Hulu CEO - "We're Not Giving It Away For Free"

Earlier this week Hulu CEO Jason Kilar responded to critics who complain that Hulu is undermining the current business models. Kilar stressed that Hulu is currently ad-supported and is focusing on "having a long term business that serves the needs of consumers and advertisers on terms that work for them". But over the past week news has been surfacing that Hulu is transitioning toward a subscription model rather than a free model supported by ads. Following this news there was a relatively large negative reaction from Hulu users, who simply stated that they would return to piracy rather than pay for a service they can get for free.

While this reasonable reaction and it's likely that a subscription model will lose a few million users, if the company can keep even half of its users then it will be financially successful. Recently, one of Hulu's owners, News Corp., has come forward pushing Hulu toward a subscription model. News Corp. chief operating officer, Chase Carey, stated that "we need to...deliver content to consumers in a way where they appreciate the value. Hulu concurs with that; it needs to evolve to have a meaningful subscription model as a part of its business". Personally, it's much easier for me to go watch a show on Hulu than it is for me to put the effort in to searching for illegally. I would be willing to pay a monthly subscription fee (similar to Netflix), assuming they nix the advertising, because Hulu provides me with a service I consider essential.

NBC Likely Orders More 'Chuck'

Joe Adalian at The Wrap is reporting that NBC is close to ordering 6 additional episodes for the 3rd season of 'Chuck', bringing its total to 19 episodes (just three shy of a full season order). NBC hasn't yet announced whether they will be bringing the show back in January or March, but if 'Trauma' continues to perform poorly on Monday nights I could easily see the network letting 'Chuck' take over its normal 8 o'clock slot.

Personally, I'm ecstatic about getting 6 more episodes of 'Chuck'. Hopefully the long hiatus has brought more fans to the show and NBC will see increasing ratings for the show when it premieres in the spring. In my opinion, 'Chuck' one of the best hour long shows on NBC (second only to 'Friday Night Lights') and it would be a shame if the network canceled it and put on more low-brow reality shows and crappy medical shows. While I'm sure NBC execs are proud of the show's critical-acclaim, it was probably more of a financial decision to give 'Chuck' 6 more episodes. It's cheaper to produce more of a show already on the roster than it is to produce an entirely new show, and because NBC is all about cost-cutting, extending 'Chuck' seems like a solid move.

EDIT: NBC has confirmed that it has ordered 6 more episodes of 'Chuck'.

BONUS: If you aren't watching 'Chuck', then you should be. Check out the promo embedded below and then head over to Hulu or theWB.com and get caught up before the Season 3 premiere.

UPDATE: 'White Collar' Pulls in 5.4 Million Viewers

It looks like USA's risky 4th quarter premiere of their newest cop drama, 'White Collar', paid off. According to Variety, 'White Collar' held onto nearly all of its lead-in from 'Monk' on its way to a 1.4/5 18-49 ratings share and 5.4 million viewers. Not only did 'White Collar' tie 'The Jay Leno Show' in adults 18-49, but it also bested the ratings for ABC's 'Wife Swap', 'Ugly Betty', CW's 'Smallville, and FOX's 'Dollhouse'. If 'White Collar' can hold on to at least 75-80% of the viewers it had for the premiere in the next few weeks then I would consider the cable show's fall premiere a success. I think other cable networks will definitely start to encroach a little more on network territory, especially if the major networks fail to stop their ratings free-fall. Who knows, maybe in a few years the majority of new cable shows will premiere in the fall (to be honest, I doubt that will ever happen because one of the most appealing aspects of cable television is that there is no set "season").

BONUS: In case any of you guys are thinking about watching 'White Collar' here's the trailer. I've heard pretty good things about it.

