Conan, Leno, and the Recession

cross-posted at http://dagblog.com

The dustup between Conan O'Brien, Jay Leno, and their corporate masters is mainly an entertaining sideshow, and nothing could make the triviality of these millionaires' personal grievances clearer than the simultaneous disaster in Haiti. O'Brien might have hurt feelings but he also has tens of millions of dollars, all the clean drinking water he needs, and his children safe in his home. Still, the behavior of the NBC executives reveals a lot about how big business thinks in modern America, and it's not pretty. Because it's not just corporations' management blunders that damage the overall economy; the conventional business wisdom of the last two or three decades has become, in itself, pro-recessionary.

The entire ill-fated move of Leno to 10 pm, the element that was most "daring" and showed an executive thinking outside the proverbial box (the element that would have made Jeff Zucker a tin god in the cult of business management, if it had worked), was also an extremely conventional and reflexive move, a response to the same management training that everyone else running a large American business has received. It was an attempt to achieve "growth" for NBC, in the strictly limited sense of quarterly profit growth, by contracting the business itself. Instead of expanding NBC's business or its market share, Zucker focused simply on cutting costs. And his approach to cutting costs was to fire employees and produce less.

The logic of Leno at Ten, the logic with which no business journalists argue, is that producing Leno five times a week is vastly cheaper than producing five hours of prime-time scripted programming a week. Of course, it is. NBC could, essentially, replace five screenwriting teams with one team, and five sets of highly paid, highly specialized actors, directors, technical and production staff with one comedian and his house band. That's a lot cheaper. It's also less productive. Replacing five hours of prime time with five hours of talk show means, in a real sense, producing less content, less product. The value of those five hours with Jay is markedly lower, both in likely advertising revenue and in later resale value, than five hours of almost any network comedy or drama. (Would you ever buy a set of DVDs that contained three weeks of Leno, O'Brien or Letterman's show? If one of your local stations started showing reruns of Johhny Carson at 7 pm, would you tune in?)

Zucker's logic, which is entirely orthodox in America's current management culture, can be summed up as make less and fire people. It is fundamentally contractionary logic, aimed at putting less money and fewer, less well-made products into the economy. This makes perfect business sense, if you imagine your own business as making all of its decisions in isolation from the economy as a whole. However, when every manager in nearly every large company in the nation has been trained, from the first semester of business school to make less and to fire people, then you have a perfect recipe for the proverbial "jobless recovery," meaning a recovery that exists on corporate earnings statements but actually represents at least a mild recession for workers, followed inevitably by a bust, when all the consumers who've lost their jobs stop buying so much of the stuff that the companies are making less of. And if a whole generation of managers have been taught the make-less-and-fire-people rule so thoroughly that they think of it as an immutable, self-evident rule of nature, then you have a long depression with no easy end in sight.

Zucker's play failed, because the business model of NBC is complicated, and depends on a number of partner and franchisee companies. Zucker's decision to stop making high-end goods for the 10 pm slot and start selling a much cheaper product instead would have looked like a success except that that loss of product value directly harmed NBC's affiliates, who suddenly couldn't get viewers for the 11 pm newscasts that are their own biggest source of revenue. So the make-less-and-fire-people got vetoed by partners who were directly and immediately harmed. But most American businesses are actually insulated from the general loss of value and prosperity that their narrow "growth" strategies wreak, and by the time it cycles around to hurt their own bottom line they don't see where the the vicious cycle started.

The other entirely routine and conventional part of Zucker's Folly is the instinct toward monopoly which large corporations routinely exhibit. For all the language of free-market competition, Zucker, like most CEOs, was in fact intent on preventing competition by any means necessary. In this case, that originally meant bending over backwards to keep either Leno or O'Brien from leaving NBC and joining another network; although that has worked out horribly, with someone leaving the network and lots of hard feelings, keeping everyone inside the tent was the original goal. Because heaven forfend that someone else be able to put out a competitive product. Again, the instinctive and orthodox response is not to make more or better things, but to insure that fewer and lower-quality things get made. The franchise of The Tonight Show must be protected, not by improving The Tonight Show, but by keeping talented comedians from putting on another show. That logic is good for one company in the short-term, and bad for the entire economy in the short, middle, and long terms.

But that's how America's business leaders think. And nothing's changing their minds.