The once proud Peacock network is struggling this season to adjust to a new TV reality where CBS and ABC are formidable contenders, and it no longer can boast of its "Must-See TV" Thursday night lineup.
One major agency buyer estimated that NBC will need to give advertisers additional inventory of at least $50 million because of its ratings deficiencies, but added, "that could be north of $200 million" by the end of the season.
Michael Gallant, media analyst at CIBC World Markets, took an even dimmer view of NBC's prospects. "The weakness goes beyond Thursday night, though they're doing better in other day parts. NBC could have a dollar decline of between $400 million to $500 million without a pick-up in the second half of the season," he said. "When you look at Thursday nights and the CPM advantage they've had, they're going to have a hard time."
Buyers said the General Electric network is holding firm on premium pricing despite a 9.8% year-on-year drop in the 18-49 demographic. While NBC remains optimistic about its schedule, some buyers believe it is taking a big gamble as the industry begins maneuvering in advance of the spring upfront. NBC booked $2.9 billion during the May 2004 upfront, when buyers secure time in advance of the coming TV season.
Keith Turner, president, NBC Universal Sales & Marketing, called the $50 million figure "ludicrous."
"It is nowhere near $50 million. It is about where we have been historically and it is no surprise," he said. "We planned for this. We knew `Friends' and `Frasier' weren't coming back."
"In terms of price premium, CPMs stand 15% more expensive than the other two," he said, a reference to ABC and CBS. When asked if that would remain the case if NBC's ratings continue to slide, Mr. Turner said, "That depends on the marketplace." Despite the shortfalls, NBC's stance is that its clients are happy. "We've always considered ourselves user friendly," Mr. Turner added.
"NBC has taken the optimistic view and is writing whatever extra [scatter] money they can. But they are not competing effectively," one senior buying executive said, adding that NBC is under management pressure to hold the line as long as it can and that the network is having a tough time adjusting to its loss of longtime market dominance.
However, come February and March, this buyer predicted, NBC could be in a worse position if its inventory is filled with make-goods-ad slots given free to advertisers to correct a shortfall in ratings guarantees. That could lead to a lack of buyer confidence going into the upfront.
NBC made bold predictions about its schedule at last year's upfront, but it is third place in the 18-49 race and, like Fox, has lost viewers in that demo while ABC, CBS and UPN have gained (WB is flat).
According to Nielsen Media Research information provided by Horizon Media, New York, the fourth quarter finished with CBS No. 1 in the demo with a four rating, ABC with a 3.9 and NBC with a 3.7. Fox came in fourth at 3.4. One buyer felt Fox had a good chance of making up losses with the return of "American Idol," but did not feel that NBC had a similar killer show on its schedule, although top 10 18-49 performer "The Apprentice" returns for a second outing this season.
potential bright spots
Last week's positive performance of mid-season replacements "Medium" and "Committed" might give NBC executives some cheer. "Medium," a drama about a woman who uses her psychic abilities to help law enforcement, premiered with 16.1 million viewers and drew a 6.3 rating for the 18-49 demo, double the season average in 18-49s. Tuesday's comedy "Committed," about a kooky single girl and her offbeat friends, pulled a 4.5 rating in 18-49s and 10.1 million viewers.
Ray Warren, managing director, OMD USA, which spends a significant amount with NBC on behalf of its clients, said, "They had a good upfront and I'm pretty sure they have some holes to fill. You have to do it with something that makes sense so the client and the agency feel like they're getting something similar."
NBC Universal has other problems. Business-news channel CNBC is faltering in prime time. According to Nielsen Media Research, CNBC averaged 157,000 prime-time viewers in 2004 against 183,000 in 2003. Fox ended the year with 1.66 million viewers and CNN 834,000.
One agency reports being compensated for ratings deficiencies at CNBC with spots during NBC's "The Today Show." A spokesman for NBC said only, "This needs to be looked at in the context of a total ad package." The network sells news packages that combine broadcast and cable news shows. Despite the ratings problems, CNBC remains a financial juggernaut for the company, reportedly pulling in some $250 million.