Late night TV replacement hosts were selected to avoid declines in audience ratings

Creating a network television schedule is similar to assembling a portfolio of financial investments, according to a useful paper by the late Barry R. Litman and Seema Shrikhande and Hoekyun Ann. Like investors who try to balance financial returns from different investments, network programmers try to balance the audience size for different programs.

The goal is to build an audience that attracts local and national advertisers throughout an entire evening of television programs.

Network programmers assemble a portfolio of programs that is designed to minimize risk, the study concludes. Risk can be measured by the variation in audience size from one program to the next. Programmers try to minimize risk by minimizing the variation in audience size.1

Efforts to minimize risk are particularly apparent when new programs are created. Programmers try to select new programs that will attract audiences that are similar in size to the audiences for the network's existing programs, the study says.

This desire to avoid failure can be seen in the selection of replacements for late night hosts Jay Leno at NBC and David Letterman at CBS. Leno has been replaced by comedian Jimmy Fallon. Letterman, who will retire in 2015, will be replaced by comedian and satirist Stephen Colbert.

These replacements represent the continuation of a decades-long strategy featuring late-night hosts who are white, male, and offer a reliable mix of stand-up comedy and interviews. This strategy still draws a combined late-night audience for NBC and CBS of more than 6 million viewers.

It’s not surprising that neither network wants to experiment with a host who doesn’t fit the established conventions for the 11.30 p.m. timeslot. Programmers at both networks surely recall how audience ratings at NBC declined in 2010 when it briefly replaced Jay Leno with Conan O’Brien.

Audiences for local television newscasts are influenced by the late night shows that follow those newscasts. So programmers must also try to avoid changes that could cause declines in the audience for local news, which is a critical source of advertising revenue at television stations throughout the U.S.

Jimmy Fallon and Stephen Colbert seem like safe choices that will help the networks avoid a loss of audience. Both replacements combine an appeal to younger audiences with a sensibility that seems unlikely to alienate older viewers. (Objections to Colbert made by politically conservative commentators will fade into irrelevance if, as expected, Colbert drops his persona as a political satirist when he arrives at CBS.)

But I wonder how long these safe programming choices will continue to work for late night television. This has nothing to do with reaching audiences who would rather watch these programs on the Internet. Both replacement hosts and both networks are adept at producing material for the Internet.

Meanwhile, the demographics of the country are rapidly and inevitably changing. States like California, where the combined minority population outnumbers the white population, represent the future. Will Fallon and Colbert have the same long-term audience appeal that their predecessors enjoyed?  Or will changing audience preferences undermine the safe choices made by network programmers?
1 A portfolio is used to balance risks. A program with large variations in audience size has a large risk. If the programs has an unusually large audience, the risk is rewarded with increased advertising revenue. But if the program has an unusually small audience, ad revenues will also be small. Programmers could use programs that consistently attract larger audiences to balance the risk of adding programs that might result in smaller audiences. But the study found programmers are reluctant to include risky programs in their portfolios. Programmers create portfolios to minimize the variation in audience size, which minimizes any instability in their ability to generate ad revenues.