2004 Annual Report - Network TV Economics

For all that people think of network news as some kind of dinosaur, financially news is an important part of the network television bottom line. Maybe, some might argue, it has become too important.

Overall, news contributes a big part of network profits, particularly in times when developing hit entertainment shows is proving difficult and signing sports contracts too expensive.

Several things stand out.

• Revenue from nightly news was up in 2003 (based on projections), the first up-tick since 1999.¹

• Despite having less than half as many viewers, morning shows greatly outshine nightly news as moneymakers, in large part because they are on two hours a day rather than 30 minutes and pack in more commercial time. The "Today" show and "Good Morning America" bring in nearly three times the revenue of their evening news counterparts.²

• The heyday of the prime time network magazines shows may be over. They air less often than they did a few years ago and earn less in advertising revenues.³

Getting a handle on the finances of network news is difficult. The news divisions are now small elements inside large corporations, of which even the networks themselves are just a small part. Many news organizations no longer have people covering network news from a financial point of view and the companies release little information publicly about them.

What is more, events can change the finances of news substantially. For instance, executives at one of the three networks report confidentially that in 1991, their network was headed toward returning $100 million to the bottom line of their company from news before the first Gulf War began. The cost of covering that war, including the giving up commercials, reduced that number to $65 million in operating profit from news for the year.

Twelve years later, insiders report, after covering the second war in Iraq, the same news division was fighting to remain revenue-neutral, to return no profit to the bottom line, but also not fall into the red.

Becoming a Profit Center

The first great change in the finances of network news came in the mid-1980s, when the news divisions were asked to become profit centers for their companies.

Until then, network news divisions were asked to bring prestige, rather than profits, to their owners. In the language of today, prestige was essential to "branding." News, in other words, was relevant to network economics but in a long-term and more indirect way. As the late CBS chairman William Paley once was quoted as telling his correspondents, "You worry about the news. I've got Jack Benny to bring in the profits."⁴

News also kept the federal regulators off the networks' backs. Today this is no longer much of a concern, not since the FCC began systematically deregulating television in the 1980s.