NBC’s scheduled self-destruction: Affiliates, rise up!

23Dec08

A few people have asked me for my take on NBC’s odd move, announced a couple of weeks ago, to abandon to dark forces schedule Jay Leno in the 10:00 pm timeslot. I don’t have much to add beyond what Derek Kompare, Alan Sepinwall, and Jonathan Gray have said, save for one key perspective: the affiliates.

Quick & over-simplified TV industry 101: broadcast networks reach households quite differently than cable channels. While my CNN is the same as everyone else’s in the U.S., NBC comes to my house through the intermediary of a local broadcast station (WPTZ for me in Vermont). Such stations sign affiliation contracts with networks, which provides the exclusive regional access to network schedules. Networks pay affiliates a clearance fee for each scheduling block, and affiliates get to sell a small portion of each hour to local advertisers (typically around 2 minutes per network hour); networks get to sell the rest of the ad time to national sponsors given their national reach via affiliates. Everyone makes a lot of money–or at least they used to. Nowdays, affiliates and networks are making less, but as far as I know, it’s still a profitable business model. (This is oversimplified, as each affiliate contract varies and some get extra money from network ads, webcasts, etc., but good enough for a blog…)

So if I’m an NBC affiliate, what is on the horizon? NBC has effectively yielded the 10 pm slot to ABC and CBS, meaning that my local ad revenue for that hour is likely to dip significantly. More importantly, the flow into my 11 pm newscast has been broken, which is a huge money-maker for local stations. And assuming that NBC viewers do not want to watch 2 hours a night of celebrity chat, we should expect that The Tonight Show‘s ratings will dip as well. The fact that Leno’s production costs are far lower than dramatic programs has no real benefit for affiliates, unless NBC jacks up its clearance rates for the show.

People have compared this to Fox, which has always ended their primetime schedule at 10 pm. However, Fox affiliates are free to program what they want at 10 – some have early nightly news, some run first-run syndicated programming like judge shows or tabloid news magazines, some run off-network reruns. But while they have to pay to produce or acquire this programming, they get all the ad revenue for themselves. I would guess that if Fox announced they were adding a nightly talk show in that slot, many affiliates would balk.

So NBC affiliates have lost the potential for a hit show at 10, going with a safe and underwhelming talk show that pretty much guarantees they’ll have lower ratings for their newscasts and less ad revenue overall. Add to this the fact that NBC’s most buzz-worthy shows (The Office, 30 Rock, the hit formerly known as Heroes) do a good portion of their business online and via DVD, where affiliates are closed out of the loop for the most part. Aside from Sunday Night Football and occasional Law & Orders, there’s little good news for affiliates on NBC’s schedule–and the Leno move makes it much worse.

What might they do? They could refuse to program the NBC feed, although that’s unlikely. More interestingly, they could use the multicasting feature of DTV – each digital TV license can actually air 4-6 channels of programming at a time – to counter-program Leno. I’d try to find a syndicated package of Law & Order reruns to put up on one channel, along with an early edition of the local news. And I wouldn’t be surprised if these programs beat Leno frequently!

I don’t know much about affiliate contracts, so I’m sure there are ways that NBC will force affiliates to feature Leno above other options. But don’t be surprised that when current contracts expire, NBC affiliates will be shopping around for better deals from other networks. Alas, NBC itself owns 10 affiliates in major markets, so those stations are stuck with Leno, doomed to ride the network into permanent 4th place.

(I welcome corrections to these thoughts from people who understand the arcane logistics of affiliation better than me…)



4 Responses to “NBC’s scheduled self-destruction: Affiliates, rise up!”

  1. 1 alisa perren

    Interesting take on this, Jason. The more I think about this venture, the more I have come to believe it will be seen as a massive misstep. Certainly will be interesting to watch it all unfold.

    Saw this article related to your post here, and thought it might be of interest:
    http://www.broadcastingcable.com/article/CA6622199.html?display=Breaking+News&referral=SUPP&nid=2228

  2. Thanks for that link, Alisa. What surprises me most about that article is that they don’t even mention multicasting – it seems that the industry (and trade press) still hasn’t wrapped their heads around what they’ve just been given with DTV!

  3. I remember when NBC was riding high with Must See TV. That was ages ago, of course, but what happened? Maybe you’ve written about this somewhere already. My understanding of the rise and falls of television networks is vague at best– is it all just a gamble? Their line-up takes off or it doesn’t?

  4. 4 Jonathan Nichols-Pethick

    Hi Jason. Thanks for this great post. My own take is that the networks care less than ever about the affiliates, and are just waiting for alternate revenue streams to even out before they finally cut the stations loose. This won’t happen any time soon, of course, but it’s been on the radar since at least the early 90s when new network heads like Wright and Tisch started to balk at –and then reduce/remove — station compensation packages. My guess is that they’ll go the cable/satellite route eventually and try to coax high retransmission fees from MSOs. I think your idea about the multicast option is a great possibility, and given what some NBC affils were willing to do when the net gave them “The Book of Daniel,” I can see it happening. Just look at what some affiliates are doing on their websites: totally severing any clear visual relationship to the network beyond a few program promos. One thing’s for sure, what’s coming down the pike is not even close to the playing filed we’ve known for so long.


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