Broadcast TV Faces Struggle to Stay Viable

Editor's Note: Broadcast TV is facing the same demographic shifts as newspapers - a loss of mass audience which is affecting its ability to collect a premium for advertising. This will have an important impact on the future of traditional broadcasters moving forward. Like newspapers, the broadcast business model is broken and no one knows how to fix it.
The New York Times - CBS, home to “60 Minutes,” the “CSI” franchise, “Two and a Half Men” and the new hit crime drama “The Mentalist,” is having a better year in prime time than any other network.

And yet, as at the other networks, profits have declined sharply at CBS.

For decades, the big three, now big four, networks all had the same game plan: spend many millions to develop and produce scripted shows aimed at a mass audience and national advertisers, with a shelf life of years or decades as reruns in syndication.

But that model, based on attracting enough ad dollars to cover the costs of shows like “Lost” and “ER,” no longer appears viable. Network dramas now cost about $3 million an hour.

The future for the networks, it seems, is more low-cost reality shows, more news and talk, and a greater effort to find new revenue streams, whether they be from receiving subscriber fees as cable channels do, or becoming cable networks themselves, an idea that has gained currency.

The last bastion of the big network audience is the Super Bowl and other live events like the Grammy Awards and the Academy Awards. The rub is that those have traditionally been viewed as promotional outlets for a network’s other shows, and rarely make money themselves.

Ratings over all for broadcast networks continue to decline, making it harder for them to justify their high prices for advertising. Cable channels are spending more on original shows, which bring in new viewers and dampen their appetites for buying repeats of broadcast shows.

For the networks, the crisis is twofold: cultural and financial. For viewers, the result is more low-cost reality shows, prime-time talk and news programs and sports from the institutions that once made “Hill Street Blues,” “All in the Family” and “Cheers.”
http://www.nytimes.com/2009/02/28/business/media/28network.html

Ads Now in Soap Opera Scripts; Products Plugged on Fox News

The New York Times - Earlier this month, the ABC soap opera “One Life to Live” featured a scene in which Todd, the publisher of the local newspaper, and Tea, his lawyer, had a conversation about Todd’s legal problems, which ranged from being a murder suspect to being on trial for kidnapping.

Tea: I warmed up some soup for you. I don’t want you to go to the police station on an empty stomach.

(Already we are on new ground since characters in soap operas do not, as a rule, ever eat anything.)

Todd: What kind of soup is this?

Tea: It’s Campbell’s. It’s healthy, good for your heart.

Todd: (spooning away) Yeah, it’s good.

Before we go any further, let me just say that I understand soap operas are not high on your list of concerns, what with the economy flat-lining and all. However, the two things are somewhat related.

... Which I will explain after pointing out that I do not actually spend my afternoons watching “One Life to Live.” Do we have that clear? O.K., let’s move forward.

For some time now, characters in daytime dramas have been taking time from their normal activities, like having amnesia, to engage in animated discussions about the sponsors’ products. The ABC soap actors spent February talking about how Campbell’s soup and other assorted products are good for your heart. (And tasty, too!)

Lynn Leahey, the editorial director of Soap Opera Digest, pointed to an episode of “As the World Turns” in which Margo needed to get her hair fixed before a date with her husband (don’t ask) and reached for a bottle of Nice ’n Easy Root Touch-Up. “I feel like I took off 10 years in 10 minutes!” she exclaimed.

And here’s the thing. Viewers don’t complain. “Oh well... To keep the soaps on the air. To keep the actors paid,” wrote a philosophical e-mailer on a soap opera chat site.

Daytime dramas are swimming in choppy waters these days. Ratings are down. Shows are getting canceled. “They’re struggling to find a business model that works,” said Leahey, in a remark I have heard a time or two lately in other contexts.

So, the viewers acquiesce. In fact, for all the complaining about car bailouts and greedy bankers, people have become extremely tolerant of irritating behavior on the part of struggling corporations. Lines we never even bothered to think of as lines are being crossed. Last summer in Las Vegas, the anchors on the local Fox station started delivering the news with two prominently placed cups of McDonald’s iced coffee in front of them. A spokesperson called it a “nontraditional revenue source.” It’s only a matter of time before TV reporters conclude interviews with disaster victims by asking if they wouldn’t like a refreshing glass of V-8.http://www.nytimes.com/2009/02/28/opinion/28collins.html

Rocky Mountain News Shuts Down Amid Ad Slump

The Rocky Mountain News on Thursday became the largest-circulation daily to close its doors in the newspaper-industry crisis, after publisher E.W. Scripps Co. failed to find a buyer for the 150-year-old Denver paper.

