To: Steve Burke, NBC Universal CEO
CC: Ted Harbert, NBC Broadcasting chairman
From: Michael Malone, B&C deputy editor
Re: How to Fix the NBC-Owned Station Group
Congrats on the NBC Universal acquisition! I thought the FCC was never gonna approve the darn thing.
I know you’ve got a lot on your plate, but I do want to pass along a few words of advice. I know Comcast’s interest in NBC was mostly about the Peacock’s cable networks, as well as the studio. I know fixing NBC primetime—sick of that phrase yet? Me too!—is a huge priority.
The NBC station group? Not a huge draw. I get it. Over-the-air TV isn’t what it used to be. Stations are a mature business, especially compared to those high-flying cable nets.
And let’s face it—the O&Os are damaged goods, after years of GE managing them like they were widgets, as opposed to living, breathing and—hopefully— evolving outlets. There was way too much of Jeff Zucker’s infamous “managing for margins” going on. But Jeff is gone, and that philosophy should be, too.
Warts and all, these are legacy stations. Returning the O&Os to their glory days won’t be easy, but it’s not inconceivable either.
Steve, I follow this stuff pretty carefully. Here’s what I’d do with NBC Local Media.
1. Keep the Stations
You’ve got guys whispering in your ear about selling them to focus on the main assets in the deal, or at least off-loading the smaller-market stations. But keep them all. Maybe San Diego and Hartford don’t fit into NBC Local Media’s Top 20 market philosophy, but they are growth markets. You own beachfront real estate in New York, L.A. and Chicago, among other top-shelf metros, including Washington, Dallas and your own backyard, Philly. Such key distribution points are vital. Such spectrum is almost immeasurable.
Then there’s political. You’ll want every station asset you can get your hands on when the presidential election derby kicks off. President Obama will spend $1 billion to keep his job in 2012, according to some early forecasts, and if there’s one thing I’ve learned about political spending forecasts in recent years, it’s that they’re usually too low.
Plus, you’ll never get close to what you think the stations are worth in today’s market—and Julius G from the FCC would simply lose it if you suddenly put them on the market. Make them work!
2. Fix Daytime
Big priority, Steve. In 2004, NBC-owned stations in the top three markets opted not to renew Judge Judy and Dr. Phil. Too expensive, said NBC.
Too bad. Seven years later, daytime is still struggling after NBC filled daytime slots with inexpensive fare, outside of Ellen. NBC recently had the opportunity to get more aggressive in its syndication purchases but passed on several opportunities, including Dr. Oz and Anderson. Between us, Anderson Cooper’s talker sure seemed like a right match for NBC’s up-market viewers.
None of those shows are necessarily station-savers, but considering Oz’s sophomore performance, committing the cash to snag it from Fox could have been the steal of the season. Sony’s Nate Berkus is improving time periods for you, but you have no ownership.
So NBC needs to beef up its basically non-existent first-run effort. I know Zucker told NBC’s syndication division to back off after the double disaster of Jane Pauley and Megan Mullally, but successful syndicators take big swings—look at places like Warner Bros., Sony, Debmar- Mercury and CBS. Instead, NBC has surrounded its first-run syndies with low-rated local programming. It’s also rolling out Access Hollywood Live in some markets, but that unfortunately looks like vintage GE—using existing resources to eke out another hour of product.
NBC’s mindset back in 2004— don’t pay higher license fees than you can earn in advertising revenue— is straight out of the GE playbook, too. The strict P&L philosophy may work for jet engine parts, but not for TV stations. They need to be unique in their markets, and that sometimes requires expensive acquisitions. Moreover, if stations surround their newscasts with shows that no one watches, eventually no one will watch their news, either. That dynamic ends up bringing down all of a station’s time periods— from prime, to late night, to early morning to daytime. Ouch!
Keep an eye on Anderson next season; if Coop does a good number, grab him for ’12. Keep tabs on Couric, too—if she tries a daytime show, give Katie a call.
3. Invest in News
Make no mistake, Steve—fixing the station group is going to be expensive and time-consuming. This is not a short-term play. But you’ve got to make a major investment in local news, which represents as much as 40% of a station’s revenue. Think long-term—the top news stations will bene! t the most from mobile DTV and its two potential revenue streams. (I know you know about those dual streams!)
