen trendy, cute VW ads, and a few Toyota ads that actually caught my interest. I’ll give Ford a little credit here – they market their trucks and the Focus fairly well IMHO.
Back to the TV topic – Moonves’ comments honestly do not surprise me. He’s of the old guard, and it’s working for him. From his frame of reference, NBC looks really bad. Still, it’s the old guard’s frame of reference. In terms of profits, we only know who is correct by looking at the bottom line (which is tough to find for NBC as you have noted). In terms of ratings and popularity, we won’t know who is “right” until several years from now, when the cycle you’ve noted in previous posts has had a chance to run its course a couple more times. Is Zucker absolutely fricking nuts, or is he ahead of his time? The latter is unlikely, but I’m no psychic so I won’t rule out the possiblity
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Les is not exactly truthful with “In a pointed reference, Moonves added, “certain people are having audience erosion, some are not. We are not.” CBS is doing better than the competition, but they’re still down this season vs. last season.
Bill, no offense, but the chart is actually far more misleading in terms of accuracy than Moonves’ statement. First, you have to figure all the networks plan on 10% year over year erosion, and at the aggregate level CBS is outperforming that expectation considerably. If American Idol “erodes” by 10% or less, Fox will be DELIGHTED.
The year over year comparisons in your link without the actual data (this year’s #s and last year’s numbers) are more misleading than Moonves’ quote. You glance at that data and you think ABC is “performing” worse than NBC which is true purely on the % of decline year-over-year but it doesn’t in any way account for how relatively crappy NBC was already vs. ABC or how much better ABC is actually doing than NBC (which through that week was 4.07mm 18-49 for ABC vs. 3.64mm for NBC).
The most interesting part of Moonves’s remarks to me was that CBS may be collecting $200m in retransmission consent deals.
Retrans consent is the sleeping giant of the whole business. It’s more than a giant. It’s a woolly freaking mammoth.
If the major broadcasters get aggressive about their retrans deals, the balance of power will tilt strongly back to traditional broadcasters. It will take some balls but I think that’s where the business needs to go.
NBC has lost their marbles – LENO @ 10pm 5 nights a week…??
…do you know in the midwest out here that would be 9pm…
…LENO at 9PM….REALLY??
Regarding the ADS for trucks and cars – they are on almost every break – i think the car industry needs to watch their spending on that for sure – !!
Mikey — my knowledge of retrans is weak so I assume those are the fees the cable and satellite companies pay to the broadcast nets. Am I off to think that in light of that, it also seems likely margins improve considerably if they go all cable and abandon the local affiliate approach entirely (an outcome the article also discusses)?
I would guess all networks ultimately go that route. Murdoch is the only one I’ve seen publicly decry the local affiliate model (in response to interest about buying NBC — he said he liked USA Network, but wasn’t enamored with the cost structure of the local affiliate model.
If the local affiliates are abandoned, and the broadcast nets get huge retransmission fees AND get all of the local advertising revenue that currently (I’m guessing must be) divvied up with the local affiliates that seems a recipe for much better margins.
So there’s been a lot of talk lately about how bad NBC is doing. Are they really doing that bad?
Robert, no offense, but I’m going to chalk up your comment to a difference in the interpretation of what kind of erosion he was talking about. On a show by show basis, there definitely are shows that are up vs. last season. If Les was referring to the fact that CBS’s flagship shows were doing better than NBC’s flagship shows then he’s right (like NCIS vs. Heroes).
On a network wide basis, that chart I linked to isn’t misleading at all. All the networks are down vs. last season, CBS just less than the others.
“First, you have to figure all the networks plan on 10% year over year erosion, and at the aggregate level CBS is outperforming that expectation considerably. ”
For individual *returning* shows perhaps, but there’s no way the networks plan for a 10% decline network wide on a seasonal basis. Before last year’s strike year, the broadcast networks aggregate annual declines were more like 1-2% per year.
My understanding of the current state of retransmission of broadcast networks is that the cable MSOs do not pay them, the way they have to pay the cable networks, because they *have* to carry them under “Must Carry” rules.
