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    Conan, Leno, and the Recession


    The dustup between Conan O'Brien, Jay Leno, and their corporate masters is mainly an entertaining sideshow, and nothing could make the triviality of these millionaires' personal grievances clearer than the simultaneous disaster in Haiti. O'Brien might have hurt feelings but he also has tens of millions of dollars, all the clean drinking water he needs, and his children safe in his home. Still, the behavior of the NBC executives reveals a lot about how big business thinks in modern America, and it's not pretty. Because it's not just corporations' management blunders that damage the overall economy; the conventional business wisdom of the last two or three decades has become, in itself, pro-recessionary.

    The entire ill-fated move of Leno to 10 pm, the element that was most "daring" and showed an executive thinking outside the proverbial box (the element that would have made Jeff Zucker a tin god in the cult of business management, if it had worked), was also an extremely conventional and reflexive move, a response to the same management training that everyone else running a large American business has received. It was an attempt to achieve "growth" for NBC, in the strictly limited sense of quarterly profit growth, by contracting the business itself. Instead of expanding NBC's business or its market share, Zucker focused simply on cutting costs. And his approach to cutting costs was to fire employees and produce less.

    The logic of Leno at Ten, the logic with which no business journalists argue, is that producing Leno five times a week is vastly cheaper than producing five hours of prime-time scripted programming a week. Of course, it is. NBC could, essentially, replace five screenwriting teams with one team, and five sets of highly paid, highly specialized actors, directors, technical and production staff with one comedian and his house band. That's a lot cheaper. It's also less productive. Replacing five hours of prime time with five hours of talk show means, in a real sense, producing less content, less product. The value of those five hours with Jay is markedly lower, both in likely advertising revenue and in later resale value, than five hours of almost any network comedy or drama. (Would you ever buy a set of DVDs that contained three weeks of Leno, O'Brien or Letterman's show? If one of your local stations started showing reruns of Johhny Carson at 7 pm, would you tune in?)

    Zucker's logic, which is entirely orthodox in America's current management culture, can be summed up as make less and fire people. It is fundamentally contractionary logic, aimed at putting less money and fewer, less well-made products into the economy. This makes perfect business sense, if you imagine your own business as making all of its decisions in isolation from the economy as a whole. However, when every manager in nearly every large company in the nation has been trained, from the first semester of business school to make less and to fire people, then you have a perfect recipe for the proverbial "jobless recovery," meaning a recovery that exists on corporate earnings statements but actually represents at least a mild recession for workers, followed inevitably by a bust, when all the consumers who've lost their jobs stop buying so much of the stuff that the companies are making less of. And if a whole generation of managers have been taught the make-less-and-fire-people rule so thoroughly that they think of it as an immutable, self-evident rule of nature, then you have a long depression with no easy end in sight.

    Zucker's play failed, because the business model of NBC is complicated, and depends on a number of partner and franchisee companies. Zucker's decision to stop making high-end goods for the 10 pm slot and start selling a much cheaper product instead would have looked like a success except that that loss of product value directly harmed NBC's affiliates, who suddenly couldn't get viewers for the 11 pm newscasts that are their own biggest source of revenue. So the make-less-and-fire-people got vetoed by partners who were directly and immediately harmed. But most American businesses are actually insulated from the general loss of value and prosperity that their narrow "growth" strategies wreak, and by the time it cycles around to hurt their own bottom line they don't see where the the vicious cycle started.

    The other entirely routine and conventional part of Zucker's Folly is the instinct toward monopoly which large corporations routinely exhibit. For all the language of free-market competition, Zucker, like most CEOs, was in fact intent on preventing competition by any means necessary. In this case, that originally meant bending over backwards to keep either Leno or O'Brien from leaving NBC and joining another network; although that has worked out horribly, with someone leaving the network and lots of hard feelings, keeping everyone inside the tent was the original goal. Because heaven forfend that someone else be able to put out a competitive product. Again, the instinctive and orthodox response is not to make more or better things, but to insure that fewer and lower-quality things get made. The franchise of The Tonight Show must be protected, not by improving The Tonight Show, but by keeping talented comedians from putting on another show. That logic is good for one company in the short-term, and bad for the entire economy in the short, middle, and long terms.

    But that's how America's business leaders think. And nothing's changing their minds.

    Comments

    Really thoughtful piece. I do take issue, though, with what I think is an assumption as your basis of depart--your argument doesn't rest on it, but it is the illustration you use. You assume that putting Leno on prime time was a failure. Another piece critical of NBC, written from a marketing perspective, insists that moving Leno to prime time was an experiment, but that it wasn't given enough time (or a well enough thought-out strategy) to actually test whether or not it would work. Plus, I don't think the time slot is as important as execs are used to thinking it is, and as it actually used to be: "Reports say that Leno didn’t do “well” at 10pm… By whose standards? The local affiliates are the ones who are complaining because they aren’t getting the lead-in to their evening news programs. (In looking at the numbers, I wonder if they are controlling for all the people who might be leaving broadcast television and getting their news online?)" Anyway, the post is worth checking out: http://blog.marketingdoctor.tv/2010/01/11/john-tantillos-brand-winner-an... Another piece that's pretty good--by a Conan fan but critical of Conan's performance on the late night time slot: http://www.thedailybeast.com/blogs-and-stories/2010-01-13/good-riddance/...

    Thanks for the kind words.

