Network newscasts are dying. And really profitable.

Commentary about business and finance.
Aug. 9 2005 5:18 PM

The Peter Principle

Network newscasts may be dying, but they're doing it profitably.

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Peter Jennings: 1938-2005 
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Peter Jennings: 1938-2005

The death of longtime ABC News anchor Peter Jennings has inspired a raftload of obituaries—not just for Jennings, but for the entire species Anchor stentorious. Dan Rather and Tom Brokaw retired, with more and less disgrace. Jennings' death signals the passing from the scene of the last of the Big Three—and the creation of a giant vacuum at 6:30 p.m.

In the last decade, the half-hour network newscasts have been written off more frequently than Tom, Peter, and Dan jetted off to cover summit meetings. Nobody watches them. We are too busy working, ferrying kids to soccer practice, and commuting to the exurbs to be home in time. With news available all day on cable and the Internet, the notion that a half-hour amalgam of over-produced, sound-bite-ridden reports, hosted by an old guy in an expensive suit, could make for an attractive program—let alone an attractive advertising vehicle—seems fanciful.

But in fact network newscasts are going to be dying for a long time, and dying quite profitably. Old-legacy media—newspapers and magazines and network TV newscasts backed by advertising—are going to be with us a lot longer than we think. And they're going to be more profitable than hipper new media upstarts for some time to come. In a commercial culture that prizes youth and growth, the audiences of legacy media may be aging and shrinking. But they're more than retaining their value.

As this New York Times graphic shows, network evening news is clearly losing its audience. According to Nielsen, the Big Three newscasts pulled in a combined 36.71 million viewers each night in the 1991-1992 season. So far this year, they're attracting 25.9 million viewers among them—a 30 percent drop in 13 years.

As Jacques Steinberg notes in the Times,"The evening news programs are nowhere near the profit centers that the morning shows are." That's not surprising. Morning shows attract younger women in the prime of their consuming lives, while the evening news demographic skews older and maler.

But they are still a good ad buy. If you're interested in reaching a large mass of people interested in current events, the nightly news is still the only place to go. As TVNewser's cable ratings show, comparatively few eyeballs are locked on Hardball and the other shoutfests. On Friday, Aug. 5, the cable news channels collectively drew about 3.6 million viewers during prime time—one-seventh of the network-news audience. More people watch the Big Three newscasts than watch Leno and Letterman. And only a few syndicated shows—Oprah, Wheel of Fortune, Seinfeld—regularly pull more viewers than nightly news shows.

Every year the television audience is more fragmented. As a result, numbers that would have made you an also-ran in the 1970s make you a cultural icon in the age of 200 channels. CSI, last week's top-ranked show according to Nielsen, pulled 13.4 million viewers, or fewer than 10 percent of households. In Nielsen's list of the 10 network telecasts that garnered the highest percentage of viewing households, the most recent was the 1994 Winter Olympics. And for all the hype surrounding the final episodes of Seinfeld and Friends, they didn't draw as many viewers as the finales of Cheers and M*A*S*H, even though the potential audiences were substantially larger.

Given that, the performance of network news isn't so bad. And the economic case for maintaining the nightly news remains compelling. Advertisers go ga-ga over concentrations of viewers, which are rarer and rarer. That's why advertisers pay more each year for spots on America's most-watched TV event—the Super Bowl. In 2005, the 30-second Super Bowl spot cost more than double the price of a 1995 spot, even though the game's ratings have declined. Super Bowl XXXIX got 86.1 million viewers, compared to 94.1 million for Super Bowl XXX in 1996. Just as Budweiser sees the Super Bowl as the only opportunity to reach 86 million potential customers with a single ad buy, companies still see the value of nightly news shows. If Procter & Gamble wants to inform 25 million viewers about a new detergent, it would rather buy ads on three shows than on 60. And the news shows' older viewers make for a pretty good audience. They've got disposable income. And those who do tune in are probably less likely to be surfing, or to use TiVo (and hence skip the ads).

In addition, the nightly news programs—once stand-alone operations—have become better at distributing costs with cable and online units. (Quiet as it's kept, ABC has a 24-hour news operation, ABC News Now.) And the price of talent—at the very top, at least, is probably declining. Jennings' replacement will certainly earn far less than he did.

The fragmentation also works in favor of another declining medium consumed primarily by old people: newspapers. If you're a Washington-area sporting-goods chain and you want several hundred thousand people to learn about a sale, the Washington Post (published by Slate's parent company) is the only vehicle that can guarantee delivery. Yes, newspaper-ad sales are drifting. But they're still significant. As the Washington Post Co.'s most recent earnings release shows, ad revenues at the Post fell 2 percent in the second quarter, while revenues at the online units, of which Slate is now a part, grew 21 percent. But look at the overall numbers. Print-ad revenues were $146.4 million, while online revenues were $18.7 million. It will take many more years of 2 percent declines for newspaper advertising and 20 percent growth in online advertising before the newspaper business model becomes seriously endangered. And as Universal McCann ad forecaster Robert Coen's 2005 report shows (see the chart on Page 7), national advertisers—big companies with big campaigns—primarily spend their money on old media.

Peter Jennings may have been the last of the celebrity globe-trotting network anchors. But there will be other anchors. Whoever fills his chair may never have the name recognition, moral authority, or salary that Jennings had. But for ABC, and the shareholders of parent company Disney, he—or she—will still be a bankable talent.

Daniel Gross is a longtime Slate contributor. His most recent book is Better, Stronger, Faster. Follow him on Twitter.