ChasNote

So here’s something I don’t get. NBC expects to lose $250 million on the Olympics. If I understand the phrase correctly, this is what’s called a “loss leader,” something that doesn’t make financial sense on its own, but it’s worth the expense because of some longer-term or peripheral benefits. An investment that, say, attracts viewers to your brand and convinces them that you’re so wonderful they should spend more time with you, check out your other products (eg, websites and cable networks), and tune into your other shows.

So why is NBC losing tons of money AND alienating younger viewers by making the online Olympics experience significantly less robust than their online coverage of the 2008 Beijing Olympics?

According to NBC Olympics President Gary Zenkel (via NYT):

“When we roll out our digital coverage, there are some financial considerations to take into account. We make a massive investment when we acquire and produce the Olympics. The lions’ share of advertising revenue continues to be generated by our television coverage.”

NBC’s ratings last night were terrific — the Olympics beat out American Idol. Given that the average viewer of network TV is now over 50, though, I wonder if NBC should be using their investment in the Olympics to build a brighter, more digital future.

From Ad Age:

“a strategic partnership that would give the search-advertising giant access to TV-ad inventory on various NBC cable channels, a move that could be seen as a major victory in Google’s quest to sell ad time in more targeted fashion and in a way that would have a TV network give up some of its control over the ad-sales process.”

I wonder if NBC will regret this move in a year or two.

Silicon Alley Insider looks at Nielsen numbers to determine ABC has taken the #1 spot among websites attached to the broadcast networks, where — according to SAI — the CPMs can be as high as $70.

I was at iVillage, getting my daily fix of sex tips from “Love Bytes with Tracey Cox”, when I was struck by the unlikely line-up of advertisers. A pre-roll video ad for Crystal Light used the uncomfortably apt tag-line “Pump It Up” for a segment on improving hand job technique by watching your man masturbate. I know you don’t believe me, so here’s a screenshot:

I assumed this to be an unfortunate, if funny, snafu created by a behavioral-targeting engine that misfired, so I refreshed the page. Next up: Kraft’s Cool Whip whipped topping. Hmm. I refreshed again. Then — continuing through the Kraft brand portfolio — Oscar Mayer, the folks behind the famous 1963 made-for-TV song “The Oscar Mayer Weiner Jingle.” Oh no, I thought. Someone in Kraft’s online marketing department just lost his or her job!

Unless, of course, this is part of something bigger. A multi-generational, cross-platform subliminal messaging campaign that started with this risque 1952 promotional give-away.

(Screenshot grabbed from Kraft’s official website.)

Thanks, Neil!

From NY Times:

“Jeff Zucker, the chief executive of NBC Universal, said Tuesday the broadcaster was moving to save as much as $50 million a year by reducing its reliance on expensive pilots of new series on the NBC television channel.”

More evidence (like anyone needs it!) that the packaged-goods approach to media — where large media companies own and control distribution of content — is breaking down. As audiences move to the internet, the economic models behind television networks are becoming less lucrative. Fifty million dollars a year to throw programming-spaghetti at the wall to see what sticks just doesn’t pay out anymore.

From WSJ:

“The walkout has cost the Los Angeles-area economy $1.4 billion so far, according to the private Los Angeles County Economic Development Corp., including nearly $180 million in wages for writers and $310 million in wages for members of the International Alliance of Theatrical and Stage Employees. But an estimate by the Anderson Forecast at the University of California, Los Angeles argues that losses will be closer to $380 million if the strike ends by March, accounting for extra wages generated by scripts stockpiled before the strike began.”

And that’s not yet counting the Oscars. “The Oscars drew 40 million viewers and $80 million of advertising revenue last year, with an estimated $1.7 million for a 30-second ad.”

From TechCrunch, which takes a look at Nielsen NetRatings numbers over the past few months. Andreessen was right, the strike is launching digital video into the mainstream. Add that to the cancellation of the Golden Globe Awards (the Oscars might be next) and NBC giving money back to advertisers, the Writers’ strike will go down as the turning point for video online.

Josh Quittner’s latest Techland column at Fortune picks up on Marc Andreessen’s theory that the writers’ strike “is killing an entire season of TV shows. And quite possibly the next season as well. Which will drive even more people to the net, especially kids” to get their video entertainment.

I agree (and Josh quotes me in the piece, too):

Edwards says that, while the near-term effect of the writers’ strike is hard to parse, he believes that in the coming months and years, Net TV will pay off — mainly because advertising dollars will increasingly flow there. “Premium online video has always sold well,” he says. “Big brand advertisers for years haven’t been able to find enough video inventory that they consider ‘quality.’ I do think stumbling TV ratings (both from the Tivo effect and from the writers’ strike) will drive more video ad dollars online — it literally has to. Ratings that drop fast mean networks are giving advertisers part of their money back, and digital will benefit.”

At the time of the interview, I thought that last line was a tad hyperbolic. Usually under-performing networks “make good” to advertisers with a bunch of free spots, rather than actually giving money back. And then I saw this, NBC plans to give money back. Tough times in TV.

The broadcasts networks are considering canceling the star-clad “upfront” events in favor of block-and-tackle sales calls with top advertisers, according to the NY Times:

“with the writers’ strike now looking as if it may extend into the new year, threatening the normal timetable for developing prime-time series, every major network is pondering the elimination of the big, garish upfront shows — which cost $3 million to $5 million a year.

“Jeff Zucker, the president of NBC Universal, is the most vocal, willing to say publicly that his network is contemplating junking its upfront event. For NBC in recent years, that has consisted of unveiling the new lineup before a packed crowd in Radio City Music Hall, and a canape-and-drinks party in and around the skating rink in Rockefeller Plaza.

“‘In light of the changing business environment, we are looking very seriously at not doing the extravaganza part of the upfront process,’ said Mr. Zucker, who acknowledged that he has been thinking for some time that the upfront shows have outlived their usefulness and cost-effectiveness. ‘Once we make it, it is not a one-year decision,’ Mr. Zucker said. ‘We do not make it lightly, and obviously we are going to consult with our advertising partners.’

“Mr. Zucker emphasized that NBC would still take part in the actual selling part of the upfront, where deals are made with advertisers to pay set prices for time on network shows. He said that the process remained ‘the best mechanism’ to do business for new network schedules.

“Those deals — the networks took in more than $9 billion in last year’s upfront — would simply be made after much smaller presentations in much smaller settings for much smaller groups of ad buyers. It would become, Mr. Zucker said, more like ‘a personal call’ on advertisers, much more the way most cable networks have sold in the upfront: small concentrated sales efforts.”

I bet that’s a relief for programming execs like Stephen McPherson, president of ABC Entertainment, who has had to dance with stars at previous upfronts.

Big news out of NBC, as reported at WSJ:

“NBC Universal is taking the unusual step of giving advertisers cash back for primetime ratings shortfalls from last season. The move is a departure for NBC, which like other broadcast networks typically gives advertisers additional TV spots, called make goods, when ratings fall short of expectations. The unusual move shows the network’s particular vulnerability both to the Hollywood writers’ strike and to a new commercial ratings system being used this year for the first time.”