“NBC is leaving a lot of money on the table,” says one industry watcher. “Getting the stations to a #2 or #3 in the market is worth a lot of dough.”
Show the nation that NBC is back in business by putting 5 p.m. news back on at WNBC New York. Sure, 5 o’clock’s current denizen, LX New York, is building on its miniscule ratings, but these homespun shows done on the cheap just haven’t done decent ratings. Raycom has an innovative show in America Now, and Belo and LIN are seeing success with their morning program models. I haven’t seen that hatching hit shows is part of NBC Local Media’s skill set.
I keep hearing the same thing about WNBC: If you’re not doing news at 5 on your " agship, it sends the message that news isn’t a big priority at the station—or the group. Let new hire Shiba Russell get to know New York, and vice versa, on WNBC’s weekend news, then slot her in on a ballyhooed relaunch of Live at Five.
Spend the cash needed to jazz up news throughout the group. More live shots! Bigger talent! I hear NBC Local Media is spending on audience research for the first time in years. Good start, Steve. As one insider told me about NBC’s local content, “What do viewers like about us? What do they dislike? What do they hate? We have no idea.” Customer service! It works for cable.
NBC Local Media has to offer an additional 1,000 hours of local news and information as part of the merger. Don’t view this as court-ordered trash removal from the side of I-95; turn the FCC’s mandate into an opportunity for NBC’s local news outfits to truly put their stamp in their markets. You’ve got SportsNet outlets in a bunch of O&O markets, such as Chicago, New York and Philadelphia, and Spotlight local sales crews too. Start putting some dream teams together in these markets.
It’s mighty tough to win back the news viewers the stations have lost over the years, and ABC, CBS and Fox are not lying down. But it’s doable. And don’t stop with the NBC O&Os—you also have 14 Telemundo stations in major markets. The U.S. gained 13 million documented Hispanics from 2000 to 2009— start preparing now for when the 2010 census data on Hispanic growth lands later this year. Give Don Browne and his news chief, Ramon Escobar, the resources to dominate local noticias.
4. Bring Back News Websites
I know, traffic is way up on the O&O Websites since NBC Local Media rebranded them in 2008, going with cool-crowd nightlife happenings in favor of hard news. But this isn’t the traffic you want—you want news consumers, not the night-crawling hipsters, attractive as they may be.
“The local news viewer is worth a premium,” says one industry watcher. “Start meeting viewer expectations of what a station site should be—make them more newsy.”
When newspapers start charging for online content, you want a robust— and free—online news option for users. When political candidates and issues start spending big online, they’ll spend on news sites, not “13 Fabulous Fashion Flicks.” There’s a place for the frothy frippery on the NBC O&O sites—below breaking news, weather and local politics.
5. Keep John Wallace
You probably want fresh perspective atop the station group, and John is dyed-in-the-wool NBC, right down to the page’s blazer he donned back in the ’80s. But keep John on board. Maybe tap someone with programming and marketing experience to manage those vital departments, but give John a chance to do his thing with the full support of a parent company behind him.
Big-name industry people like and respect Wallace, and most salute him for doing a pretty fair job with the stations despite having, as one of these big names puts it, handcuffs on. “He knows the stations from breaking them down, and he’ll know how to build them up,” says one top stationbusiness insider. “Let John prove himself in building mode.”
Give ’Em Hell!
Steve, the broadcast community is behind you. Your new brethren loves that your father ran Cap Cities/ABC, that you made your bones there, that you’ve got broadcasting in your genes. They think Comcast is just the right outfi t to finally get NBC’s primetime fixed—and to fix the owned stations as well.
“Burke understands what it takes to run good stations and a good network,” David Barrett, Hearst TV president/CEO, said at NATPE. Barrett’s not the only one who feels that way.
Getting the O&Os back on track is good for the business as a whole. We’re all rooting for you.
P.S.: While you’re fixing prime, tell Fey to lay off the “Kabletown” quips!
P.P.S.: Any chance you can introduce me to her?
—Paige Albiniak contributed to this article.
To: Steve Burke, NBC Universal CEO