No Mercy / No Malice: Last Laugh

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I'm Scott Galloway, and this is No Mercy, No Malice.

It's getting late early for late night television.

But don't worry, they're just being reconstituted as podcasts.

Same irreverence, same talent, just 90% less production costs.

Last Laugh, as read by George Hahn.

It's getting awfully late, early, for late night TV.

Stephen Colbert shocked his audience on July 17th with the news that CBS had canceled the late show.

I interpreted it as the latest sign of America's descent into fascism.

Another media company bending the knee.

The headlines came just three days after Colbert slammed Paramount's decision to pay Trump $16 million to settle a nuisance lawsuit over the editing of a 60 Minutes interview, calling it a big fat bribe.

CBS is part of Paramount, which needed the Trump administration to bless the transfer of billions from one billionaire Nepo baby, David Ellison, to another billionaire Nepo baby, Sherry Redstone.

At some point, people will notice the only ones willing to buy media companies are rich kids who didn't have to actually make any money.

But I digress.

I was wrong about Colbert.

Economics are driving him out, not politics.

Granted, two things can be true at once, and Colbert's constant ribbing of the president probably made his walk on the green mile shorter, but let's be clear, winter was coming.

This is an overdue reshaping of the supply chain in TV.

Colbert isn't going anywhere.

It's 185 of the 200 people working for him who are going to be getting their real estate licenses.

The media reaction was outrage.

Nothing is more precious than a 60-something comedian who earns 100 times what his staff makes, getting furious at the suits.

But the opportunistic infection that took a weekend late-night show down was the WGA's decision to go on strike in 2023.

Netflix and, to a lesser extent, scripted TV had enough shows in the bank to hang on to all or most of their audience, respectively, for about five months.

But But nobody was going to tune into Jimmy Kimmel to see Michael Avenatti again.

When late night went dark, millions of Americans realized they didn't miss it, and they never returned.

Jon Stewart should tell the WGA board, not Paramount's management, to go fuck themselves.

From New York, The Tonight Show, starring Johnny Carson.

Johnny Carson, the king of late night during his three-decade run as host of The Tonight Show, attracted a nightly audience of 10 million to 15 million at his peak.

Adjusted for population growth, that would be like 25 million people tuning in tonight.

By the late 70s, tonight accounted for 17% of NBC's revenue.

Live from the NBC studios in Burbank, California, the Tonight Show with Jay Leno.

In 1988, a few years before Carson handed the reins to Jay Leno,

advertising dollars spent on late-night TV surged to more than $1.2 billion

as car makers, beverage companies, and movie studios rushed to win over younger, more affluent consumers.

In 2002, Leno's show routinely attracted more than 5 million viewers a night, still strong, and late-night shows continued to deliver into the next decade.

About 15 years ago, a popular late-night program could earn about $100 million a year.

Those days are gone.

The entertainment sector has experienced a seismic shift, with late-night TV advertising revenue collapsing 50%

to an estimated $220 million in 2024 from $439 million in 2018, according to data firm Guideline.

In the five years leading up to its Chapter 11 filing, General Motors revenue declined 40%.

In sum, if late-night television were a standalone business, it would have declared bankruptcy last year.

During the last two months, for the first time ever, viewers spent more time watching streaming services, including YouTube and Netflix, than the broadcast and cable networks combined.

We're still catching the highlight clips of late night TV,

but as they do with the rest of media, technology platforms rent the content for two cents on the dollar.

It isn't the end of Colbert.

It's the end of late night TV.

Colbert's late show reportedly has been losing more than forty million dollars a year for CBS, with a budget of one hundred million dollars per season and about two hundred employees.

Colbert quipped, quote, I could see us losing twenty four million dollars, but where would Paramount have possibly spent the other sixteen million dollars?

Oh yeah,

unquote.

Assuming the show is reeling in sixty million dollars a year in revenue, that equates to $300,000 per employee.

But less than 10% of the late show's audience is between 18 and 49 years old, that coveted demographic still in their mating years and making irrational high-margin purchases.

And one of the key insights from the 2024 election is that podcast listeners swing elections as they are much younger and more likely to be swayed.

