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NBC Entertainment’s Marc Graboff Keynotes at Digital Hollywood

Although MobilizedTV is focused on content on mobile platforms, we do make the occasional exception. We are attending Digital Hollywood at the Loew’s in Santa Monica (expect additional coverage over the next few days) and attended the conference’s keynote address, by Marc Graboff, chairman of NBC Entertainment and Universal Media Studios. Graboff was interviewed by CNBC media and entertainment reporter Julia Boorstin.

Although the conversation only briefly touches on the mobile platform, we thought readers–especially U.S. readers–would find the conversation of interest. What follows is a fairly faithful transcript of the conversation, edited for clarity.

Graboff described NBC’s current status. “Jay Leno so far is performing above our expectations. Our 8 to 10 shows are performing fairly well. Biggest Loser did its best number ever last week since last year’s finale. The Office is doing well, and people are finding Law & Order: SVU in its new time slot. We’re encouraged with our new shows as well, and will be doing back-order pick-ups soon.

Boorstin noted that Jay Leno–which had been touted as a Tivo-proof show–was a controversial move.  “NBC is being criticized for lower than expected ratings,” she said. “Is it hurting the affiliates whose news come after Leno?”

“What criticisms?,” answered Graboff to laughter from the audience. “It’s hard not to sound defensive. I said it when we announced Jay Leno that this was for NBC the right move at the right time with the right person. Had any of those factors not been there, I’m not sure we would have done this. We had a situation with our primetime ratings: a cyclical downturn in the economy, increased use of DVRs and we faced losing Jay. We wanted to keep Jay and Conan. We felt there was a place in the NBC family with both of them, and we jumped at it. I know some of the critics have said the show is killing NBC’s primetime. Our answer is that it’s exceeding our expectations and those of our advertisers. It’s the early inning of a nine inning ball game. As to affiliates, the 11 o’clock news, which is what Jay leads into, is down 12 percent, but that’s only one point more than the other networks. The Jay Leno affect isn’t what people are saying it is.”

Boorstin asked about which part of the huge media blitz for the Leno showed worked the best. “It’s too soon to say,” answered Graboff “Our main goal was ingrain in peoples’ brain Jay Leno 10 pm comedy. Those were the three messages we were instilling. This wasn’t intended to revolutionize anything but to be counter-programming to crime dramas and other 10 pm programming. We needed to zig where they’re zagging. We wanted comedy to their drama. So we stressed it was a new type of show.

Boorstin asked about the cancellation of Southland, a critically acclaimed show.  Graboff led into his answer. “Another in the dramatic category was Friday Night Lights, a critically acclaimed but low rated show. It made no sense for us to do financially but we brought in DirecTV and it became feasible. Southland is a great show. But NBC isn’t the right platform for that show. Where we would have put it on Friday night would have been a disservice to viewers. We’ve given them the chance to find a platform where it’ll work and cooperating with them to help them do it, on basic or pay cable.”

Boorstin asked, “What does that say about where NBC is?” Graboff responded that NBC is facing “a cyclical problem and a secular problem.” “The cyclical problem is two fold: advertising downturn which is starting to rebound. The scatter market is fairly strong across all the networks, which means the economy for national broadcasting is starting to rebound. That’s the cyclical problem facing NBC in particular. For many years we were number 1 and now we’re number 4. It’s not a fun period to be in and  we’re doing everything possible to climb out of it, and I know we will. The secular problems are DVR usage. It’s not streaming of TV shows that’s hurting. It’s the time-shifting with DVRs for which we don’t get compensated. Heroes was time-shifted by almost one-third of the viewers. We don’t get paid for that. The Office was time-shifted by 25 percent of the viewers . Every network has examples of that. Yet we have to pay for the programming.”

Graboff said that NBC, along wih other networks, are working to come up with metrics that they can show advertisers about who consumes the shows, the platforms it was consumed on, and other specific information, enabling them to sell shows to the advertisers based on their needs. “Then we’re on our way to getting compensated for it,” he said.

