Is the Jay Leno Move A Strike Against SAG?

In the same 24-hour period as SAG held a large town hall meeting to discuss a strike authorization vote, Jeff Zucker announced a potential cutback in their primetime schedule. Then news leaked out that NBC was giving Jay Leno a 5 night per week slot at 10pm.

Are the events related?

I think the Leno move can be seen as a SAG negotiating ploy, or more likely it can be seen as another round of layoffs. Or both. Here's why.

With Leno on 5 nights per week, NBC has 5 fewer primetime hours to produce and prepare pilots for. "My Own Worst Enemy" was a $4 million per episode show, but that's on the high end. Let's take half that to be conservative (and account for the relatively cheap cost to put on the Leno show), i.e., $2 million per prime time hour to put on a scripted show, amortizing in development costs. That's $10 million per week NBC is "saving," or $520 million per year. Assume that $520 million drops to the bottom line, then at a P/E ratio of 9, parent company GE adds $4.5 billion to its market cap, currently $192 billion.

If you assume the average job associated with the making of those now non-existent shows is $50,000 per year, that's 10,400 SAG, IATSE, AFTRA and other jobs that just went away. Assume the average job is $100,000 per year, that's 5,200 jobs. Either way it's a lot of jobs. It's clearly another round of NBC job layoffs in disguise, on top of the 500 jobs announced last week of in-house NBC employees. My math may be off somewhat, but you get the point.

Those layoffs included the highly regarded programming executive Katherine Pope, who made it a point to mend NBC's fences with Dick Wolf of "Law and Order," who has two dramas on NBC right now. Guess what hour those two shows are on? Has Jeff Zucker been reading "The Prince?"

Is the Leno move having an effect on SAG? Judging by the comments section on the awesome Nikki Finke's website, many SAG members are getting increasingly nervous and saying settle now and avoid the strike. However Finke reports that the vibe at SAG's town hall meeting was pro-strike.

Whatever the case, the Leno move is either shrewd on NBC's part, or a case of shooting itself in the foot with a BFG. Ben Silverman remarked recently that NBC is programming for margins now, not ratings. If so, the Leno move makes perfect sense. Deprive your competition of a proven money maker (Leno) and slash your programming costs.

If NBC has 21 hours or so of primetime programming every week, the Leno move just eliminated 5 hours of that or 24% of potential scripted programming at NBC. Taken across the spectrum of the Big 4 networks, we may have just witnessed the elimination of 5-7% of all of scripted primetime programming.

Was the Leno move intended to intimidate SAG? My sense is no, it was a decision that makes economic sense in the short term, but is detrimental to NBC in the long term, but then again NBC is owned by GE, whose stock was $29 per share ten years ago, and is $19 today.

A year ago I gave a speech to a business organization, and wound up seated next to one of the top 5 executives at GE. I remarked that I had been on CNBC a few times, and I found it to be one of the most chaotic organizations I'd ever seen. He muttered something to the effect that show business is not exactly GE's core business.

It may not be, but the same Six Sigma business theories GE uses to build jet engines and nuclear power plants are now being applied to television programming. There is a difference between production decisions regarding LN20 block entry points for wing empty weight saving on jets, and production decisions for "My Name Is Earl."

When you're in 4th place in the ratings, you naturally claim you're managing for margins, not ratings. Ratings are generated by developing new programs, and taking care of your franchises (Law and Order). In other words, the work Katherine Pope used to do rather well. The problem is that NBC's short term Six Sigma, all-boy club decisions are profoundly affecting thousands of workers in Hollywood long-term.

So was the Leno move intended to affect the SAG negotiations? Probably not, the two BFFs that now run NBC are too busy trying to fire all the talented females at NBC that threaten them. Will the Leno move affect the strike? It has to. Somewhere Rupert Murdoch is laughing.

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Comments

[Untitled]

I think they just want to f--k with Letterman. He's always been second pony to Leno, and maybe he was hoping with Leno gone, he could get more viewers.

As for Conan, I really don't care what happens to him. I think Craig Ferguson is much funnier.

[ACMallet]

Please remember, the Leno show is fully staffed by union workers. Every performer is SAG/AFTRA; every writer is WGA ... are we now saying that some SAG/AFTRA/WGA members are more deserving than others because they work on scripted dramas?

I hope not.

[NightflyLester]

"..every writer is WGA"

Except when crafting a monologue during a writer's strike..... Allegedly.

[Ron Galloway - Huffpost Blogger]

What I was saying was that the result of the Leno move will be thousands of jobs, union and non-union, will simply vanish because of the decreased demand for prime time shows, both developed and aired. From actors to drivers to caterers to trainers. $520 million pays for a lot of jobs.

[NightflyLester]

As long as we're offering corrections, it was Zucker that first forwarded the idea of programming for margin rather than ratings. Silverman just drank the Kool-Aid.

[Ron Galloway - Huffpost Blogger]

You're right. It's ben Benny-boy that picked up the mantra.

[ashcalvin]

"With Leno on 5 nights per week, NBC has 5 less primetime hours to produce and prepare pilots for."

Five "fewer" hours, actually. If you can count it, it's "fewer;" if you can't, it's "less." E.g., fewer raindrops. But less rain.

[Ron Galloway - Huffpost Blogger]

Noted and corrected. Thanks.

[SomaMinneapolis]

Is that tip from "The Elements of Style?"

Just curious. ;-)