The closure of Colorado's oldest newspaper, which prints its last edition Friday, makes Denver the first of what could be a string of major metropolitan markets to lose a daily. Tumbling advertising revenues have endangered one or more dailies in Philadelphia, San Francisco and Minneapolis, among others, and two publishers have filed for bankruptcy protection in the past week alone.

"Most of us thought it was a matter of time," said Bernie Lincicome, a Rocky sports columnist since 2000. "Nobody buys newspapers."

In early December, Cincinnati-based Scripps said it planned to sell the Rocky and its 50% stake in the Denver Newspaper Agency, a joint venture that handles the business operations for both the Rocky and its similarly sized rival, the Denver Post, owned by MediaNews Group. Scripps gave prospective buyers until mid-January to submit bids, but only one potential buyer emerged, and that party didn't present a viable plan, the company said.

Mark Contreras, Scripps's senior vice president of newspapers, said fast shrinking advertising revenues and readership ultimately meant "the model with two major metro dailies in a market the size of Denver was not sustainable." The Rocky had average weekday circulation as of Sept. 30 of 210,281, compared with the Post's 210,585.

Like a lot of cost-cutting measures by newspapers, joint ventures like Denver's haven't done enough to stem the industry's losses. Both Seattle and Tucson, Ariz., which operate as two-newspaper cities under a similar business arrangement, may lose a paper within weeks.

The Rocky's demise ends what is regarded as the country's oldest continuous newspaper rivalry. Fresh off the Rocky's announcement, the Post said it would publish an extra day -- Saturday -- begin delivering to all Rocky subscribers and poach some of the newspaper's star writers.http://online.wsj.com/article/SB123567732712586001.html

Pressure to Re-evaluate Dow Index

The Wall Street Journal - As the Dow Jones Industrial Average hits lows not seen since the dot-com bust, Wall Street is getting antsy about its inclusion of low-priced stocks that some traders and analysts believe should be yanked from the 30-stock average.

Their gripes are based in simple arithmetic, since the average is weighted according to the nominal price quotes of its 30 components, hand-picked by top editors at Dow Jones & Co., which also publishes the Wall Street Journal.

With five stocks in the Dow trading under $10 – Bank of America, Citigroup, Alcoa, General Motors, and, as of today, General Electric – the average’s detractors say it’s become a skewed indicator of the market. They want the runts replaced for essentially the same reason the editors would never add in an extremely high-priced stock like Berkshire Hathaway, now trading above $76,000 a share, or Google, at $340.

“The committee is just not doing its job by leaving these names in,” said James Bianco, president of Bianco Research in Chicago, which recently sent a note to clients analyzing the impact of low-priced stocks in the Dow. He notes that a simultaneous drop in all five sub-$10 Dow components to zero would only cause the average to fall by less than 200 points. However, a 100% decline in the Dow’s most high-priced component, IBM, would cause a drop of more than 700 points.

In the eyes of many investors these days, several of the Dow’s sub-$10 stocks are indeed candidates to go to zero if the government nationalizes them, wiping out private shareholders’ equity. Bank of America and Citigroup are most often cited by traders as candidates for a takeover, though executives and government officials have attempted to dissuade investors from believing that will happen.

Dow Jones Indexes removed American International Group from the industrial average last fall after it received bailout funds that amounted to a de facto nationalization. Mr. Prestbo said the index committee is ready to remove other names quickly if a similar scenario comes to pass, but the committee won’t make moves in anticipation of any government takeovers.http://blogs.wsj.com/marketbeat/2009/02/20/the-unbalanced-dow-industrials/

Bankruptcy Funding Solicited for Car Makers

The Wall Street Journal - Outside advisers to the U.S. Treasury have started lining up the largest bankruptcy loan ever, talking with banks and other lenders about at least $40 billion in financing for General Motors Corp. and Chrysler LLC, in case the two auto makers need it, said several people familiar with the matter.

While acknowledging the grimness of the task, administration officials involved in the auto talks said they are trying to find a way to restructure the two companies without resorting to bankruptcy proceedings. They stressed the latest efforts were "due diligence" on the part of the government advisers, and that bankruptcy financing may not be necessary.

Still, people involved in talks with senior Obama administration officials said that the administration believes that the option of Chapter 11 filings by the two auto makers needs to be seriously considered.

"Everything is on the table right now," one person involved in the matter said, adding that President Barack Obama doesn't want to see more massive job losses in the auto industry. His administration also doesn't want to anger the United Auto Workers by appearing to push for bankruptcy, this person added.

