Cyma Zarghami, president of kids’ behemoth Nickelodeon, had a problem even Will Smith couldn’t solve. On Sept. 12, 2011, Nick’s ratings dropped by 20%, literally overnight. “Even in the worstcase scenario, ratings don’t drop that fast,’’ Zarghami recalled in an interview with B&C. In the previous quarter, ratings had scored an all-time high. “We saw no signs of it coming,” Zarghami added. “So our first reaction was, it will pass.” It didn’t. Ratings stayed down the entire fourth quarter of ’11, a crucial time for clients looking to reach kids before the holidays. That meant that millions of dollars’ worth of ad inventory went toward make-goods for those advertisers.
“It was a huge mystery for a while and then yes, it was scary,” Zarghami said. “But it was also sort of a huge challenge, and I’m always up for a challenge.”
Nick had its high-rated Kids Choice Awards, hosted in March 2012 by Will Smith, and a bushel of new episodes of programming ready to roll.
“It really wasn’t making that much of a difference. We sort of stabilized for a minute and then we said ‘OK, let’s really figure out what this is,’” she said.
Nickelodeon first looked into changes in the Nielsen sample. But in hindsight, Zarghami said it turns out that several other factors also led to the stunning decline. There was some content fatigue, and while Nickelodeon had some hits, led by the irrepressible SpongeBob SquarePants, it might not have had enough.
“The things that we had been developing and launching weren’t coming up behind the hits the way we wanted them to,” she said. “Our competitors were actually doubling down in many ways on the amount of content they were doing.” And the audience was changing. “I call that the year of the iPad,” she added. “People were starting to see how much content kids were watching on YouTube. And then really important to us was this idea that the millennials were growing out of the demo and there was a new audience emerging.”
Two years later, the bleeding appears to have stopped. Nick says it has had five straight quarters of ratings growth among kids 2-11. In the first quarter, ratings were up 3%. Though still significantly below its record levels before the crash, the net claimed the No. 1 spot in Q1, boasting new animated hits Sanjay & Craig, Breadwinners and Rabbids, along with the liveaction shows Sam & Cat and The Thundermans.
Analyst Michael Nathanson of MoffettNathanson Research, estimates that the plunge cost Nick $80 million in ad revenue the first year. “They’ve done a good job in trying to right the ship and develop other franchises,” he said. “It will take a couple more years to find out how big these [new] franchises will get and whether they can replace series that used to generate substantial revenue like iCarly.”
Nathanson gave credit to Viacom CEO Philippe Dauman for thoughtfully approaching the problem and not having heads roll, including Zarghami’s. “They changed some people, but Cyma is one of the people still in place as [Dauman tries] to work through this program challenge,” Nathanson said.
How did that happen? In an interview with B&C business editor Jon Lafayette, Zarghami explained the process. An edited transcript follows.
When did you think that your plan to turn around the network would work?
I always knew it was going to work, because I have an incredible amount of confidence in the organism that is Nickelodeon and the team that I have in place. If you ever ask people what they know about me, one, they will say that I’m fiercely competitive. And so I was laser-focused on fixing Nickelodeon. We knew it was going to take some time. I think you can study marketing books and it takes at least two years to turn a brand around. We were ahead of schedule, and I think our best asset was owning that it was our own problem.
How did you adjust to a new generation of kid viewers?
Once we sort of wrapped our heads around this idea that it was a different audience and that what they were going to like was not going to be the same stuff that the audience graduating from us was going to like was really when we sort of got energized and said, ‘Now we know what we’re going to do.’ We had to go into serious development mode, serious research mode and serious creative reinvention mode. What we know now is there is a pace at which this audience wants new content. It is different than it was before. We know that now. This audience has a different sense of humor than the audience before it. And we’re getting smarter every day about them. Seventy percent of the kids in the U.S. right now are post-millennials, so there’s a very small percentage of millennials left in our mix.
Nickelodeon had been very successful for years. Why did many of the people behind that success lose their jobs in this process?
If an organization does not change and adapt, it gets stale. We’re changing and adapting. And I think we’ve been doing it for years. That’s not new to Nickelodeon, change and adapt. We have thought about new ways of doing business every two years mostly because the audience changes so much, we have to adjust.
How did you gear up to create all the new content?
We needed singular leadership on the West Coast, so we sent Russell [Hicks, president, content development] there to sort of bring energy to the West Coast that we were trying to bring to network.
