Jeff Zucker, Managing the Margins and Why Content Is King

Originally from Vancouver, Peter Rowley got his start writing for the theater while studying at the University of British Columbia. After a narrow escape from law school, Peter submersed himself full time in the film and television world, first by interning with Keatley Entertainment, and then spending two years working as part of the development team at Screen Siren Pictures. Peter completed the Canadian Film Centre’s CBC Prime Time Television Program in 2009. You can read more of Peter’s thoughts on the film industry at http://petertypingfaster.wordpress.com/

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I know what you're thinking. What the hell does any of that have to do with the current CRTC hearings? Well, the short answer is: Not a hell of a lot. But, stick with me a while, and I'll tie it all back, if not to the CRTC specifically, at least to the Canadian Film and Television Industry in general.

We're going to start off with a little bit of travel through both space and time. Where to? Why the good ole' National Broadcasting Company down in the U S of A.

Now everyone needs to understand that the NBC of today bears little resemblance to the NBC of the late '80s early '90s. Really the two couldn't be more different. The NBC of today is David going up against Goliath...without a sling. Or even a rock. NBC is Samson, without his hair.

I'm going biblical because it's just that bad.

How did NBC fall so low? This was the network of Must See TV. This was the network that came in first place every week for an entire year (the 88-89 season if anyone was wondering), a feat no other network has come close to repeating. This is the network that brought us Cheers, ER, Seinfeld, Friends, Hill Street Blues, St. Elsewhere, etc, etc.

What the hell happened?

Really it's pretty simple. They stopped trying to come up with new ideas.

The reality of being a broadcast network is you always need new shows in the development pipeline. A TV show has a limited life span, and you have to have something to plug in once it's gone. If you don't, you're in for a world of hurt.

And NBC has been hurting for a while now.

Things really went sideways when Jeff Zucker was named President of NBC. Zucker came from a production background (he was the youngest Executive Producer in the history of The Today Show), but the skills required in that line of work aren't the same ones needed to develop new hit shows.

Rather than pursue an aggressive development slate to fill the holes left by shows going off the air (Seinfeld, Friends, etc), NBC relied on stunt programming (Fear Factor) and throwing obscene amounts of at old shows (Friends, ER) to keep them around "for just one more season." The fact that these programs were either way off brand, or had already gone past their creative "sell-by-date" never seemed to matter.

Even worse than the above were the scheduling tricks that started to crop up throughout NBC's primetime lineup. Of course I'm talking about the "Supersized Era." Instead of developing a new comedy, NBC started tacking on an additional fifteen minutes to two existing comedies (usually Friends and later The Office) and plugging the gap that way.

The downside was huge. Tacking another fifteen minutes onto a comedy often made it less funny (just throw in the deleted scenes!), the time changes would wreak havoc with peoples VCRs, and it pretty much just annoyed everyone.

But it was cheaper than developing a new hit show, which ultimately meant that NBC was making more money. During the first three years of Zucker's tenure as President of NBC (2000-2003) operating earnings for NBC went from $532 million to $870 million.

NBC's business strategy became about managing the margins rather than providing a superior product.

The idea behind managing the margins is pretty simple, and goes a little something like this.
To increase profits you either:

A) Raise the prices of a good sold
or
B) Reduce the costs of a good sold.

NBC went with the latter.

A thirty second spot on a hit show (lets say a Lost or a Grey's Anatomy) costs more money than a thirty second spot on a moderately rated show (say a Numb3rs). By developing hit shows you're effectively raising the prices on your goods.

The flip side is cutting costs. The only way to cut costs is by reducing production costs. Instead of producing five scripted shows, you produce five hours of The Jay Leno Show. You sell a thirty second spot for a fifth of what you'd get on a half-way decent scripted how (yeah...not even kidding), but since it only costs pocket change to produce five hours, you still come out ahead.

And that's the Zucker model. Managing the margins. Screw quality, lets just shovel the cheapest crap we can down the audience's throat and hope they don't notice the difference.

Plan for the short term and screw the long term consequences.

The only problem is it doesn't work. The audience noticed.

NBC is getting drubbed. The Jay Leno Show has underperformed, doing so badly that its been beaten in recent weeks by Sons of Anarchy, a show that airs on basic cable. Advertising revenues have been depressed across the board. With no one watching NBC's ten o'clock programming, they've been unable to effectively promote other programming that still has a chance at success.

Its been an unmitigated disaster. The only thing keeping NBC afloat is Sunday Night Football and a prospective buy out by Comcast. In ten years the strategy of managing the margins has destroyed the most successful broadcast network in history.

So what's the lesson?

In my mind it's pretty simple. It's a lesson that I'm always amazed people seem to forget, and it's one I can sum up in three words.

Content Is King.

Viewers don't care what your bottom line is. Viewers care about the quality of show you air. They want to be entertained. They want to be challenged (but not too much). They want to see something fresh, something that they haven't seen before (but not too fresh, or too unfamiliar). If you deliver that, then they'll show up in droves.

To quote a great article from New York Magazine "If creaky old NCIS can draw 20 million viewers, imagine what the combination of money, creativity, smart casting, production values, and an innovative broadcast-network programmer could do."

It's a nice thought, isn't it?

Now up at the top I promised that if you stuck with me long enough, I'd tie it all back to the Canadian business. I don't want to break my promise, so let me try to do that.

Last Friday I had the pleasure of shooting the breeze with Mr. DMc himself, and eventually the conversation turned towards the "why's." Why is it so hard to get something truly original off the ground in Canada? Why don't we have a Canadian version of The Wire? Why aren't we willing take a risk on a potentially great show? Why? And eventually I blurted something out.

"It's like everybody who runs a network here is Jeff Zucker."

((Denis attributed it to a "smartypants emerging Canadian writer" on twitter, but that's neither here nor there.))

And while I initially said it out of frustration (and a couple of pints), the more I think about, the more I think there's a core of truth to it.

Canadian broadcasters have based their entire business model around managing the margins. Cut production costs, spend as little as possible, don't worry about the quality of the programming, and watch the proceeds roll in (even if they roll in in smaller and smaller Brinks trucks).

But look where its gotten NBC.

It's time Canadian broadcasters woke up and started planning for the long haul. You can't keep clinging to a dying business model. It's the equivalent of sticking your head in the sand and praying for the best. It's not going to work.

What is going to work is Content. Content is King. Content is our Savior.

The WGC commissioned a study showing that Canadian TV makes money. Canadians have shown that not only are they willing, but they actually WANT, to watch Canadian programming (Battle of the Blades was doing 1.8M viewers easy, Heartland consistently nets 1.2M viewers, Flashpoint brings in 1.6M viewers, etc). TMN and Movie Central have been rapidly approaching HBO / Showtime quality with series like Durham County and ZOS. The point is this.

WE CAN DO IT.

We can generate quality content. We can generate content that Canadians want to watch. And we can do it while making money. And you know what? I have no doubt that we WILL do it.

Maybe I'm just an optimist, but if I am, I wouldn't want to be any other way.