USA's 'White Collar' Lands Fall Premiere

The premiere of USA's newest crime drama, 'White Collar' marks the first time that the cable giant has had a new show premiere around the same time that broadcast networks traditionally premiere their fall lineup. As the power of cable networks continue to rise it seems likely that more networks may try premiering new shows in the fourth quarter. However, there's still a long way to go before a cable network premiere can easily compete with a broadcast network premiere. According to the New York Times, USA spent an estimated 10 million dollars to market 'White Collar', which includes several sponsorship deals as well as extensively promoting the show through social networking sites, sweepstakes, billboards, etc. Once the ratings for last Friday's premiere are released it'll be much easier to determine whether or not this strategy is something that other cable networks are willing to try in the future.

TNT Likely to Pick Up 'Southland'

According to The Hollywood Reporter it's looking more and more likely that TNT will pick up the recently canceled 'Southland'. Though a deal isn't yet official it seems likely because of TNT's affinity for cop dramas and the fact that six episodes are already in the can and NBC has no intention to air them. I'm extremely surprised that 'Southland' is garnering so much interest from cable networks when so many other critically-acclaimed canceled-too-early series simply faded away after they were canceled (Veronica Mars, Pushing Daisies, Arrested Development, etc.). While I'm happy for 'Southland' fans that the show will probably continue on, it's not a great sign for the quality of network television that an ever-increasing number of critically-acclaimed series are forced to migrate to cable.

NBC Picks Up 'Community', 'Parks', and 'Mercy'

Yesterday afternoon NBC announced that it was giving a full season order to comedies 'Community' and 'Mercy' as well as freshman drama 'Mercy'. The back-nine order for 'Community' doesn't surprise me at all. 'Community' has held its own in a tough Thursday time-slot and fits in nicely with NBC's "Comedy Night Done Right". 'Parks & Recreation' has improved in ratings and quality from last year so I fully expected it to get a full season order from the beginning. Plus, even if it sucked NBC probably still would have picked it up because they don't want to screw up their relationship with Greg Daniels, who is also the creator of NBC's 'The Office'.

The surprise for me was 'Mercy'. The show pulls in decent ratings (for NBC) but in terms of quality it doesn't seem to be anything special. Angela Bromstad, NBC President of Prime-time Entertainment, said of the announcement: "we're confident [it] can be a strong player for NBC". In my opinion, that's code for "'Mercy' is cheaper to produce than other freshman medical show, 'Trauma', and we can't cancel it because we have nothing else to put on the air".

Gaspin Says NBC is Managing for Ratings Not Margins

In a recent interview with The Wrap new NBCU Entertainment Chairman Jeff Gaspin actually had to clarify that NBC is not "managing for margins", a phrase put forward by his predecessor Ben Silverman, and is in fact trying "to put the best possible shows we can on the air". Basically, he said that getting higher ratings is more important than keeping costs low. Washington Post reporter Lisa de Moraes put it best when she explained NBC's philosophy under Silverman's reign: "The idea is that a network can make a tidy profit on shows that aren't winning the ratings in their time slots--may not even be finishing second or third--so long as the show is really, really cheap to produce". This wonderful philosophy *sarcasm* has brought us The Jay Leno Show...and we've all seen how well that show has worked out so far.

If Gaspin actually commits to managing for ratings and follows through with his promise to produce the "best possible shows" then there is a real chance that he could start to turn the Peacock network around and bring back viewers. He just needs to start by getting rid of The Jay Leno Show as soon as possible.

BONUS- Here is a great article from tvbythenumbers.com that looks at whether or not Gaspin's statements are even true or just warding off bad press:

Is NBC "Managing for Margins"?

Fox Benches Dollhouse During Sweeps

According to EW's Michael Ausiello, FOX has changed its sweeps schedule and decided to air repeats of mega-hits House and Bones on Fridays from 8-10 during November. Last week FOX released their sweeps schedule and everyone was shocked to see that FOX decided to keep Dollhouse on during sweeps despite its less than stellar performance. On it's last new episode Dollhouse had 2.25 million viewers and a 1.0 rating in 18-49 yr. olds. While these numbers aren't great they are more of a reflection of poor marketing and poor lead-ins that have inhibited the show's ability to gain new followers.

