The Incredible Shrinking MSM

by on October 20, 2006

Ars reports on the NBCU 2.0 initiative, NBC Universal’s bid to cut costs and diversify into more cutting-edge media formats in a bid to keep up with the pace of change:

NBC plans to slash costs on prime-time programming by no longer producing expensive comedies and dramas for the first hour of prime time (8pm in the Eastern and Pacific time zones, 7pm Central and Mountain). Instead, expect to see more of the reality TV we’ve become accustomed to. Think more “Deal or No Deal” and less “Friday Night Lights.”

NBC will also consolidate the news bureaus for its three networks (NBC, CNBC, and MSNBC) and network-owned affiliates on the east and west coasts. Workforce reductions go hand-in-hand with consolidation, with the network expecting to cut 700 jobs–about 5 percent of its workforce–over the next two years. Between layoffs, news consolidation, and other cost-cutting measures, the network hopes to chop $750 million in costs by the end of 2008.

This is a classic example of the long tail thesis in action: NBC’s prime-time programming are the “blockbusters” of the TV world, and they’re bleeding viewers as more and more alternative programming is created and distributed without NBC’s overhead.

I’m impressed by the decisiveness of NBC’s management. As NBC Universal television group CEO Jeff Zucker puts it: “we have to recognize that the changes of the next five years will dwarf the changes of the last fifty.” These guys know full well that their core business is going to fall off a cliff once Internet-based video distribution matures, and they appear to be doing their best to assure that’s not the only card in their hands when it happens.

I expect we’ll see a lot more stories like this in the coming years. Newspapers, record labels, and Hollywood studios are all facing a future with hundreds of nimble competitors with fixed costs an order of magnitude smaller than theirs. I think companies like NBC that recognize the threat now and act decisively to cut costs and move into new markets will find themselves much better positioned a decade hence than the companies that try to shoehorn their 20th century business models into 21st century markets.

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