Hearst-Argyle Warns That NBC's Cost Plan Could Hurt Affiliates

The top executive at one of NBC's top affiliate groups suggested Thursday that well-publicized plans to slash costs at the network could hurt program production--and ultimately, fail to improve revenues.

"We're going to have to watch and wait and see," said David Barrett, President-CEO of Hearst-Argyle, the second-largest NBC affiliate owner with 10 stations. "The biggest challenge all of us have is distinguishing between what costs are necessary to build and grow businesses, and what costs are extraneous and unnecessary. ... NBC makes a lot of fanfare out of these kinds of day-to-day management decisions. Our hope is they get it right."

Barrett, who spoke on a conference call to discuss third-quarter results, said Hearst-Argyle is not a fan of the network's expressed desire to air less expensive reality and game shows in the 8 p.m. hour on weekdays. (NBC has since backed away from this claim.) A 9-to-11 p.m. focus, he said, could hurt "audience flow" and viewership for the later hours--something stations count on to lead into their late local news.



In the third quarter, Hearst-Argyle reported an 11% revenue increase to $183 million, fueled by a $21 million jump in political revenues. But Barrett said the company was hurt by sluggishness in the auto category, a slowing ad economy in New England, and NBC's continued trailing of ABC and CBS--although its ratings are up for the season in prime time. (Auto dollars dropped 10.5%, with a spending cut by General Motors accounting for 36% of the decline.)

"All the affiliates expect there has got to be a strong programming commitment by [NBC]," he said. "It's what has led them to huge profitability in the past, and it is what's leading the way for Fox and CBS and ABC, to a certain extent. It's about the show ... they've got to be investing in the content."

As part of a highly publicized announcement by NBC Universal last week that it plans to cut hundreds of jobs and alter business practices to save $750 million a year by 2008, network executives said they were planning to rely solely on low-cost non-scripted programming at 8 p.m. Monday through Friday. The network has since reversed its position.

Part of the network's reasoning, however, puts it at odds with affiliates that look for late-news viewers. There is a belief that fewer people are watching shows in their broadcast windows but increasingly on-demand, via new media alternatives.

Hearst-Argyle owns the ABC affiliates in Boston and Manchester, N.H., which have been hurt by a slowdown in ad spending in New England. Barrett said that was due partly to consolidation in the retail and banking categories.

NBC trails ABC by 10% and CBS by 8% in 18-to-49 prime-time ratings this season.

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