How have you upped the pace of development?
That is one of the things we sent Russell to the West Coast to do. He has instituted a shorts program, an innovation, so that we can have six to 12 new creators making work for us at the same time. We are in year two of the shorts program. We have a Groundlings program, and it’s now taking shape where we’re cultivating new talent all the time. We have put in place an animatic phase of pilot production so that we can make sure that the pilots get to 100% of what they can be before we take them to research. We’re working much closer with the research team to do that in real time so that we don’t have to wait quite so long. We’ve probably cut quite a few months off the development process. And the most exciting part is that we are now finding millennials who want to make work for the postmillennials. And that’s when the work gets exciting, is when the graduating generation sort of makes the work for the generation behind them.
We went through the development process and we said we need a lot of As. No Bs. We just need a lot of As. So we eliminated anything we thought might be a B and moved aggressively to make the As. We spent a lot of time looking at the shows in development and making sure they were as good as they could be.
Were there other keys to adjusting the programming to a new audience?
There was also a moment when we said to ourselves, we need to focus on one big idea for kids. Funny has always been in the DNA of Nickelodeon, and making kids laugh has always been our mission. By saying to the entire company that we care about nothing else but making them laugh, it really did sort of bring people together and say ‘OK, I get the assignment.’ Simple works, there is no doubt about that. So your job now is that in everything that we do, make sure we are making kids laugh. Once people digested that notion and started bringing stuff to light, that was when we all knew we were on the right track.
Having survived a plunge like this once, how do you make sure it doesn’t happen again?
The other thing that emerged while all of this was going on was we became way smarter about data. We understand what to look at and where to look much more frequently than we had before. We discovered in the analysis that our heavy viewers had actually been leaving for a little while, and it was being masked by more of the light viewers. And so had the light viewers not been compensating for the heavy viewers we would have seen signs of it earlier, but we didn’t up till that point really frequently study the heavy users. So now we’re watching both very carefully, and it is our heavy viewer that is coming back and driving a lot of the ratings right now.
NICK WANTS TO SCORE WITH SPORTS
At its upfront presentation in March, Nickelodeon announced plans to air the awards show Kids’ Choice Sports 2014. President Cyma Zarghami joked that the concept sells itself, and Subway has indeed already signed on as a sponsor.
Sports could be a bigger part of Nickelodeon’s lineup soon. “It’s no accident that we’re doing Kids’ Choice Sports at this particular time because there’s a sort of coming together of the leagues being interested in families, families being interested in sports, and our ability to capture from a kids point of view what’s really exciting about sports,” Zarghami said. “This past Olympics was really exciting for a lot of kids.”She added that the pro sports leagues in particular are interested in the kids’ audience and the family audience.
As with its series programming, Nick is working to put more humor in its specials. “Kids Choice Awards [2013, with host] Josh Duhamel, we started thinking about funny in a whole new way. We made comedy the center,” Zarghami said. “Kids vote and they care very much about who wins and whether they had any effect on that. But we tried to make it a show full of entertainment as well as awards.”
REPLACING ZARGHAMI WAS NOT AN OPTION: DAUMAN
When Nickelodeon’s ratings plunged, replacing Cyma Zarghami as president “never crossed my mind,” said Viacom CEO Philippe Dauman.
“She’s a tough-minded, excellent manager who lives and breathes her brand, and I was optimistic from the beginning that this was something we would work through,” Dauman said. “Cyma was and is the right leader for Nickelodeon.”
Dauman was sure Zarghami was up to the challenge. “She’s very competitive. She’s a winner,” he said. “In fact I told her at the time that going through this, while one doesn’t feel very good right now, at the end it will make you and your organization much stronger than when you went into it, and that’s proven to be true.”
During the crisis, Dauman met with Zarghami more often than usual. “Her approach is she doesn’t shy away from the issues. She tackled them head on,” he said, adding, “I spent more time watching Nickelodeon than I had before without having young children anymore, and I’m just thrilled to death with the job Cyma and her [team] have done.”
Dauman is convinced Nick is now on the right path. “We made the right organizational changes. We have a great strategy across all of our Nickelodeon branded networks,” he said. “We’ve put our foot on the accelerator in terms of the programming development. We continue to attract a lot of great young talent, particularly in the animation area. It was a good wake-up call, and I think Nickelodeon is really well set up for the years to come.”