Unfortunately this news most likely means that Dollhouse will not get a back-nine order and will finish its run at the end of its current 13-episode order. This is such a shame because if FOX put a bit more effort into accurately marketing the show and gave it a better time slot the show has the potential to build a slightly bigger, extremely loyal fan base. While I'm sure the network doesn't agree, I think it would be a smarter financial move to end season two in December and give the show a third season because of the potential DVD sales than to cancel it in December. Joss Whedon has a massive cult following that continues to grow and Dollhouse stands to make a lot of money on DVDs in the next few years. FOX should try making Dollhouse their guinea pig show to see if the cable programming model can be successful on a broadcast network.

News Corp. Not Pursuing NBCU

News Corp. Pres. and COO Chase Carey stated today at the B & C OnScreen Media Summit that his company is not "actively engaged" in pursuing a stake in NBCU should Vivendi exercise their option to sell in November. Though he has admitted to thinking about pursuing a stake in the company, he believes that there's a "decent chance" that Comcast will in fact hold the controlling share in NBCU come December.

I think it's great news that News Corp. isn't going after NBCU. They already own FOX and there would be way too many legal and ethical issues involved with them owning two of the 4 major broadcast networks. The bigger problem/issue with the whole Comcast deal is that if it does happen then it opens up the possibility for the other major distributors to try to acquire similar deals.

Just last week, Liberty Media CEO John Malone stated that he believes combining content and distribution "creates quite a bit of value opportunity". While this is certainly a true statement, the television industry is entering uncharted territory and no one knows exactly what will happen next.

Twitter Boosts Big Bang Theory

In Business of Media we've talked a lot about the power that Twitter has over buzz in the entertainment industry and last night Twitter struck again. The Wrap is reporting that CBS used Twitter to tease a special guest star on last night episode and it seems to have paid off in the ratings. Big Bang scored a series high ratings share (3.9/10) in adults 18-34.

For those of you who don't know (myself included until I watched last night's episode), Wil Wheaton is a Star Trek: The Next Generation alum with over a million followers on Twitter. The Big Bang Theory, even though it's a sitcom that everyone could enjoy, is targeted toward, for lack of a better word, geeks. The show follows the story of 4 scientists and the hot girl who moves in across the hall and the hijinks that ensue. Here's a promo that CBS ran for the episode:

With the knowledge that their core audience is probably very familiar with Twitter, Wil Wheaton and show runner Bill Prady used the social networking service to encourage viewers to tune in. His exact tweet was "Twitterverse, what's our plan to show the power of the online world and make the @wilw ep on Mon. the most watched ever?".

It was definitely a brilliant bit of marketing to use Twitter to create a certain level of buzz about last night's ep before it aired, and a lot of shows should take the cue from Big Bang and embrace this free marketing tool. However, The Big Bang Theory's popularity has exploded in the past few months and it's important to note that, while the Twitter campaign certainly helped, Twitter was not the sole reason for the high ratings. Other shows, Dollhouse for example, have been trying for months to create enough buzz on Twitter to boost ratings with little success. Ultimately I think The Big Bang Theory's success comes down to being able to have the right elements come together at exactly the right time.

Ratings System Under Scrutiny

Today Variety is holding their first Entertainment and Technology Summit, and the hot topic of the day seems to be the executives general unhappiness with the Nielsen ratings system. FX general manager John Landgraf seems to have hit the nail on the head when he said:

"It needs to be completely revamped. We have to follow viewers wherever they are. The simple fact that we can't get any compensation for anyone who doesn't watch within a three-day window is ridiculous...now that viewing takes weeks for months".

