News Corp. frets about 'American Idol'
Ratings for the 11-year-old reality show have been down by double digits this year. Speaking to investors, COO Chase Carey said he isn't ready to hit the panic button quite yet. He has made similar comments before.
The show is averaging a 5.4 rating this season, down from 8 a year ago, and may lose its top spot on the list of most-watched prime-time shows on broadcast television to "Saturday Night Live," according to MediaPost.
"It's a big profitable No. 1 show," Carey said. "It was down more than we would've liked this year. But it's a big valuable franchise and makes a lot of money. We certainly think we've got a lot of life left in it, and I think our challenge for next year is to put some fresh energy" into it.
What Carey meant by "fresh energy" isn't clear. Jennifer Lopez and Steven Tyler were hired to do just that and have failed. News Corp. is probably eager to restructure their contracts. To this casual fan, the show hasn't been the same since the departure of Simon Cowell and to a lesser extent Paula Abdul. Moreover, the contestants on "The Voice" are far more talented than their counterparts on "American Idol."
Musical aesthetics aside, investors should start to worry as well. Television networks sell advertising based on guarantees to advertisers about viewership from particular demographic groups. If broadcasters fail to meet those targets, they have to provide "make goods," essentially free commercial time.
Whether "American Idol" has reached that threshold is difficult to say. During the quarter, News Corp.'s television business was a weak spot. Operating income fell to $171 million, and, excluding the absence of the Super Bowl, lower ratings at the show offset higher advertising rates.
"American Idol" reportedly makes more than $7 million per 30 minutes, by far the most of any television show. That translates into roughly $730 million or so in annual advertising revenue. It's not a cheap program to put on. The judges and host Ryan Seacrest are probably making more than $10 million each. Seacrest's future at "American Idol" came into question after he recently signed a contract with Comcast's (CMCSA -0.37%) NBC Universal that enables him to contribute to Super Bowl, Olympics and presidential election coverage.
In the coming months, Carey and his boss, Rupert Murdoch, are going to have to decide how much longer News Corp. can squeeze money out of "American Idol." The show is dragging down ratings of the entire network, which, season to date, has attracted an average viewership among people age 18 to age 49 of 3.24 million, down 13% from a year earlier. That is still the most among the broadcast networks, Media Post says.