The initial discussions call for private banks to provide the financing -- known as a debtor-in-possession, or DIP, loan -- with the government guaranteeing or backstopping the loan. In this scenario, some of the financing would be used to pay back the $17.4 billion the government lent GM and Chrysler late last year.

Treasury advisers are handling the effort and keeping GM and Chrysler informed of the steps through back-door channels, said the people familiar with the matter. The interplay between the government, auto makers and the markets is proving to be complicated.http://online.wsj.com/article/SB123535613910745405.html

Murdoch Hasn't Given Up on Print or Newspapers

The New York Times - Rupert Murdoch had an office built for him at The Wall Street Journal within days of buying it 14 months ago, and he has made ample use of it — ordering up a wave of changes in the once-staid paper’s content and culture, from the addition of a weekly sports page to general news displacing financial news on the front page to the thinning of its layers of editing.

But Mr. Murdoch, as much old-fashioned press baron as 21st century multimedia mogul, faces a depressing reality: his lifelong fondness for newspapers has become a significant drag on the fortunes of his company, the News Corporation.

The company recently took $8.4 billion in write-downs, including $3 billion on its newspaper unit, which includes The Journal’s publisher, Dow Jones & Company. Meanwhile, the News Corporation’s stock price has fallen by two-thirds in the last year, a sharper decline than at media conglomerate peers like Time Warner and Viacom.

In more vibrant economic times, investors and Wall Street analysts were more willing to look past Mr. Murdoch’s attachment to newspapers — the newspaper segment is now the company’s biggest single source of revenue, about 19 percent in the most recent quarter. But they find that a tougher chore these days, as other media struggle and newspapers suffer through their worst slump since the Depression.

“The thing I hear from investors is that they wish News Corp. was everything but newspapers,” said David C. Joyce, media analyst at Miller Tabak & Company.

“Investors are more forgiving when they are in a better mood,” he said. “The hope for a turnaround in the newspaper business is looking elusive.”

The declining economy and the sinking fortunes of print publications have placed in stark relief Mr. Murdoch’s love of newspapers and his deal to acquire Dow Jones just before the recession set in. Mr. Murdoch, chairman and chief executive of the News Corporation, paid more than $5 billion for an asset that generated about $100 million in operating income last year, a price that now looks like a staggering overpayment. Mr. Murdoch declined to comment for this article.

On the surface, the News Corporation’s Feb. 5 earnings report, for the quarter that ended Dec. 31, appeared to show a nearly $90 million increase in newspaper division revenue from a year earlier. But that was an illusion created by the addition of Dow Jones, which the News Corporation owned for only 18 days of the year-ago period.

What's in a Wall Street Bonus Figure? Not Accuracy

Many of the chief executives from financial institutions, testifying before Congress, drew criticism for reported bonus grants at their companies

The Wall Street Journal - Late last month, New York state's comptroller said Wall Street bonuses totaled $18.4 billion last year. The firestorm he provoked helped lead to legislation that may upend compensation at major banks.

So much depended upon a number so few understood. The figure, which is neither precise nor complete, is probably an underestimate.

After the figure came out, President Barack Obama called the bonuses "shameful" in the wake of the government's $700 billion plan to bail out many of these same Wall Street firms. The criticism laid the groundwork for a provision inserted into the stimulus bill signed into law this week that caps bonus payments for top earners at companies that have received taxpayer dollars.

But the $18.4 billion is merely an estimate, derived from tax-withholding data, labor statistics and bank balance sheets. Bonuses aren't always specified as such on tax returns, so they are estimated by New York state officials from bumps in pay during bonus season.

The comptroller's office releases the estimate annually, usually before some bonuses have even been paid. Later estimates, based on more-complete data, sometimes revise the initial ones by more than 40%. And even these are just estimates. Banks don't supply hard numbers, and important components, such as stock options that haven't been exercised, are excluded.

The figures also cover only employees who work in the securities industry in New York City. How many bonuses are excluded as a result is impossible to say: The industry's highest earners work in New York, but most of its employees work elsewhere.

"People have a tendency to jump to the number and not fully understand it," says Ken Bleiwas, state deputy comptroller for New York City, who oversees the number-crunching. "It's not an easy analysis."http://online.wsj.com/article/SB123509366925028921.html

Economy Dreadful, But Worse Elsewhere

The New York Times - If the economies and stock markets of the world were graded on a curve, the United States would be doing quite well.

In the fourth quarter of last year, the American economy shrank at a 3.8 percent annual rate, the worst such performance in a quarter-century. They are envious in Japan, where this week the comparable figure came in at negative 12.7 percent — three times as bad.

