Failing Network News Model: Not Katie's Fault

One of several pesky questions hovering around Les Moonves when CBS (CBS) reports Q1 earnings Tuesday: What’s to become of Katie Couric?

But the even tougher underlying question is one that all three networks must answer: Should they be in the evening news business at all?

CBS’s return on their investment in Couric has been dismal. Paying $15 million a year for five years for the former “Today” anchor–50% more than NBC’s Brian Williams — only made sense if she brought in more viewers (and revenue). Instead, Couric has accelerated a ratings decline. In 2007, her first full year as anchor, ratings were down more than 13% for CBS’s “Evening News.”

But this isn’t just a CBS problem: Network evening newscasts collectively lose about a million viewers a year. (This year they’ve lost 1.2 million, helped along by the writers strike.) Revenue is going down in lockstep: the three network evening newscasts reap about $100 million in ad revenue apiece, but are declining at about 2% a year. The network morning shows are also trending down in viewers, but they make a lot more money: $1.04 billion a year according to Nielsen Monitor-Plus.

At the same time viewers and ad revenues go down, the cost of gathering the news goes up. CBS’s Baghdad bureau alone costs $7 million a year to operate; Baghdad and Couric alone consume 22% of the “Evening News” revenue.

With these economics, it’s no wonder CBS tried to tie its life raft to CNN. As it is, CBS is already understaffed in the field, with 1,500 total news employees compared, say, to CNN’s 4,000. And since general news is commoditized, it doesn’t mean much to the viewer if the correspondent on the scene at the Minneapolis bridge collapse is a CBS employee or not, as long as its the CBS anchor in the studio asking the questions.

The more radical solution would be to cancel the “Evening News” and turn CBS’s other news programs, “Early Show,” “48 Hours,” and “60 Minutes” into studio shows with much smaller staffs. But here’s why that won’t happen, at least not soon:

  • Competitively, if CBS bows out of news, it helps ABC and NBC, which will divvy up the still-substantial available ad dollars. It helps CBS in the Upfronts to have a news division to package to advertisers.
  • CBS’s owned stations depend on the national and international news from the network, and CBS depends on its stations for reliable cash flow.
  • CBS’s morning show is a ratings non-player, and it would be further crippled without a credible news division behind it, damaging both the network and stations.
  • On the PR/ego front, it’d be a disaster: Edward R. Murrow’s home abandoning news! The horror!

Likely solution: A stopgap. Move out Couric of the “Evening News,” replace her with a cheaper anchor who will do no worse in the ratings, and continue to manage decline. CBS moves Katie to “60 Minutes” full time and splits her salary with CNN, who gives her Larry King’s spot at 9 pm. CBS already shares talent with CNN, including Anderson Cooper, who is on “60 Minutes” staff and Dr. Sanjay Gupta, who contributes to the “Evening News.”

That won’t solve CBS’ longer-term problems. Then again, we don’t know any TV network that’s facing their long-term issues head-on, either.

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