NBC's sweeping shake-up of its entertainment division last week highlights the deep problems it and other networks face in continuing to produce high-quality shows as advertisers slash spending and viewers find alternate ways to watch TV.
The General Electric Co.-owned network, which has seen its ratings plunge 14% this season, plans to announce this week that it will merge its two programming groups -- one at the NBC network and the other at its television production studio -- into one unit.
The restructuring, which could save the company millions of dollars a year in overhead, comes as the TV industry braces for advertisers to dramatically scale back their purchase of commercial time next year, pressuring revenues and eroding profit margins.
"This is the most fragile advertising market that I've ever seen in my 25 years as a media and entertainment analyst," said Larry Gerbrandt, head of Media Valuation Partners in Beverly Hills. "Every major company is looking at how to cut costs, cut staffing and cut advertising. This is not a good time to be the No. 4 network and not have any new hit shows on the air."
NBC's move could signal a shift in how television shows, which underpin the Hollywood economy, are bought and sold. NBC, one of the largest producers of programs for all the networks, could decide to retrench by producing shows only for one of the channels the company already owns -- leading to fewer jobs for actors, writers and scores of people who work "below the line" making TV programs.
It is not unusual in the TV industry for rivals to team up and produce shows, in effect helping a competitor make money. Although a particular show may not fit well on one network's schedule, it can often prosper on another, which generates income for both.
For example, NBC has been producing the comedy "Worst Week" for CBS, and CBS produces the drama "Medium" for NBC. The most profitable show that NBC Universal owns is the medical drama "House," which stars Hugh Laurie and runs on Fox.
Fox retains the advertising revenue, but NBC is paid a license fee by Fox and keeps the revenue from sales to foreign networks.
On Friday, NBC forced out three top programming deputies -- Katherine Pope, Teri Weinberg and Craig Plestis -- after the network's dismal start to the new fall season. The company's biggest prime-time bets, including "Knight Rider," "My Own Worst Enemy" and "Crusoe," flopped and its one new sitcom, "Kath & Kim," has been a ratings laggard.