Boorstin wanted to know if NBC was looking in different places for new shows, such as UGC (user-generated content). Graboff responded that “there are a million great ideas for TV shows but it all comes down to execution.” “Advertisers really want to be involved integrally in the programming,” he added. “We’ve had conversations with them from everything from them being partners from the beginning of the show to fully sponsoring a show. We had a very successful example when Bud Light Wheat fully sponsored last week’s Saturday Night Live. It was very successful for Bud Light and us. This kind of sponsorship harkens back to the early days of TV. We’re also doing a lot of your normal integrations where a product is woven into the storyline from a bottle of water on a desk, to Heroes with a Sprint phone woven into the storyline.”

Boorstin noted that traditional TV advertising is down 15 percent this year. “Will product integration compensate for that decline?,” she asked. “No,” answered Graboff. “You can’t replace it dollar for dollar. The viewer starts getting turned off if there’s too much. For the show creators, product integration has to be organic to the show.”

As to whether ad revenue will come back, Graboff reported that they have done an analysis of, if they get back to the No. 1 position again, what it would mean in terms of ad revenue. The answer: it won’t be like it was in 2003. “You have to adjust your cost per programming to get re-set in the light of lower advertising revenues or find other ways to make revenues,” he said. “I think this is the new normal.”

And yet, Graboff pointed out that broadcast TV is still the way to get the big reach. “If you want to get a mass message out, it’s still the best way to do it,” he said, citing the American Idol finale and Super Bowl.

Boorstin brought up Hulu, and asked the role that played in promoting–or cannibalizing–shows. “Our research shows that making our programs available online is additive, not cannibalizing,” said Graboff. “Now people are sampling shows online. The Office is an example of a show that wasn’t doing that well. When iTunes first came out, it was one of the first shows on iTunes. We feel that turned it into a hit TV show.”

“Whether you sample it on your mobile phone or computer screen, you’ll eventually want to see it on your big screen,” continued Graboff. “But we have to make the experience economically seamless. And that hasn’t happened so far. What we’ve all done is created a safe legal environment to stream content that’s not a bootlegged rough cut. That’s not the quality we want people seeing.  Now the trick is, as Jerry Zucker says, to turn those digital pennies into digital dollars.”

Boorstin asked about the collapse of the TV window, asking if shows would soon be available online or on the mobile platform not long after being on TV. “I wish I could tell you what the future is,” said Graboff. “I go from my personal experience. It used to be you’d watch whatever was on, you picked the lowest objectionable program. Now in this day and age with Hulu, DVRs, gaming, online twittering and blogging, people will watch what they want, when they want it. You won’t watch something by default anymore. What was a hits driven business is even more so. There’s no middle class. There’ll be the hits and then there’ll be everything else.”

“The risks are bigger in creating hit TV shows and the rewards are smaller,” Graboff continued. “The way to combat that is to maximize the audience flow as q1uickly as possible, by getting it out on Hulu as quickly as possible, put it on iTune or Amazon as quickly as possible, sell in the foreign marketplace, and maybe you sell a window to a cable partner immediately where they can run it in two weeks. The problem is that TV affiliate body thrives on having exclusivity. They don’t want you to be able to watch the same episode of The Office on Comedy Central next week. The marketplace will set itself with regard to windowing. There’ll be hit shows like that that will survive the collapsing of the windows. The trick is to produce the run of the mill show and monetize it in a way that it makes money for you.”

Tags: ad revenue, advertisers, DVRs, Heroes, hit TV shows, Hulu, iTunes, Jay Leno, Marc Graboff, MobilizedTV, NBC Entertainment, NBC primetime, product integration, The Office, Tivo-proof, UGC

This entry was posted on Wednesday, October 21st, 2009 at 7:59 pm and is filed under Advertising/Marketing, Content, Devices, Home Feature, Monetizing Mobile.