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NBC Universal Undergoes Restructuring That Will Cut 700 at the Network

October 19, 2006 at 6:30 PM EST
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TRANSCRIPT

JIM LEHRER: Finally tonight, NBC, known as the Peacock Network because of its famous logo, sheds more than feathers. Jeffrey Brown has our Media Unit report.

JEFFREY BROWN: More and more, television viewing looks less like this and more like this. Today, one of TV’s historic leaders, NBC, now called NBC-Universal, announced a shakeup to respond to the changing reality, targeting more products to new delivery systems, like video-rich Web sites and portable devices, while cutting in traditional areas, including its news operations.

BRIAN WILLIAMS, Host, “NBC Nightly News”: Good evening. Tonight, all eyes are on a tiny…

JEFFREY BROWN: Bob Wright, chairman and CEO of NBC-Universal, announced the moves today in a written statement, saying the new strategy, called “NBCU 2.0,” was intended to, quote, “help us exploit technology and focus our resources as we continue our transformation into a digital media company for the 21st century.”

NBC says it will save $750 million by the end of 2008, shedding 700 jobs, mostly in news, and merging the operation of its long-struggling 24-hour cable news channel, MSNBC, into other news facilities. The company’s TV station group will consolidate in Burbank, California, along with the NBC-owned Spanish-language broadcaster Telemundo.

JASON LEE, Actor, “My Name is Earl”: You know that guy you see going to the convenience store…

JEFFREY BROWN: One change on television that viewers will notice: NBC will stop scheduling high-priced dramas and comedies during the first hour of primetime at 8:00 p.m. Current shows, like “My Name is Earl” and “30 Rock,” will be placed later in the evening instead, replaced by cheaper shows like “Deal or No Deal.”

Becoming 'a digital media company'

JEFFREY BROWN: And joining me is Tom Wolzien, a digital strategy media consultant. He's a former Wall Street media analyst and NBC broadcasting executive.

Tom, why don't we start with that big picture, that quote from Bob Wright about the transformation into a digital media company? Now, that's everyone's mantra, but what does it mean in this case?

TOM WOLZIEN, Digital Strategy Media Consultant: Well, Jeffrey, I think they're trying to play to something that's sort of a zero-sum game. Advertisers are shifting to the Web. Web advertising this year will actually exceed -- it's $16 billion -- will exceed the advertising going to the four broadcast networks.

So they're trying to position themselves to capture some of that advertising. And also, as viewers, as consumers shift to these handheld devices and Web types of devices, they're trying to make sure that they have their content in front of the consumers in those new locations, as well.

JEFFREY BROWN: Of course, today's announcement I guess also reflects some bad years for this network in their traditional programming, as well.

TOM WOLZIEN: Well, sure. What they're trying to do is make some financial changes so that they can make the necessary strategic changes but still send the appropriate amount of profits up to their parent company, GE.

News, primetime programming changes

JEFFREY BROWN: Now, the cuts in news, Jeff Zucker, one of the top executives at NBC, he said -- he was pretty blunt -- he said, "The growth in news is in difference places. It's online; it's on wireless." So they're clearly not looking at this as a kind of future growth area.

TOM WOLZIEN: Well, news for a long time has not really been a growth area. The question is in the cuts and how it affects the content and the quality is whether they're going to be changing sort of the factory floor, consolidating some of their operations, pushing MSNBC together with CNBC or bringing it over to the 30 Rock headquarters, and saving jobs that way, or whether they're going to actually go out and cut the number of crews they have in the field, the number of reporters in the field, or the amount of money that the shows have to produce what they're putting on the air every day, every morning and every night.

JEFFREY BROWN: There weren't too many details released on that. Do you know any more about how that will all unfold?

TOM WOLZIEN: No, I do not.

JEFFREY BROWN: OK. The move about the 8:00 comedies and drama, now, is that all about cost and the cost of production?

TOM WOLZIEN: Pretty much so. The dramas and the comedy shows are expensive to produce. If you can consolidate in two hours rather than three, it certainly saves you cost. But the real question is whether the programs that they put in at 8:00 are able to bring in enough revenue so that they actually make more money than they were making with the dramas or the comedies.

If you have an inexpensive program to produce and it brings in a large audience, clearly it becomes extremely profitable.

Web-savvy positioning on the net

JEFFREY BROWN: What about that question of quality? Is there fear that, as Wall Street drives these things, that the programming quality goes down or is hurt?

TOM WOLZIEN: Well, let's not kid ourselves here. These are publicly traded companies or they're parts of publicly traded companies. And other than the regulations or the threats of regulations, they're going to do ultimately what's good for their corporate parent and for their shareholders who, by the way, are mostly mutual and pension funds that many of your viewers have interests in.

JEFFREY BROWN: You mentioned the advertising moving online and elsewhere. Can you quantify that? Give us a sense of what exactly it's moving to and how much.

TOM WOLZIEN: Well, the online business looks like this year, by most estimates, will be pushing between $15 and $16 billion dollars. That's out of about $240 billion total advertising across all media, newspapers, TV, magazines, direct mail, and so on.

So in the overall proportion, it's not that huge. But the online advertising has already pretty much decimated the newspaper classified business, as search was able to replace printed classified. And now what the television-based companies are concerned about is, as more people have broadband, they'll be able to get video on the Web. And now the next step will be video advertising, and that would cannibalize the advertising that's on the current video outlets, broadcasting cable networks.

JEFFREY BROWN: All right. So the real question then, to respond to this new world, what exactly is NBC and other networks, I guess, what are they doing to bring their content, to bring their programming to the online world?

TOM WOLZIEN: Everybody's taking a little bit different approach. Rupert Murdoch and News Corp. bought MySpace.com, which at this point looks like an inspired purchase, because they paid about $500 million for it, and they already have a billion-dollar deal with Google.

CBS has been working hard to put a number of its shows on the Internet. They have the "CSI" series available on Google. They just cut a deal to sort of set up a channel on MySpace -- or I'm sorry, rather on YouTube. I took a look this afternoon, and there were promos for the "CBS Evening News with Katie Couric," as well as for "CSI," right on YouTube as you went to the homepage there.

Disney, Bob Iger there, took a huge step last year when he made "Lost" and "Desperate Housewives" available first for sale on iPod. And then they recently did a test of having advertising embedded in them and offering them for free across the Web.

So all of these different companies are working to try to find different ways of positioning themselves, but nobody quite knows yet what's going to work. They just know they have to try.

A 'gamble' on the World Wide Web

JEFFREY BROWN: That's what I was going to ask you. You mean, at this point, it's all an experiment or a gamble to figure it out, but nobody has a clear way?

TOM WOLZIEN: Nobody has a clear way. There's an interesting example at Disney, at ESPN, where ESPN tried to set up their own cellular telephone service. They basically bought the time and packaged it as an ESPN cell phone. They pulled the plug on that a couple weeks ago, but they learned a heck of a lot in the process.

So the key, I think, at this point is companies want to try. They want to try different things, but then they have to be able to triage in a hurry and move on to something else if it doesn't work.

JEFFREY BROWN: Jeff Zucker also said today, "The pace of change over the next five years is going to dwarf the pace of change over the last 50." So that's got to have network executives and others kind of running scared, I guess.

TOM WOLZIEN: Well, absolutely. Look at the case of YouTube. A year ago, it had a million hits. Last month, it had over a billion. You know, how does a legacy big company respond to something like that? Most companies historically would spend a year studying whether they ought to buy something or not, but a year ago it didn't even exist.

JEFFREY BROWN: All right. Tom Wolzien, thanks a lot.

TOM WOLZIEN: Thank you very much. Good night.