Industrial production in the United States is falling at the fastest rate in three decades. But the 10 percent year-over-year plunge reported this week for January looks good in comparison to the declines in countries like Germany, off almost 13 percent in its most recently reported month, and South Korea, down about 21 percent.

Even in the area of exploding mortgages, the United States has done better than some countries, particularly in Eastern Europe. There it is possible now to owe twice what a house is worth — even if the house has not lost much of its value.

Grading on the curve, as any college student knows, requires that a certain proportion of high grades be given out no matter how badly the class as a whole performs. If the best student in the class gets just over half the answers right on a difficult test, that student deserves an A.http://www.nytimes.com/2009/02/20/business/economy/20norris.html

After Losses, a Move to Reclaim Executives’ Pay

SHOULD executives get to keep lavish pay packages when the profits that generated their compensation go up in smoke?

As the financial crisis deepens, what might have been a philosophical question is now the topic of the day. With losses mounting at the nation’s largest financial institutions, years of earnings have been erased, investors have lost billions, thousands of employees have been let go, and taxpayers have been tapped to rescue the financial system. But executives who helped set the problems in motion, or ignored them as they mounted, are still doing fine. Humbled, perhaps, but well paid for their anguish.

Executives at seven major financial institutions that have collapsed, were sold at distressed prices or are in deep to the taxpayer received $464 million in performance pay since 2005, according to an analysis performed for The New York Times. Almost half of that consisted of cash compensation.

Yet these firms have reported losses of $107 billion since 2007, a result of their own missteps and the ensuing economic downturn. And $740 billion in stock market value has been lost since these companies’ shares peaked in 2007, just before the housing bubble burst.

The New York Times - Against that landscape, a growing chorus is demanding that executive compensation snared shortly before problems emerged be given back.

“There is a line that separates fair compensation from stealing from shareholders,” said Frederick E. Rowe, a money manager in Dallas and a founder of Investors for Director Accountability, a nonprofit group. “When managements ignore that line or can’t see it, then hell, yes, they should be required to give the money back.”

Corporate boards that awarded lush executive pay packages almost always justified them by saying they encouraged superior performance and were directly tied to benchmarks like profitability.

But now, with a public backlash against excessive pay and taxpayer lifelines extended to crippled companies, the idea of recouping compensation, known as “clawback,” is gaining traction.http://www.nytimes.com/2009/02/22/business/22pay.html

When Consumers Cut Back: A Lesson From Japan

TOKYO — As recession-wary Americans adapt to a new frugality, Japan offers a peek at how thrift can take lasting hold of a consumer society, to disastrous effect.

The economic malaise that plagued Japan from the 1990s until the early 2000s brought stunted wages and depressed stock prices, turning free-spending consumers into misers and making them dead weight on Japan’s economy.

Today, years after the recovery, even well-off Japanese households use old bath water to do laundry, a popular way to save on utility bills. Sales of whiskey, the favorite drink among moneyed Tokyoites in the booming ’80s, have fallen to a fifth of their peak. And the nation is losing interest in cars; sales have fallen by half since 1990.

Japan eventually pulled itself out of the Lost Decade of the 1990s, thanks in part to a boom in exports to the United States and China. But even as the economy expanded, shell-shocked consumers refused to spend. Between 2001 and 2007, per-capita consumer spending rose only 0.2 percent.

Now, as exports dry up amid a worldwide collapse in demand, Japan’s economy is in free-fall because it cannot rely on domestic consumption to pick up the slack.

In the last three months of 2008, Japan’s economy shrank at an annualized rate of 12.7 percent, the sharpest decline since the oil shocks of the 1970s.http://www.nytimes.com/2009/02/22/business/worldbusiness/22japan.html

Journal Register seeks bankruptcy protection

NEW YORK (Reuters) - Journal Register Co sought Chapter 11 bankruptcy protection on Saturday, making it the latest U.S. newspaper company to buckle under deteriorating advertising revenue and debt that it cannot easily repay.

The company publishes 20 daily newspapers, including The New Haven Register and The Trentonian. It joins the ranks of the Minneapolis Star-Tribune, as well as Tribune Co, publisher of the Chicago Tribune and Los Angeles Times, and highlights the challenges U.S. newspapers face as advertisers flee their print editions and more people get their news for free online.

For years, Journal Register has been among the smallest of publicly traded U.S. newspaper publishers. Nevertheless, its filing will increase scrutiny on other U.S. newspaper publishers, including McClatchy Co and Lee Enterprises, which are trying to survive a severe ad downturn without running afoul of their creditors.

