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Network TV Economics

Economics

By the Project for Excellence in Journalism

Network news divisions, already under long-term pressure, were hit even harder in 2008. The faltering economy sent them scrambling to trim earnings estimates and cut costs. And a surge of interest in political and economic news failed to generate more ad revenue for network news programs in 2008.

These cyclical problems only added to underlying and long-term pressures on the networks caused by changing technology. And matters were made more complicated because of problems elsewhere in the companies that own networks. Disney, ABC’s parent, for instance, made plans for cutbacks in 2009 based on expected declines in visitors to theme parks, declining advertising on its television programs and declining sales of Disney-produced music and movies. Problems at NBC and its owner, General Electric, have affected NBC News.

Network News Advertising Revenue

Assessing network news economics presents particular challenges. The networks do not release revenue data for their news divisions, let alone for any news programs in particular. The news divisions are sub-units of the networks, which in turn are now sub-units of television divisions of companies, which may in turn be subsidiaries of larger conglomerates.

Some market research firms estimates how much ad revenue each network news division brings in. The best known of these is TNS. But these estimates, insiders say, often do not reflect actual revenues.

TNS takes the networks’ advertising rate cards and estimates revenue based on how many advertisements air on each program. While widely used in the industry, there are several reasons they may be off. Advertisers may buy time across multiple programs, or even television channels, owned by the same parent company. There is no way of knowing what discounts may be applied to the ad buys. Nor do the estimates account for the cost networks may pay to advertising agencies. Not infrequently, TNS estimates suggest that lower-rated programs bring in more money than higher rated ones.
Still, the TNS data offer a starting point, from which we can extrapolate some more precise estimates based on private discussions with those more familiar with network economics.

TNS estimates suggested that network news revenues were down slightly over all from their estimates a year earlier through the first 11 months of the year.

TNS estimated that CBS pulled in $176 million in ad revenue for its morning and evening news programs through the first 11 months of 2008. That number, according to PEJ sources inside the industry, was probably low. We would estimate revenues from morning and evening news for the year at closer to $230 million, and when 60 Minutes, 48 Hours, Sunday Morning, Face the Nation, and all other radio and television news programs are added in, the total will be about $500 million.

ABC likely had revenues higher in 2008, closer to $700 million, according to our estimates, consulting TNS data and other sources. That, by our calculations includes probably something close to $200 million for World News, in the neighborhood of $400 million for Good Morning America and the rest coming from its magazine programs, Nightline, 20/20, its Sunday shows and more.

NBC, by all industry estimates, is the leader in revenue. It was No. 1 in evening news during 2008, and in morning news with Today. The morning program also produces more hours than its competitors. According to television professionals, being the ratings leader in a time slot for news traditionally translates into a premium for advertising revenues of roughly 10% for those shows. Meet the Press, also No. 1, is an important revenue source as well. NBC makes less from magazines than its rivals, given that it is down to one program a week, Dateline, airing often on Saturday. Sorting out the accounting between NBC and MSNBC on television is another complication. In the end, we would estimate NBC News revenues at somewhere above $800 million, but in television, the number can be accounted for in various ways, particularly when ads can be bought in packages not only across programs but across channels. And NBC’s ownership of more cable channels than its rivals makes that accounting more complicated.

It is quite possible that NBC News is the only news division in 2008 to be a significant profit center. By one accounting, NBC, MSNBC and MSNBC.com may have returned pre-tax profits of $400 million.

At ABC and CBS, in turn, the pressure on news to turn a profit may also have lessened somewhat. At least for the moment, our sense is that the nightly newscasts, in particular, are managing costs at both networks in such a way that they are not losing money, but the pressure on them to be profit centers is not intense. Revenues are probably greater than expenses, but not very much so. The CBS Evening News and Early Show together may be just breaking even, with whatever operating profit the division generates coming from 60 Minutes and 48 Hours, Sunday Morning and elsewhere.

If the pressure on the news divisions to be profit centers has lessened at all, several factors are at play. Some executives say their owners more fully understand the role that the news divisions play in building brand. It may also be that even if the news programs cannot make a profit, the cost of removing them from the schedule is thought to be too damaging. The shift has also coincided with prime-time news magazines becoming a smaller part of what news divisions produce, particularly at ABC and NBC. The news magazines had to justify themselves on the schedule against entertainment programs. If they didn’t bring in more in operating profit than a sitcom, drama or reality show, there was little reason for network programming executives to put them on the schedule. Whether these shows aired was strictly a business decision. And there is now far more money to be made elsewhere than in news magazines, particularly in reality programming.

We sense from network insiders, too, one other shift in network news. The pressure from advertisers seems more intense. Demands for “synergistic” pieces on the morning programs, a category that could mean anything from features about brides that might attract certain advertisers to tie-ins with other network properties, has become more intense. Political commercials ran inside the network newscasts in the last year, something once considered forbidden because it might encourage confusion between ads and news. As the business becomes more difficult, and revenues harder to scrabble together, the pressure to find new ways to attract revenues inevitably increases. And that will inevitably make the job of network news professionals more complex.