The talk for a while was that the broadcast networks would try and change that dynamic and get paid like the cable networks get paid, but that it hasn’t happened yet.
Of course, I could be totally wrong.
Bill, I disagree.
looking at the aggregate historical trends over the last (pick ‘em, 20, 10, 5, 3) years, I can’t imagine why you wouldn’t plan around a 10% decrease and then view 2% in the aggregate as no erosion. That does mask the bigger issues with the erosion in the demos but in the aggregate I think you would plan on such erosion.
And for Fox, if I’m right and they do plan Idol to be down 10%, the forecast for the network overall is even worse (Idol huge part of Fox’s overall success, not impacted by WGA strike, no Super Bowl this year, yadda, yadda). From an internal expectations setting perspective, I can’t imagine not taking such an approach.
[edit] I believe looking at the aggregate of broadcast masks many many things. Looking at year over year comparisons pre strike, the drops for all the networks were in the 5-10% range for the few years I ever looked at, though there was one *huge* bump for CBS (I think though am not sure that was comparing through late May 2006 vs. late May 2005) which I suspect, but again am not sure, was Super Bowl related.
Bill, I believe you’re right about retrans, that’s why I’m guessing (I could be way off) there is much more $$$ to squeeze out of it if they abandon the local affiliate model. I’m not sure how the FCC will feel about that, but…
Robert/Bill, in 1994 the US made it so that a station could choose to be removed from the “must carry,” rule. So a network station could choose between “must carry,” or retransmit consent. I’ve heard of many recent fights between local networks and cable providers. With cable losing the right to transmit the local networks because the cable companies were being cheap.
Since the FCC allowed a network to be able to “opt out,” of the must carry, the retrans profits are still mostly untapped. So Mikey is correct in his assumption that retrans is where the untapped money is at.
I don’t know how valid it would be to look at those charts until the Spring anyway. Considering, as of right now, FOX’s numbers for the season have not factored in American Idol yet, ABC’s haven’t factored in LOST, and other various midseason returners, nevermind the fact that 24 didn’t air at all last season for FOX. I’m not saying you can’t analyze what’s there right now, all I’m saying is we’ll have a more accurate idea of those numbers by the Spring.
Vader, the charts actually are fair comparisons already in that they compare this year S-T-D to last year S-T-D through the same point in time. The declines aren’t versus the season average or even the Sept-May average, but compare the same time periods. It’s not perfect, CW and Fox started some shows early, America’s Next Top Model ran longer last year, etc.
Though the chart will certainly change as the season progresses, as far as American Idol and Lost go, they weren’t airing yet at this point last year either so the year over year declines (or gains in the case of Uni and MNT) are a valid comparison.
Robert and Bill, Does retrans mean that the brodcast networks will drop their affiliates and be carried by cable and satalaite operators like the cable networks?
He really is a cocky SOB isn’t he??
Les knows he’s the best network executive in the game right now and he should be cocky about it b/c the other networks fail hard against CBS when it can easily be done to beat them or at least compete with them closely.
NBC adding Leno was a huge mistake by that network and their going to regret it next season not having that valuable 10pm hour to showcase their dramas. Just going to make ABC and CBS stronger.
CBS does well in originals and repeats.
To expand a bit on Nick C’s post, one of the reasons that you see so many cable operators carrying crappy channels that nobody watches like Fox Business, Fuel, and Fox Movie Channel is that the MSOs want to maintain positive relationships so that a company like News Corp will NOT opt out of retrans consent.
Free carraige of the broadcast network effectively subsidizes the cable business for a company like News Corp.
To this point it has been in the overall interests of News Corp and Disney to allow this to happen, but I don’t think it will always be this way. At some time I think the major broadcasters will determine that they can make more money fighting retrans battles for the big network and letting the little networks survive or fail on their own merits. This would/will result in a) titanic money flowing into the big four broadcast networks and b) a lot of niche cable channels going out of business.
