NBC Still a Local Contender

Solid newscasts help keep stations in the running

aw & Order and its spinoffs are down in the ratings, and must-see Thursday nights are a thing of the past, but the NBC-owned-and-operated stations are still on track.

NBC’s 9% decline in prime time (season to date, adults 18-49) thus far is having a limited effect on station performance, which is still strong in its 14 markets. Top-market general managers say although they prefer to have a successful prime time lineup, and particularly a strong 10 p.m. lead-in to late news, it is more important to have established brand loyalty to station newscasts.

“We have got to put together a product that our viewers want to watch and connect with, independent of the lead-in,” says Jay Ireland, president of NBC Universal Television Stations.

Competitors agree. If a station has built a solid local-news audience base, it can withstand a prime time tumble.

“People are creatures of habit. They watch a certain newscast that becomes their favorite, and then it takes them months to move off of it,” says Emily Barr, vice president and general manager of ABC-owned WLS Chicago.

In New York and Los Angeles, the NBC stations won the November sweeps at 11 p.m. among the key station demographic of adults 25-54 and in households, while in Chicago’s Central time zone, NBC O&O WMAQ came in a close second to ABC powerhouse WLS among adults 25-54 at 10 p.m. While WLS has long been Chicago’s highest-rated station, WMAQ is the top biller, over-indexing among young, affluent viewers, says Larry Wert, the station’s vice president and general manager.

Maintaining audience loyalty is going to be especially important for NBC stations in upcoming months. CBS is a tough 10 p.m. competitor, with CSI franchises on Mondays and Wednesdays, plus Without A Trace on Thursday nights. And ABC is suddenly the network to beat on Sundays, with Extreme Makeover: Home Edition, Desperate Housewives and BostonLegal.

Season-to-date this year, CBS is up 22% among total viewers at 10 p.m. Monday through Friday, while NBC is down 10%. Among adults 18-49 in the time period, CBS is up 36%, while NBC is down 11%. And among adults 18-34, CBS has jumped 44%, while NBC has declined 13%.

CBS-owned stations have a definite advantage in prime, but that edge hasn’t translated into winning late news. In New York, Los Angeles and Chicago, the CBS stations remain at least third, although they have improved substantially in recent years. In Los Angeles, where the metro area is 40% Hispanic, Univision’s KMEX often beats all stations in the market to win major dayparts, including the 6 o’clock news.

Political and Olympic Ad Windfall

New York’s WNBC is NBC’s biggest earner, taking in the most revenue of any station in the country at $335.8 million in 2003, according to BIA Financial Networks. The rest of the stations combined generate nearly $1.8 billion in annual revenue, according to industry estimates and BIA.

In 2003, KNBC was the second-largest earner in the NBC family, showing $250 million in revenues, while WMAQ came in third at $158 million. And while growth among general-market TV stations has slowed considerably, NBC’s stations still turn in profit margins of 45-50%, says Ireland.

In a fragmented media market, the fortunes of the NBC stations were lifted this year by political and Olympic advertising. These ads helped boost the NBC station group to 13% growth in 2004 versus 2003, according to industry estimates.

Next year, it will be especially tough for stations to grow, as special events will be scarce. Still, WNBC has big expectations. New York Mayor Michael Bloomberg is running for re-election, and Sen. Jon Corzine is running for governor of New Jersey. Both elections are expected to generate substantial ad monies.

Otherwise, to combat flat-to-slow growth in the stations industry, the arrival of personal video recorders and the decline of the 30-second spot, the NBC station group is implementing what it calls its “organic growth” initiative.

“There are additional sources of revenue we can tap into by using our on-air product as an enhancement,” says Paula Madison, president and general manager of KNBC and regional manager of NBC Telemundo. “It’s less about our on-air and more about the total offering of what KNBC can bring.”

In New York and Raleigh, N.C., NBC just launched Weather Plus, its new 24-hour digital weather service shown on multicast digital channels. NBC hopes to roll it out to its other O&Os this year.

Focus on Local

“We just have to keep going after other things,” says Frank Comerford, president and general manager of WNBC.

WNBC has thrived as the station that gets behind local events and charities, a strategy that dates back to when Dennis Swanson was general manager. (He is now COO of the Viacom station group and gets major credit for beginning the turnaround of CBS stations.)

Other stations say local programming is too expensive, and they are sticking with syndication. But syndicated programming is also costly, and NBC is looking for alternatives.

“There has been less local programming on TV stations and, frankly, we have to do more,” Ireland says. “We have to use the one thing we have that differentiates us from cable. And we can’t be fully dependent on syndicators to reach our audience.”

In recent years, NBC has dumped most of its expensive sports contracts. While they were rating winners, the rights fees made them guaranteed money losers. That’s the same approach the NBC stations are taking toward high-end syndicated programming, Ireland says.

Last month, NBC stations in New York, Los Angeles and Chicago let go of top-rated early fringe syndicated programming—Paramount’s Judge Judy and King World’s Dr. Phil—judging that both shows cost more in license fees than they could earn in advertising revenue.

To replace that programming, the stations are going to have to come up with better syndicated offerings, or their own shows.

“The question is, can you pay a reasonable price to own the show, and can you make money on it?” Comerford says. “If you don’t own the show, the distributor makes all the money and the station takes all the risks.”