Journal Register has already agreed with key creditors on a pre-negotiated reorganization plan, and said it was planning to restructure its operations.

The case is In re: Journal Register Co., U.S. Bankruptcy Court, Southern District of New York, No. 09-10769.http://uk.reuters.com/article/burningIssues/idUKTRE51K20520090222

Banks May Need to Be Nationalized

Dow's Lineup of Companies Changing

Associated Press - NEW YORK -- Some dogs of the Dow have lost their bite.

If the prices of the three cheapest stocks in the Dow Jones industrial average -- General Motors Corp., Citigroup Inc. and Bank of America Corp. -- fell to zero, the index would shed fewer than 70 points. That's only about 0.9 percent.

With the three companies valued at less than $5 a share apiece, some investors think the Dow should replace them among its 30 stocks. A $1 move in a Dow stock corresponds to about an 8-point move in the index, according to Dow Jones Indexes.

"I'm certainly surprised they haven't done it," said Jack Ablin, chief investment officer at Harris Private Bank. Ablin said he already considers stocks such as GM and Citigroup "ex-officio" members of the Dow.

Dow Jones said it has no plan to shuffle out components, and it has no official threshold to determine whether a company should be included or excluded. But it has a history of replacing weak companies with stronger ones and isn't ruling out future changes.

The Dow Jones industrial average is far from the be-all, end-all measure of the U.S. stock market. Market participants tend to use broader indexes such as the Standard & Poor's 500 index for statistical analysis. Even Prestbo said the Dow is "very subjectively run."

But the Dow is the most-watched stock index in the world, and it is historically useful because it is so old. It was created in 1896 by Wall Street Journal editor and Dow Jones & Co. co-founder Charles Dow. General Electric Co., which sank yesterday to a 13-year low of $9.95 before closing at $10.06, is the only original component left.http://www.dispatch.com/live/content/business/stories/2009/02/20/dow_components_0220.ART_ART_02-20-09_C8_2MCVONK.html

Nationwide's CEO dumped - Columbus Dispatch Asleep at the Wheel

Editor's Note: Another big story where The Dispatch totally misses the boat. Few reasons given, but we are told a lot about what a great corporate citizen Mr. Jurgensen was. Also, notice how the company's 2008 loss isn't mentioned until 10 graphs into the story and we have to read on to the jump to see that Mr. Jurgensen received $23 million for taking the company's publicly traded unit private. Maybe the newspaper will follow up with a more complete story - MT

The Columbus Dispatch - The top executive at Nationwide has stepped down and been replaced by the president and chief operating officer, bringing abrupt change to one of the city's largest employers.

Jerry Jurgensen, chief executive since 2000, and the company's board of directors "mutually agreed" that Jurgensen would step down, Nationwide said in a news release yesterday. He has been replaced by Steve Rasmussen, who has been with the company since 1998.

Rasmussen, 56, has been president and chief operating officer of Nationwide Mutual and Nationwide Mutual Fire Insurance Co. since September 2003. He also has served as chairman, chief operating officer and director of Allied Group Inc., a Nationwide subsidiary.

The company gave little explanation for Jurgensen's departure, and he could not be reached for comment.http://www.dispatch.com/live/content/local_news/stories/2009/02/20/nationwide_print.ART_ART_02-20-09_A1_RNCVP8V.html?sid=101

New York TImes Stock Drops Below $4 Per Share

Post courtesy of Emily Mullin

Barron's - One sign of how desperate things have gotten at the New York Times (NYT): the share price is cheaper than it costs to purchase a copy of the Sunday paper in New York City.

Shares dropped below $4 in Tuesday’s trading, reaching an all-time low for the stock. That’s south of the $4 cover price that the paper commands at New York City news vendors. (Newsstands themselves have become about as rare as a good quarter of ad spending.)

The downturn in the housing and automotive markets, coupled with the overall economic recession, have cut sharply into advertising revenues, and effectively ruined the model for newspaper operations. When the Times reported its fiscal fourth quarter late last month, it said its net plunged 48% on a year-over-year basis, as ad revenues declined 18% in the period. The company has looked for non-core assets to sell, and has hired bankers to organize the disposition of its partially owned sports operations, which include the Boston Red Sox and Fenway Stadium.

Still, as the poisonous ad-spending market continues to wreak havoc on the operations of newspaper publishers, it’s a wonder whether there won’t be a time when shares of the Times meets the price newsstands charge for the daily paper, currently pegged at $1.50.http://blogs.barrons.com/stockstowatchtoday/2009/02/17/sign-of-the-times/trackback/