NBC's Script Needs A Rewrite

Why not spend less on dramas and comedies or hook up with Yahoo?

It's not a great time to be Jeff Zucker. The CEO of NBC Universal Television Group is under pressure from General Electric boss Jeffrey R. Immelt to revive the flailing network in the face of intense competition from the online world. If Zucker doesn't do it quickly, he could lose his chance to succeed Bob Wright as chief of all of NBC Universal. Yet Zucker has chosen a remarkably tentative plan for turning the network around--whacking jobs and promising to rethink its prime-time lineup. Granted, it's not tentative to those affected by the 700 jobs that are being cut (out of 14,000) or the $750 million in expense reductions. (Some of these savings will be plowed into boosting the company's online presence.) But none of this will completed until the end of 2008.

It's hard to see how cutting a few hundred jobs and goosing digital revenues will stabilize a wheezing business model. The same goes for the new focus on reality or game shows instead of scripted series for the first hour of prime time. (Early headlines on this point caused a ruckus, which is why the network is walking it back: NBC Entertainment President Kevin Reilly now calls such plans "a target, not an absolute.") In short, broadcast TV's production costs are too high, competition is stiffening, and consumers are looking elsewhere.

THIS FALL SEASON, the networks won kudos for spending big to pump up the quality. However, hefty bets on the likes of NBC's Studio 60 on the Sunset Strip and CBS' Smith did not result in a ratings bonanza. Why? When it comes to hits, as screenwriter William Goldman once put it, no one knows anything. Here's what we do know: Scripted network TV keeps getting pricier. NBC's most promising new entry, Heroes, has no stars, yet it costs $2.7 million an episode. "We've gotten the public comfortable with very high quality of execution," says Reilly. "It's hard to get the genie back in the bottle." Union rules are partly to blame, along with the competition for top talent that keeps jacking up costs. (Imagine what The Sopranos creator David Chase will get for his next project.)

It's TV's slavish devotion to satisfying viewers' perceived demand for high production values for scripted series that really ties execs' hands. Yet think of the wildly different looks of The Blair Witch Project, Crash, and Titanic, which show that there are many routes to massive movie profits. There is no such assumed tolerance for varying approaches to scripted network series, and there is nothing lo-fi on nonreality network TV. Even the plainest sitcoms are shot well, lit sharply, and loaded with glossy surfaces. This puzzles some pros. "You should, theoretically, be able to do a comedy for much less," says one cable programming exec, if you "cast unknowns, control the process yourself, and shoot it" cheaply. Underline "theoretically," because the best minds at the Big Three haven't come up with a way to do a scripted series as cheaply as Deal or No Deal, which costs just over $1 million an episode.

NBC Universal can lay claim to an escape hatch--the Web and other New Media offshoots. The company's digital-related revenues will be around $400 million this year, and the goal is for them to top $1 billion by 2009. (New initiatives include a revamped cnbc.com, due in December, and a rollout of more MySpace-like features on iVillage.com early next year.) Total NBC Universal revenues last year: $14.7 billion. So even after three years, digital revenues will be well below 10% of the company's total. That means NBC's digital initiatives won't open an escape hatch you can wriggle a network's old infrastructure through. Of course, there are other moves that could amp up digital initiatives in a big way. Attention Messrs. Zucker and Immelt: There's this company called Yahoo! It gets lots of Web traffic, but it's losing traction. Maybe your bankers should give them a call.

For Jon Fine's blog on media and advertising, go to www.businessweek.com/innovate/FineOnMedia

Corrections and Clarifications In Jon Fine's column "NBC's script needs a rewrite" (Media Centric, Nov. 6), the figure given for NBC Universal's total 2005 revenues was incorrect because of a production error. The correct figure is $14.7 billion.

By Jon Fine

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