Big news in the world of media comes from NBC where Jay Leno will be on NBC 46 to 48 weeks per year every weeknight at 10 PM ET. Jay is giving up The Tonight Show to Conan O’Brien in June. The re are a lot of moving parts but this move is being driven at least in part by NBC’s very poor ratings performance and inability to develop any new hit programs for several years. In other words, NBC can take the risk.
Also, contributing to the decision is the likelihood that Leno would have gone to NBC or FOX and severely undercut profits on The Tonight Show. In addition, NBC spends $15-25 million per week during the TV season to produce scripted dramas. The cost for the new Leno sow will certainly be less than $5 million per week. Some of the savings will be given back when Jay is live and NBC would have been in reruns. Leno also is likely to earn a lower CPM due to lower ratings than might have been achieved with scripted dramas. Zome savings amy also be reinvested to try to revive the sorry state of NBC’s ratings in 8 to 10PM period.
Ratings is probably the biggest risk for NBC. According to the Wall Street Journal, Leno averages 4.8 million viewers on The Tonight Show. While the #11 show on TV this season has averaged 15 million viewers at 10 PM. Clearly, more viewers exist at 10 PM than 11:30 PM but will viewers want to watch the same show every night? If Leno’s ratings tank, the loss will be more than just revenue at 10PM. 10 PM shows provide important lead-ins to local news which is where TV stations make most of their profits. NBC owns TV stations in all the largest markets so it is putting itself at risk. It is also risking ratings and revenue for its affiliates who are even more reliant on local news for profits and are already unhappy with NBC due its multiyear run of poor rating performance.
Investors have little to worry about here as NBC is owned by GE. This shift, which is monumental in the world of network TV, is immaterial to GE.