The Plot Thickens

Network News at a Crossroads

By Brian Stelter and Bill Carter
Published: February 28, 2010

ABC News is making no secret about what is behind the sweeping staff cuts it now faces: raw survival instinct.

“I just looked out at the next five years and was concerned that we could not sustain doing what we were doing,” said David Westin, the president of ABC News, as he explained the decision last week to jettison up to 400 staff members, a quarter of the news staff, in the coming months.

The same compelling motive already instigated strategic retrenchment at ABC’s broadcast competitors. NBC, the one network with a cable news channel, MSNBC — and, not coincidentally, the only network in a sound position of profitability — has drastically pared down its operations over the last few years. So has CBS, which is losing money already and has cut about 70 jobs this year.


But with news available more places than ever, on cable channels and Internet sites, and with revenue challenged by heavy dependence on shrinking advertising dollars, the future for the news divisions at ABC and CBS remains deeply insecure.

“Long term, it’s going to get harder for these guys to exist as they are currently constructed, with the exception of NBC because it can offload the costs on MSNBC,” Michael Nathanson, an industry analyst for Sanford C. Bernstein & Company, said.

The economic problems facing ABC News and CBS News in many ways mirror those faced by newspapers, which have been similarly afflicted by a drop in advertising revenue. The reaction — severe cuts in personnel and other costs — also looks to be the same.

But can you shrink your way to prosperity? Andrew Heyward, the former president of CBS News who is now a news media consultant (NBC News is one client), said of the ABC cuts: “The real issue after this is what is going to drive growth? How do you generate more profit? And this doesn’t address that.”

The easy answer would seem to lie in NBC’s structure, because in contrast to its competitors, that news organization is flush, making an estimated $400 million in profit a year.

“We actually think we have a completely different model,” Steve Capus, the president of NBC News, said. That model: win every significant ratings competition on the broadcast side and rely on MSNBC’s revenue stream of advertising plus cable subscriber fees to subsidize the high costs of news gathering.

The effectiveness of that formula inevitably resurrects predictions that a marriage with a cable news organization is imperative for CBS and ABC. The obvious partner is CNN, and both those networks have been in courtships with it before. To date, the cultural challenges have been insurmountable. CNN, which says last year was its most profitable since its founding in 1980, would seem to have little incentive to rush to the aid of a network. And neither network wants to cede editorial control to CNN.

“If it were easy or obvious, it would have happened by now,” Mr. Heyward said.


But a longtime network news executive, who asked not to be identified because of connections to previous private negotiations involving CNN, said that ABC or CBS was likely to enter into an alliance with a partner like CNN “within the next few years.”

Even Mr. Westin, who said he did not see how a match with CNN “makes sense for us,” conceded: “In general, in business, when there is real decline, consolidation inevitably happens.”

Already, outlines of consolidation are discernible. Several CNN stars contribute to “60 Minutes” on CBS. And CBS executives, mindful that Katie Couric’s contract expires in a little over a year, have talked to Anderson Cooper of CNN about an anchor job, according to two TV veterans informed of the meeting.

In recent months, a handful of ABC News reporters has appeared on the business channel Bloomberg, and the two organizations have tried to jointly hire at least one person, according to two staff members who asked not to be named because they were not authorized by their employers to speak. Those two, and two others, labeled the sharing by ABC and Bloomberg — what one person called flirting — a possible prelude to a broader news-gathering pact.

A Bloomberg spokeswoman said that the company was a client of ABC’s affiliate service and declined to comment on any talks about a broader relationship between the organizations. An ABC spokesman said the current level of cooperation with Bloomberg was “hardly unusual.”

Network news divisions have historically been family jewels for their parent corporations, lending prestige and an aura of public service — as well as a shield against government intrusion. Mr. Heyward called the network evening newscasts a “bastion of serious news coverage at a time when so much of television has become tabloid and trivial.”

While they have steadily shed viewers, to a cumulative 22 million in 2009, from about 50 million in 1980, the newscasts still amass an audience that dwarfs any show on a cable news channel. In the last five years, the more lucrative network morning shows have also shown declines, Tom Rosenstiel, director of the Project for Excellence in Journalism, said. “What’s occurring in broadcast news is not some sudden crisis. This has been a glacial erosion,” he said.

A survey by the Pew Research Center last year reported that three-quarters of respondents thought the cancellation of the evening newscasts would be an “important loss” to the country. Mr. Rosenstiel said, “None of these news division presidents wants to be the first guy to kill an evening newscast.”

Not that it would be their call. That decision would fall to the networks’ corporate parents. Executives from CBS News and ABC News said the top corporate executives for both networks remained outspoken supporters of the news divisions.

ABC employees were reviewing buyout packages last weekend. Eligible staff members have until March 26 to decide whether to leave. If ABC cannot meet its goal, layoffs will follow.

Mr. Westin said ABC News could no longer afford to support a worldwide staff of about 1,500, with bureaus in cities foreign and domestic, most with traditional TV news work forces: camera operators, sound engineers, tape editors, assignment editors and, of course, correspondents, many with substantial salaries.

More journalists will become jacks-of-all-trades, wielding cameras, microphones and lights, as well as lists of interview questions. More production work will be conducted out of New York. “The ones who fear the most from the cuts are the ones that have a single function,” one ABC staff member said.

Mr. Westin said high-priced and purely cosmetic talent would become an increasingly endangered species. “There have been people in television news — very successful people — who do not write,” he said. “We are going to definitely require more of our journalists.”

Mr. Westin said he did not think the cuts would compromise ABC’s journalism, but not everyone shares his confidence. One veteran ABC News executive said, “Clearly the signal is: It’s not important to create anything new. We simply have to figure out a way to manage it cheaply.”

CBS, similarly, is trying to do the same with less. In an interview after its layoffs in early February, the CBS News president, Sean McManus, said the organization was figuring out how to “utilize our resources in a more efficient way.”

NBC News, meanwhile, remains the envy of the business, largely because of its decision in 1996 to start up a separate cable news channel.

The total work force at NBC News — which includes MSNBC — is 1,100, the size ABC now aspires to be. CBS is believed to have fewer than 1,400 on staff.

So far, Web revenue is a rather small part of the broadcast networks’ bottom lines, although Mr. Westin said ABC’s digital income was “up substantially.”

But if digital revenue cannot offset ad losses, Mr. Heyward suggested there was high ground from the flood if the networks could find a way to make their news stand out.

“The notion of investing more in distinctiveness and less in sameness is critical,” he said. That means more enterprise reporting and less overlapping coverage of news that cable handles, like reporters standing in snow drifts with yardsticks.

But the networks will surely stick it out, he predicted, if only because they do not want to see their competitors win.

“I sometimes compare it to three people in a leaky boat,” Mr. Heyward said. “Each one sees an island shimmering in the distance and starts thinking: I could jump out and swim for the island and maybe I could make it.

“On the other hand, I could drown and make the boat lighter so the other two make it. I think you are going to see everybody staying in the game because everybody knows leaving guarantees a longer lease on life for their competitors.”