Nine out of ten people who watch cable news and late night from an economic lens don't matter.

Think about it.

As a percentage of the population, late night has shed 90% of its audience over the past several decades.

Contrast Colbert with our company, ProfG Media.

I never missed the opportunity to boast.

We expect to generate $15 million to $20 million in annual revenue next year with about 15 full-time people.

That figure, which excludes my podcast Pivot with Kara Swisher, equates to $1 million to $1.3 million per employee.

Unlike the late night category, we're growing 20% to 30% annually with half of our listeners in the 18 to 49 age bracket.

We're reaching nearly as many of the core demographic as late night with 8% of the staff and cost.

TV's biggest stars are simply arbitraging the means of production, i.e.

losing 90% of their staff.

The talent in front of the camera and mic has figured out how to hold on to their income and cultural relevance by reducing production costs.

When Fox News fired Tucker Carlson in 2023, a week after the network settled a defamation lawsuit with Dominion Voting Systems for almost $800 million,

he embraced his newfound independence.

The Tucker Carlson show averaged 1.06 million views throughout most of June and sat at number 11 on YouTube's podcast rankings last week.

Even if his audience is smaller than it was previously, he's likely capturing similar economic value, i.e.

pay, with a smaller team.

Podcasts are TV,

just more efficient.

Megan Kelly, ousted from NBC in 2019 is another example.

Semaphore reported last year that her Megan Kelly show was drawing audiences comparable to those of the legacy media outlets.

with only six employees.

The show, among the most followed political podcasts in the U.S., had 3.5 million subscribers in March.

Finally, consider Conan O'Brien, who hosted Late Night and The Tonight Show, both on NBC and then Conan on TBS.

I'd speculate that O'Brien, who launched the weekly podcast Conan O'Brien Needs a Friend in 2018 and later sold his podcast business to Sirius XM for $150 million,

is making more money today than he did in his late night heyday.

The 150 people who worked at late night?

See above.

Real estate agents.

Even though his audience has dropped from a peak of more than 3.1 million viewers in 2017 and 2018, Colbert enjoys better ratings than his competitors, Jimmy Kimmel and Jimmy Fallon, registering an average of 2.42 million viewers during the three-month period ending in June.

That compared with $1.77 million and $1.19 million for Kimmel and Fallon, respectively.

If Colbert can't hang on, it doesn't bode well for his rivals or the staff who don't make it onto the podcast arc with their boss.

Colbert, Fallon, and Kimmel shouldn't be worried.

They are caged in a broken business model, and it's only a matter of time before they break free.

In his first broadcast since CBS pulled the plug, Colbert earlier this week warned Trump that the gloves are off.

When his contract ends in 10 months, the economic shackles will also come off.

Instead of leading a $60 million business with 200 staff, Colbert will likely helm a $20 million business with 12 highly skilled people.

These shows might lack the glitz and glamour of late night, but that can be an advantage, as Colbert demonstrated during the pandemic when he delivered monologues at home without a live audience, his wife, Evie Colbert, by his side.

More stars will follow Colbert into the next frontier after he leaves the late night stage.

MSNBC's Rachel Maddow, who's already reduced her on-air commitments to pursue podcasts, may not be able to match the $25 million salary she reportedly negotiated at the network, but her current compensation is unsustainable.

and she knows it.

When it returned to its traditional format in the Ed Sullivan Theater in June 2021, the late show seemed eager to embrace the old school model and ditch everything it learned in lockdown.

But the future looks more like Colbert at his vacation home in South Carolina than in front of a live audience with a band, Manhattan rent, and union workers.

It means sharply lower production costs with a team of 20, not 200.

Call it the old navy of media.

80% of the production quality for a fifth of the price.

The end is nigh for late-night TV,

but podcasts delivering high-quality and highly profitable entertainment are just warming up.

Colbert will be just as relevant and as much a pain in Trump's ass.

He'll just do it via a different means means of production.

Podcasts are TV, but with an audio-first overlay and better unit economics.

Commending the RAF in 1940, Winston Churchill said that never, quote, was so much owed by so many to so few, unquote.

In cable news and late-night television, rarely have so many talented people been less relevant.

Life is so rich.