The Jay Leno Experiment

Will Leno's prime-time comedy show drive hundreds of thousands of viewers away from network TV to cable?

Say what you will about Jay Leno—over-the-hill windbag or cherished national comic—his move to prime time is likely to cause sizable shifts among the viewers advertisers crave most. Four months before the square-jawed jokester starts throwing one-liners at a prime-time audience, television executives are tussling over who stands to benefit when NBC (GE) launches its Leno experiment.

Turner Broadcasting's (TWX) research unit released a report on May 13 predicting that as many as 500,000 viewers in the 18- to 49-year-old demographic might leave the 10 p.m. time slot when NBC airs The Jay Leno Show nightly—and many may defect to cable. That's more than the number expected to jump ship from the networks to cable and satellite when the government-mandated switch to digital TV happens, currently scheduled for June 12.

That migration will help cable networks lure as much as 10.5% of the broadcasters' audience of 18- to 34-year-olds that advertisers most want to target, Turner contends. The analysis, prepared from viewing data collected by Nielsen, is Turner's attempt to lure advertisers away from broadcast networks at the height of the "up front" season, the annual scrum between network executives and the advertising community over the pending season's ad rates.

NBC Faces Skepticism

Needless to say, broadcasters are firing back with similarly upbeat assessments of their own. NBC executives say its study of viewers showed that 54% "would watch more network television if there was a nightly comedy show that they could count on for humor and entertainment," a network spokesman told BusinessWeek. In a release, NBC says Leno was recently named "America's Favorite TV Personality" in the 2009 Harris Poll—which highlights the fact that the network is filling a full hour of valuable airtime with a well-known name.

Leno will end his 17-year run on The Tonight Show on May 29. He currently has about 4.6 million viewers for his 11:35 p.m. slot and is expected to draw more than that in prime time while allowing NBC to spend far less on programming costs for those five hours per week. But the network has faced skepticism about whether Leno's comedy show will prove to be a draw, and it has already scuffled publicly with a Boston station, WHDH, that had planned to show local news at 10 p.m. before reversing that decision when NBC threatened to revoke its affiliation.

The Turner argument is that folks turned off by Leno will accelerate a shift to cable that has lured 17% of the broadcast networks' prime-time audience to cable since 2004, and 20% of the 18- to 49-year-old demographic that advertisers most want to reach, says Turner Chief Research Officer Jack Wakshlag. He predicts that as many as 3.5 million of the 33 million 18- to 49-year-olds, or about 10.5%, could jump ship this year.

A Silver Lining for Networks

The way Wakshlag figures it, 7% of that shift will be due to "natural attrition," a continuation of viewers' broad shift to cable, while up to 2% of the broadcasters' audience will switch this June when they trade in their analog antennas for digital as required by the federal government. Many of those people will find cable networks then and become viewers, following historical patterns, Wakshlag says.