Network news: No money in their nets

Network News at a Crossroads
ABC News is making no secret about what is behind the sweeping staff cuts it now faces: raw survival instinct.
By Brian Stelter and Bill Carter
Published: February 28, 2010
The New York Times
"I just looked out at the next five years and was concerned that we could not sustain doing what we were doing," said David Westin, the president of ABC News, as he explained the decision last week to jettison up to 400 staff members, a quarter of the news staff, in the coming months.
The same compelling motive already instigated strategic retrenchment at ABC's broadcast competitors. NBC, the one network with a cable news channel, MSNBC — and, not coincidentally, the only network in a sound position of profitability — has drastically pared down its operations over the last few years. So has CBS, which is losing money already and has cut about 70 jobs this year.
But with news available more places than ever, on cable channels and Internet sites, and with revenue challenged by heavy dependence on shrinking advertising dollars, the future for the news divisions at ABC and CBS remains deeply insecure.
"Long term, it's going to get harder for these guys to exist as they are currently constructed, with the exception of NBC because it can offload the costs on MSNBC," Michael Nathanson, an industry analyst for Sanford C. Bernstein & Company, said.
The economic problems facing ABC News and CBS News in many ways mirror those faced by newspapers, which have been similarly afflicted by a drop in advertising revenue. The reaction — severe cuts in personnel and other costs — also looks to be the same.
But can you shrink your way to prosperity? Andrew Heyward, the former president of CBS News who is now a news media consultant (NBC News is one client), said of the ABC cuts: "The real issue after this is what is going to drive growth? How do you generate more profit? And this doesn't address that."
The easy answer would seem to lie in NBC's structure, because in contrast to its competitors, that news organization is flush, making an estimated $400 million in profit a year.
"We actually think we have a completely different model," Steve Capus, the president of NBC News, said. That model: win every significant ratings competition on the broadcast side and rely on MSNBC's revenue stream of advertising plus cable subscriber fees to subsidize the high costs of news gathering.
The effectiveness of that formula inevitably resurrects predictions that a marriage with a cable news organization is imperative for CBS and ABC. The obvious partner is CNN, and both those networks have been in courtships with it before. To date, the cultural challenges have been insurmountable. CNN, which says last year was its most profitable since its founding in 1980, would seem to have little incentive to rush to the aid of a network. And neither network wants to cede editorial control to CNN.
Network news divisions have historically been family jewels for their parent corporations, lending prestige and an aura of public service — as well as a shield against government intrusion. Mr. Heyward called the network evening newscasts a "bastion of serious news coverage at a time when so much of television has become tabloid and trivial."

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