Sunday, January 10, 2010

NBC's Bad Bet

In what's become a bit of a scandal for NBC, the fourth-place network has reversed course and is giving Jay Leno his 11:35 time slot back, pushing Conan O'Brien's Tonight Show back 30 minutes to 12:05. From the NYT:
The announcement on Sunday, which followed several days of private negotiations inside NBC, is an embarrassing retreat for NBC, which had heralded Mr. Leno’s 10 p.m. show as transformational because it could be produced for far less money than expensive dramas that had been in that hour. The program had its premiere just 17 weeks ago.

Separately, the network announced an aggressive slate of pilot programs, and said it would scrap its early spring “infront” presentations for advertisers, instead opting for a traditional upfront in May.

Mr. Gaspin said the 10 p.m. experiment with Mr. Leno was “working financially” for the network. But it was not working for NBC’s affiliate stations. Many of the stations saw the ratings for their 11 p.m. newscasts drop precipitously after “The Jay Leno Show” debuted last September.

“The audiences that were watching the show were smaller than we anticipated, and they were not staying for the late news,” said Michael Fiorile, the chairman of the NBC affiliates board.

In some cities — including Indianapolis, at Mr. Fiorile’s station, WTHR — the NBC stations that had been No. 1 in the ratings at 11 p.m. were suddenly No. 2 for the first time in many years.

“It was a problem at 10, it was a problem at 11, it was a problem at 11:35,” Mr. Fiorile said.

According to the Associated Press, “some affiliates told NBC in December they would go public soon about their complaints if a change wasn’t made, or even take Leno’s show off the air.”
The only reason why this move is worthy of note is the colossal failure of NBC's strategy for programing its prime-time line up. The original plan was for Leno's cheaper talk show to replace the expensive scripted dramas that are typically shown at 10:00, thus providing the network a wider profit margin. It's an example of Schumpeter's concept of innovation. Not all innovations work. Autonomy always remains with the consumer. No matter how much NBC hoped Leno's star power would change the preferences of its viewers, it didn't work. Creative destruction demands that bad bets will result in failure. It's unclear how this change of course will affect NBC, but it's quite possible that one misfire will lead to another.