While Nieslen ratings are generally regarded as an outdated system, it seems to me more than a little ridiculous to lay the blame for falling ratings on the system that measures them. There is a great article on tvbythenumbers.com that breaks down the Variety article and attempts to refute their claims that the ratings system is responsible for changing the television business. Though the article is clearly biased, it raises some interesting points about Landgraf's statements. Number one, Nielsen ratings are not responsible for the fact that networks don't get paid for viewing that doesn't occur in that three day window. Advertisers don't want to pay for those viewers. Television execs need to stop looking for someone else to blame for falling ratings. Yes, the Nielsen system is outdated and it could probably do with an update, but simply changing the way viewers are measured still won't change the fact DVR and online streaming changes the way people watch television.

NBC Affiliates Unhappy with Leno Lead-In

The LA Times is reporting that NBC affiliates across the country are starting to complain about what the media has coined "The Leno Effect". The 11 PM news is key for NBC affiliates, bringing in about a third of their revenue, but since The Jay Leno Show premiered in September it has provided a weaker lead-in for that crucial nightly news. NBC believes that ratings are in line with what the network expected and "cautions patience as viewers discover the new time slot". But how long are affiliates expected to wait?

As NBC continues to cut costs and tighten its belt in preparation for its potential sale to Comcast, affiliates will continue to lose money and may ultimately decide to find new programming for the 10 o'clock slot. Back in April the NBC affiliate in Boston originally refused to air The Jay Leno Show but after a swift threat from NBC about losing its affiliate status the network backed down. What will happen when more and more affiliates threaten to simply stop airing the show? I've said it once and I'll say it again, The Jay Leno Show is a short term fix for a long term problem. Aside from their Thursday night comedy block NBC has a ton of costly low-quality dramas that audiences, for the most part, aren't interested in watching. Adding another talk-show to their repertoire that people have shown they don't want to watch isn't the solution. NBC made the mistake of committing to Leno's show for two years but if ratings continue to slide it doesn't look like their affiliates will be willing to actually keep the show on the air for that long.

Here is a news clip form April on the NBC Boston affiliate's attempt to not air The Jay Leno Show. It's a bit outdated but it brings up some really interesting issues that have popped up again in the past couple of weeks.

Murdoch/FOX Seek Retransmission Fees

In a statement at an annual shareholders meeting Rupert Murdoch announced that News Corp, which owns FOX, will start seeking retransmission fees from cable and satellite affiliates. For those of you who don't know, retransmission fees are fees that cable and satellite affiliates pay to the broadcast network for the right to retransmit the broadcast signal to their subscribers. Aside from FOX, CBS is the only other network to have negotiated retransmission fees in the past few years. During the meeting Murdoch stressed that "the broadcast business can no longer be supported by ads alone". Basically, News Corp/FOX wants "fair compensation", which Murdoch believes to be a small share of profits from distributors.

I think it's great that someone important in the television industry is not only acknowledging that the current broadcast television business model is failing, but is actively coming up with ways to change it. I'm not saying that charging retransmission fees is going to save the industry; however, it's refreshing to see a network with enough confidence to try something new. I suggest the other networks follow Murdoch's lead.

NBCU's Profits Up 13% in the Third Quarter

GE released NBCU's third quarter profits today and profits were up a surprising thirteen percent. Though that's great for NBCU the most interesting part of the release was that profits had increased 13% despite the fact the revenue had actually gone down 20%. They increased profits to 732 million, up from 645 million last year in the same quarter. I knew NBCU was cutting costs, but wow, that's impressive that they could actually make a greater profit while actually bringing in a lot less money. Clearly, NBCU's other assets (aside from their broadcast network, NBC) must be having more success and covering the network's failures.

NBC - "There's Nothing Watchable the Rest of the Year"

I know I've been picking on NBC a lot in this blog, but number 1, it's just too easy, and number two, it's because they've been having major financial problems lately the media has been coming NBC stories a lot more than usual. Anyway, the big news this week is that NBC cancelled its cop drama, Southland, before the second season even premiered. The show already had six episodes in the can were in the process of filming more when the news came down from the higher-ups that NBC plugged the plug before seeing what the ratings would be like. Before I go into more detail here is a promo clip for the show to given those of you who've never seen it an idea of what it's about.