    I don't buy that local newscasts were losing viewers to the internet and blaming it on Leno; the losses to the internet are real, but they're a slow and gradual bleed, and many of the CBS local newscasts (but only CBS newscasts) had sudden, dramatic drops in ratings, sometimes drops of fifty percent, tightly correlated to Leno's move to ten. That's no accident.

    But really, my argument is not about whether or not Leno would have pulled his ratings up in another year, or about whether the Leno experiment would have "succeeded" given time. Even if it had "succeeded" in Zucker's terms, the success still would have been employing fewer entertainers and making less original programming. Making five more hours a week of talk show, which is low-intensity, essentially one-off programming, isn't the same as producing five hours of prime time dramas. Zucker's idea is a bigger version of something all the networks are doing, filling more of prime time with cheap, essentially throwaway programming like reality shows and game shows. But that strategy is about shrinking the production side of their businesses, not growing it.


    You make a great point about resale value of a show, particularly ability to plug in reruns and sell dvd sets about dramas and not Jay's talk format.  My big beef with the whole situation is ratings.  It's clear that NBC has little regard for the toes of the people they step on in order to save some face, albeit that face will have a few serious black eyes.  How can NBC claim that the affiliates' complaints about ratings are what is ultimately forcing Leno back into his old timeslot?  What if his ratings were to continue to be bad?  Would they then be obligated to make a move so as not to hurt Jimmy Fallon's lead-in?  (who, by the way, was totally non-committal on his show this week, refusing to take sides, and playing the ultimate fanboy with his "just happy to have a job" statement).  And where does that leave Carson Daly in the whole mix?  He's hosted a show that few people have really cared about in the 7 years it's been on the air, but it fills a half hour of programming.  By canceling Jay outright and replacing him with some drama, couldn't NBC ostensibly "make up" for the "losses" they are realizing with Conan in the Tonight Show timeslot (which, I think, are grossly exaggerated)?  If NBC is placing all their hopes on one make-or-break timeslot, they are in for a world of hurt.  By letting their affiliates call the shots, they are admitting their own defeat and totally killing any respectability their network programming may have had.  The days of network programming as the Law of the Land are too far gone.


    Although I won't argue with your logic, measuring value is a little difficult. For me personally, I'd much rather have five hours of Leno than whatever he replaced. (Of course, I do all of my viewing on-line, and not during the targeted time-slot. I don't even have a TV anymore, but that's not to say I don't watch "TV".) Sure, you could argue on some objective measurement such as ratings or advertising dollars, but you can't disagree that what really matters is what I want to see.


    Measuring value is difficult, and that's why there are lots of different theories about how to measure it. Your measure, that what you like is valuable to you and what you don't is not, makes sense. But for NBC, it only makes sense when examined on a mass scale. From their own economic persepctive, what's valuable is what millions and millions of people want to watch, which turns out not to be Leno, so much.

    An episode of E.R. was more valuable than an episode of Leno, because a much, much larger audience watched E.R. That was valuable in that it allowed the network to make more ad money,  and alos valuable because it helped affiliates' 11 pm news shows. (E.R.'s massive audience created spillover value from people who just didn't bother to change the channel.)


    Now, what would be valuable to me, as an individual, would be to see live Shakespeare in prime time. That's much more valuable, in my humble opinion, than, say, The Ghost Whisperer. But since there are millions more people who want to watch The Ghost Whisperer than Liev Schrieber playing Henry V live from Central Park, the silly show about the psychic has more market value.

    The other measure I was using was durability, and reuse value, which is trickier. Reality shows sometimes have even more immediate ratings value than scripted drama. American Idol has bigger ratings than 30 Rock. Survivor gets better ratings than Lost. But reality shows, game shows, and talk shows don't maintain their economic value as well. They don't draw repeat audiences well, and are nearly impossible to syndicate or repackage as DVDs. American Idol will win its night, but basically that's it; all of its value was captured up front, and it's not worth much after that. 30 Rock is designed to stand up to repeated viewings, to be syndicated first on cable and then on local stations, and to be sold as DVDs. Lost can be sold over and over while Survivor can't.

    Leno's show is designed to be disposable, not durable. It's meant to be watched once, or even halfway through, and then dumped. (The halfway-through model is actually probably a big reason that Leno's formula did badly in prime time. Late-night shows are designed to lose big chunks of their audience in the middle, as those people go to sleep, and so the shows are designed with the best material in the first fifteen or twenty minutes and lame guests at the end. But that model is actively destructive if you're leading in to the the eleven o'clock news.) When I say Leno's show isn't valuable, I mean it's a disposable low-cost product, a paper napkin instead of a cloth napkin.

     


    You've put a lot of thought into it, and I applaud you for it. Ultimately what you're failing to factor in, however, is that what I want is the only thing that matters, although I can be convinced that what I want later is something to be considered into addition to what I want now. As for tricking me into watch the evening news, (a) I don't want to watch the evening news, and (b) I'm watching Leno on Hulu, so that trick won't hunt anyway.

    Being serious for a second (which can be difficult for me), I do wonder how much the networks factor in internet-only viewers. We might not be that big of a demographic right now, but our numbers are growing. As for durability, I've watched a few of the "classic" SNL episodes on-line, and they really bear out your point. I used to love the Dana Carvey skits or the Eddie Murphy skits, but they haven't really held up as well as I would have thought.


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