Now here’s where my knowledge of retrans is weak and maybe Nick can help us out: I don’t know that the affiliates *necessarily* have to be abandoned if broadcasters seek to collect a sub fee. I think the over-the-air signal could continue to be offered, and MSOs would simply lose their ability to retransmit that signal for free. The fee paid to the broadcasters would then have to be shared in some way between the network and station ownership.
Interesting. I had not realized there was a quid pro quo going on between a company’s broadcast and cable networks with the cable MSOs. If that’s the case, the fact that CBS has only Showtime, which I would assume has different economics with the MSOs than ad supported cable networks, might mean that CBS spearheads any changes.
Can someone please explain what retrans, MSOs, must carry and the other things you’re talking about are?
Mikey, that is fascinating. I do not believe the affiliate model needs to be abandoned, though it seems like that abandoning them would be the more profitable model for the big networks. How big of a deal is it to ABC, CBS,Fox, etc to have the local affiliates and broadcast towers at this point? It seems like any sharing of fees should be heavily in favor of the network and not the local affiliate (I’m sure the local affiliates may not share this view). Perhaps my viewing is atypical — I don’t care about local content (including local news) at all.
Besides the fees paid by the cable companies, there are some additional revenue opportunities if the affiliate model was abandoned. I’d definitely be willing to pay $5 a month extra to receive the east coast feeds of the broadcast networks.
Tom, MSO = Multiple System Operator. It’s pretty much just jargon for cable and satellite companies. Retransmission = retransmission of broadcast (over the air) network signals on cable and satellite offerings. “Must carry” involves regulations around what channels cable and satellite companies absolutely have to offer their subscribers.
To further add to Robert and Mikey’s definition of “Must Carry,” it’s a FREE service. The cable company retransmits their signal for FREE.
So far the leading networks for opting out of the “Must Carry,” option with the FCC are CBS and NBC affiliates. I remember reading about a large holdout by an NBC and CW affiliate (two stations owned by same company) in a fight against TIME WARNER. The company decided to opt out of the “Must Carry,” and became an option for TIME WARNER to carry. TIME WARNER offered to continue carrying them for FREE just like it does with their CBS, FOX, & ABC affiliates in that area. The company owning the stations held out for I believe $1.25 per subscriber. TIME WARNER started airing commercials about how the NBC station was “greedy,” and that the others were available for FREE!
TIME WARNER ended up losing the rights. So they started airing commercials about how you could use rabbit ears or an antennae on your roof to get the stations. Meanwhile the “greedy” (according to TIME WARNER only) NBC and CW stations started airing FREE commercials for DISH NETWORK and the local phone company who was offering TV over internet who had reached an agreement with them. They also aired commercials educating their viewers on the “Must Carry,” law and how TIME WARNER had essentially been rebroadcasting their content for FREE because of an old dated FCC regulation and how LOCAL COMPANIES had to pay more for advertisements on local stations because of it all.
DISH NETWORK sales went up and TIME WARNER sales went down and they lost thousands of customers to DISH NETWORK and lost thousands of internet customers to the phone company. Then by week two DIRECTV reached a deal with the company to retrans and they were added into the free commercials. The hold out by TIME WARNER didn’t last a month after that. They ended up paying more than the $1.25. TIME WARNER’s brand in the area was tarnished while DISH NETWORK and NBC and CW had their image improved.
The company that owned the stations gave all employees a slight bonus. They also released a press release stating they’d now be healthier than ever before and looked forward to sharing their success with local businesses through lower advertising costs for local companies. This story was passed on to many Marketing & Advertising firms on how the retransmit changes could affect brands. Then that was passed on to people in the biz.
Opting out of the “Must Carry,” provision does not mean any punishment at all from the FCC. You just possibly lose advertising income if you can’t reach a deal with the retransmit firms (cable & sat).
CBS has done the most opting out of all the major networks, and I believe they made over $200 million last year from choosing to do so. There is huge money to be made and they don’t lose anything for dropping out of “must carry.” The only people to be hurt are the truly greedy cable companies who want to continue paying nothing for something.
If Les thinks broadcast network is just fine how come no broadcast drama but House is nominated for the Golden Globes. Les your network got only ONE measly nomination so how good is your shows compared to HBO?
Ayla