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When Is A Broadcast Network Really A Cable Channel?

The decline of NBC may turn out to be a bellwether for the Big Four networks that once ruled the television landscape.

So what happens when NBC starts running Jay Leno five nights a week at 10 pm? 

The other networks applaud, for one thing.  
The Leno move strikes many in the industry as another step away from NBC’s being a broadcast network.
"It felt like NBC was becoming Bravo before our eyes, like there’s nothing special about NBC," said an executive at a rival network. The head of one of the big talent agencies agreed. "It’s really a lesson in how to kill a brand," he said. 
The decline of NBC may turn out to be a bellwether for the Big Four networks that once ruled the television landscape. And it seems to have taken one step closer to going off the broadcast cliff. 
For even as executives at CBS and ABC say thanks, they wonder how long they’ll be able to gloat. They’re wondering if NBC really will convert itself to a cable channel, and if that’s the case, they’re wondering if re-inventing the business in this way might actually represent the future for them all. 
"Ultimately there is no need for a full-service broadcast network any more," said Fred Silverman, a veteran television producer. "There are better shows on cable than broadcast right now. A two-hour Biggest Loser? You don’t need a broadcast network for that."
The broadcast networks have always rolled the dice on expensive prime-time programming in the hopes of luring bigger audiences than could be found elsewhere and charging advertisers for access to all those eyeballs. With Leno, NBC has stepped away from that game. The network won’t have as many expensive failures, like Bionic Woman, but it won’t have much of a shot at runaway success, like the Law & Order franchise.
NBC’s rivals have made no secret that they think they can benefit from the network’s decision to run Leno in prime time, which is planned for the fall.  Regardless of whether viewers want to stick with a diet of drama at that hour, advertisers definitely do. They are balking at paying prime-time prices for commercials during the new Leno show. 
The transformation of NBC has been going on for some time. More than a year ago, with an increasing amount of cheap reality trash cluttering NBC’s schedule, I asked co-chairman Marc Graboff how anyone would be able to distinguish between NBC and a cable channel. The answer: NBC would have to hold on to just enough high-end programming to set itself apart.  
So far, it’s fair to say the network hasn’t found that balance. 
At the gathering of television critics last month, CBS entertainment president Nina Tassler said NBC’s strategy "doesn’t and shouldn’t suggest the current network television system doesn’t work." And for now, that’s true enough.  
But an industry executive who declined to be identified said Tassler’s network also has been looking at the notion of turning itself into a cable channel. CBS has been performing as strongly as anyone could reasonably expect, but like the other networks, its television stations have gone from cash cows to trouble spots. 
Analyst Rich Greenfield has just issued a report stating that television station businesses are "in complete free-fall; not just at CBS, but across the entire industry." Greenfield added that CBS TV station revenues could decline 35-40% in 2009 with profits down 65-70%.
By going cable, the networks can introduce a new source of revenue-subscriptions-while splitting off those stations and sorting out what to do with them separately.
Knowledgeable executives say Fox’s internal analysis suggests that after an initial burst of interest, Leno’s show is likely to settle into a 2 rating. That’s only likely to exacerbate the problem with the local stations. "You find me an affiliate in the country that is going to be satisfied with a 2 rating going into the 11 o’clock news," said one network executive. (A 2 rating is something around 2.3 million viewers.) 
Silverman nonetheless remained bullish about the Leno experiment. He thinks that Fox ratings estimate is too low. "Thirty weeks of the year, he will run against repeats or lousy reality shows," he says. Leno will average better than a 2 at a fraction of the cost of a scripted show. "The average cost per hour will be less than $500,000," Silverman said. "A filmed show can go for $3 million. Reality shows-even the cheap ones-cost better than $1 million an episode." 
Even if Leno generates enough profit for NBC to declare victory, competitors think the network will pay for its decision. The network is undermining its own late-night schedule since high-profile guests will go with Leno instead of Conan O’Brien. (Who now, according to the New York Times,  may face competition as well from ABC’s Jimmy Kimmel, whose comedy show may be moved to O’Brien’s 11:30 slot, replacing "Nightline." ABC has denied that a move is planned.)  
And then there’s the sheer volume of talk on the network: two and a half hours, every night. 
A veteran executive at another network said the Leno show is "a short-term fix" and that "it’s going to be hard for them to remain viable as a broadcast network." Like many others, he is sharply critical of NBC Universal CEO Jeff Zucker. "Jeff will keep reinventing the business until he re-invents them out of business," he says.
Silverman agrees that NBC is badly managed (that’s perhaps the single most universally held belief in Hollywood at this point). He doesn’t see why all the broadcast networks wouldn’t switch to cable; in NBC’s case, he notes, "the ineptitude of the management just hastens the process." 
Even a top executive at one of the most successful networks says the days of broadcasting may be numbered. "If you’re under 30, I don’t think a lot of people really know the difference" between broadcast and cable, he says. "I’d love to say there’s no way in hell it would ever be us — but it’s a very powerful model."