NBC says that it cancelled the show because it was too expensive to produce (it costs over 2 million an episode); however, if this is the only reasons that NBC gave Southland the boot then it seems to follow that new show, Trauma, which costs 3 million an episode will soon follow Southland on this season's list of casualties. Nikki Finke from Deadline Hollywood recently stated that NBC insiders are still using Ben Silverman, who is no longer an NBC employee, as their go-to excuse for their shows' failures. However, the most shocking part of the article was that Finke reported that one NBC insider went so far as to say that "there's nothing [new] watchable the rest of the year". Even if that's true, it doesn't seem like a great idea to tell the public that.

I think the real reason that NBC decided not to give Southland the time to grow is that NBCU is trying to tighten up its finances for its potential sale in November. At this point though, no matter how many more shows they cancel "to save money" this season the network really needs to stick behind the shows it already has and try to build solid audiences rather than just throwing them out and starting from scratch.

Here are a few more articles on the whole Southland fiasco:

"Southland": Leno's First Casualty

NBC Cancels Well-Regarded 'Southland'

Quick Follow-Up: Zucker at NBC

Jeff Immelt, the current CEO of GE, which owns 80% of NBCU, in an interview with Businessweek.com stated that he thinks Zucker is "as good as anyone running a media company today". Immelt credits Xucker for hiring from within to minimize disruption to the company (re: Ben Silverman as NBC Entertainment co-Chairman). But, honestly how well did that work out for NBC? Everyone keeps talking about how well Zucker is doing given the current economic climate and the changing TV industry. I'm gonna go out of a limb and say that maybe NBCU doesn't need to minimize disruption, maybe disruption is exactly what it needs to start moving in the right direction. Bottom line: Something needs to change over there. Whether it has to be replacing Zucker as CEO remains to be seen, but I'm really hoping that if Comcast does end up with a majority share in the company that they decide to put the effort into re-establishing NBC as a major force in broadcast television and that it doesn't continue to be the television industry's biggest joke.

Comcast Says Zucker Stays

I went home over the weekend and on Sunday night I was talking a bus back and the person I was sitting next to happened to be a former producer for the NBC Nightly News. We started talking about the potential change in ownership at NBCU and he mentioned that he thought that if Comcast took over that it would be the end for NBCU CEO Jeff Zucker. I agreed with him; I think with a new owner generally comes a new regime, which is why is was surprised to read this article over at broadcastingcable.com that stated that Comcast planned to keep Zucker on as CEO.

In my opinion, Comcast really needs to sit down and think about whether or not that's the right move for what would hopefully be a new NBCU under their command. Zucker, himself, is a fantastic success story, beating cancer at age 31 to become CEO of NBCU at age 42. However, there is no denying that NBC was faltered under his reign. Personally, I think his biggest mistake was hiring Ben Silverman to run NBC Entertainment. Silverman has become such a joke that CBS's Craig Ferguson actually made fun of him on his late night television show:

A few months ago Silverman and NBC parted ways, but that happy move still doesn't erase years of poor programming choices that has made NBC a joke in the television industry.

Over the past few years NBC itself has had very few successful shows and continues to produce less than stellar ratings and low quality writing. While it is important to acknowledge that one of Zucker's biggest successes has been NBCU's cable channels, those channels cannot continue to carry the broadcast network's failures. If Comcast does end up buying a majority share in NBCU maybe it's time to change things up and hope that NBC will no longer fall at the bottom of the television heap.

Procedural vs. Serialized Shows - Cable Changes the Game

I was skimming through Variety today and I noticed an op-ed titled, "Are DVRs, procedurals serial killers?". My first thought? "I sincerely hope not". I haven't really mentioned it yet on this blog, but, for people who know me, it's no secret that I am no huge fan of procedural dramas. For the most part, I think that those type of shows are for people who want to sit in front of the TV and be mildly entertained for an hour without having to put in any mental effort ("CSI", I'm looking at you). The only problem? I'm in the minority.

Nielsen Media Research, which is the company that tracks TV ratings, consistently shows me that Americans just loves their procedural shows. For example, last Wednesday night, 14 million people (with a 3.6 18-49 ratings share) watched procedural, "Criminal Minds", while only 7 million people watched the highly-original, critically-acclaimed "Glee".

According to Brian Lowry at Variety, the gap between ratings for procedurals and serialized shows exists in large part because of DVRs. Because viewers are more involved in the story lines and cliffhangers on serialized programs, "the rate of time-shifting and commercial avoidance is generally higher across the board". I'm definitely inclined to agree with Lowry on this point. If I had the option, I would much rather DVR my favorite show and watch it on a delay so that I could skip the commercials instead of just watching it live. This isn't good news for the business television, especially for the broadcast networks. According to TiVo, roughly 80% of users fast-forward through the commercial for serialized drama, compared with the drama average of 73%. Even though this may not seem like a huge difference, when advertising provides the majority of a network's income those statistics could push a bubble show (a show that could be either renewed or cancelled) into the red.

If these trends continue it may mean that creative, serialized drama fail to find homes on broadcast networks and migrate to the more ratings-lenient, niche cable networks. Take for example, ABC's "Pushing Daisies". A show about a pie-maker who can bring the dead back to life with the touch of his finger failed to find anything more than a fiercely loyal but small cult audience. The show only lasted for 2 seasons, despite being, in my opinion, one of the most original ideas to come out of network television in years. For the past three years cable networks have scooped up the Emmy for best drama (1 for The Sopranos and 2 for Mad Men), with networks shows increasing failing to even garner nominations. Unless the major broadcast networks find ways to bring more eyes to their quality serialized dramas they may become a thing of the past, only to be found on smaller-scale niche cable channels.

NBC Universal Facing Major Behind-The-Scenes Upheaval

According to Variety reporter Cynthia Littleton, cable-provider Comcast is looking to acquire major shares in NBC Universal. This news comes just two weeks after the New York Times Business section printed an article speculating on whether or not Vivendi, the French media conglomerate, would be looking to sell its 20% share of the Peacock network. Vivendi, which originally owned Universal Studios, gained its NBC U stock in 2004 when the company merged with General Electric's NBC. The NYTimes does a great job of explaining how Vivendi is able to sell their shares: "Under the terms of that deal, Vivendi received the annual right to sell its stake, either through an initial public offering or by being bought out by G.E. The yearly window to exercise its option is from Nov. 15 though the Friday of the first full week of December."

Enter: Comcast. They reach 24 million subscribers in 39 states making it the nation's largest cable company. While Comcast itself denied that it was looking to acquire shares in NBC U, there have been rumblings in the media that NBC U's extremely strong cable channels (USA, Bravo, Syfy, etc.) is a huge draw for Comcast. Variety believes that the most likely scenario is that Comcast buys a controlling interest in NBC U (51%), while G.E. retains the other 49%.

If things play out like this, I think that the biggest concern would be anti-trust law violations, which prevent one company from having a monopoly over a certain market. There should be a separation between content/development and distribution. What if Comcast buys NBC U and decides to air some of its cable channels exclusively to Comcast subscribers? What happens to the people who have a different cable provider?

Ultimately, I doubt that these impending behind-the-scenes changes will be noticeable to the average television audience member, but it does provide an interesting ethical dilemma over how much power is too much for a media company. I'll continue to post links to various news outlets as more information becomes public knowledge.

Here are the link to the NYTimes and Variety articles about NBC U incase you don't feel like clicking on the links embedded above:

Vivendi Said to Prepare Sale of Stake in NBC Universal, Will Comcast acquire NBC?, Scenarios swirl around NBC U