NBC Has the Wright Approach

Jul 14, 2003  •  Post A Comment

Bob Wright, chairman and CEO of NBC and vice chairman of GE and a member of its corporate executive office, first joined the network in 1986 and has overseen significant changes and enormous growth since then. He recently sat for a wide-ranging interview with TelevisionWeek, conducted by Editor Alex Ben Block and business reporter Jay Sherman at the NBC offices in New York City’s Rockefeller Center. This is the first of two parts.
TelevisionWeek: NBC has indicated an interest in acquiring the entertainment assets of Vivendi Universal, but didn’t actually make a formal bid. Why not?
Bob Wright: We just have a different approach than the other bidders. The others are more financial bidders. Their proposal is to purchase the assets with a mostly cash offer and then make subsequent payments. But it’s really more like an LBO [leveraged buyout], which we see often in business today.
TVWeek: How would you contrast that with what you offered?
Mr. Wright: What we offered was to merge their assets into ours [NBC’s] and to negotiate a percentage of ownership that they would have for at least the next few years to give them a path out by [eventually] either getting back cash or GE stock or doing an IPO [public stock offering].
TVWeek: Do you see a scenario where one of the other bidders will buy all of the assets and then sell some to you?
Mr. Wright: It is possible, but I don’t see that because the nature of what we are trying to do is to make the company bigger without spending a lot of cash to do it. It is a different format.
TVWeek: Is it important for NBC to have a studio now that CBS is a sister company to Paramount and ABC is sister to Disney?
Mr. Wright: Well, I think that it would make the whole business stronger. It would be a useful piece added to what we have. It is not critical but it is something that is useful. On the other hand [Universal’s] television production business is mostly with us, so that is important. The cable channels (USA and Sci Fi) are entertainment channels and would be a good fit with us. We do have Bravo now, but the three of them together would be very good. And we have our news/ information channels. So that would make a pretty good basket of cable channels. It would be stronger than they are by themselves; it would be stronger than with any of the other bidders. So I think that is what makes it a good deal.
TVWeek: Would you like to be in the movie business?
Mr. Wright: Well, I think it would complement what we are trying to do, and I think it would make us stronger as a media company as well. It’s really the [Universal film and TV] library. That library will grow in value over time in a digital world, and I think it complements what we can do.
TVWeek: Do any of the bidders have an inside track?
Mr. Wright: I don’t think so. It’s basically two options. It’s either the financial players or it’s us. If you need the money now or really feel that you want the money now, you are going to go with the financial players. If that is the case, it’s really about the one who has the most money to offer up front.
TVWeek: If you take yourself out of the mix, who do you think wins?
Mr. Wright: I don’t know. It’s all about how much money is offered and how fast.
TVWeek: While it is now legal for NBC to own some or all of the shows it airs, there is the matter of risk. How much of what you air would you like to own and how do you balance that risk factor?
Mr. Wright: What we have learned is that for us to try to be self-sufficient on the television side of the business, as far as prime time, would require us to make what we believe is just too great a [financial] commitment to development deals. These deals are too expensive, and the track record over the last seven to 10 years in the industry hasn’t been that good. So we have elected to do some development deals, but not many. By making that decision we are always in the market for development, specific project development, which are oftentimes with an existing studio but not exclusively. Some are with companies like Carsey-Werner-Mandalbach, which is clearly an independent. We have two with them of the eight commitments that we have made. We do not have ownership in those shows. But actually, we do have ownership in one, because we originally had the idea ourselves, and they had some writers who picked it up. So we do business with whoever is out there. As an example, we may want projects that Fox is developing. It may be a show that moves away from what they want and it might be more comfortable with us. Things have changed, though. NBC and ABC have always been very similar in their approaches to traditional comedy. They [want comedies that] are a little younger and family-oriented. We are more urban. CBS has been more adult. Now CBS is trying to be more like us and less like themselves. ABC is about the same, and we are about the same and Fox has been young and male-oriented. So the shows kind of drop out that way. What’s changed is that CBS has become much more likely to bid on the same shows that we bid on. I have always said that if Les [Moonves of CBS] was really smart, he would stick to his own knitting because he had that [older] audience to himself. There are an awful lot of good writers and producers out there who want to produce comedy and drama for that [older audience], and he owned it. But the inevitable pull of the business is to Madison Avenue’s taste. So he’s elected now to enter the competition, where the programs are more expensive, more difficult and much more competitive.
TVWeek: You have shows with stars who are popular but very expensive. Some shows are aging and may soon end. What is your strategy going forward?
Mr. Wright: Well, you’re always hoping that you are going to have an orderly replacement for your star shows as they move off the air for whatever reason. And it almost never works that way. We try, but it isn’t perfect. Every time you develop a show, you’re hoping it’s going to be a big hit, but you know generally that’s not the case. So we are in the same boat. We have a good development slate this year, but will one of these shows break out and be [as big a hit as] `Friends’ a year from now? I don’t know. But that’s what you are trying to do, and as I say, it is always imperfect.
TVWeek: Meanwhile you have some very expensive shows such as `Frasier,’ which are clearly aging, so one way or another you’ll have to deal with it.
Mr. Wright: Sure. But you are always reluctant to move away from a show that has been successful. You know you are going to pay a lot of money to keep it on the air, but it is very important to our stations and our affiliates. So it’s a good problem to have.
TVWeek: What about the negotiations with producer Dick Wolf (`Law & Order’)?
Mr. Wright: I don’t think anything is going to happen there until the Vivendi situation resolves itself. `Law & Order’ is tied to the sale of USA Studios and Universal TV production. The sale complicates the whole thing for everybody. They are using that as one of their key assets in their negotiation. So I don’t think there will be any resolution there until that ownership is resolved.
TVWeek: Do you think that if News Corp., does get DirecTV, it will change the marketplace in terms of how you do business?
Mr. Wright: Well, it could. Because Fox would, through News Corp., own a big chunk of distribution. However, I think they will have to work very hard and they have a limited time. The digital world has changed. Cable is now pretty much digital, and their consolidation is happening right in front of us. The easy pickings for satellite has already happened. There are 20 million satellite subscribers divided pretty evenly between the two services [DirecTV and EchoStar], and as they roll out these cable systems into 750 megahertz, which are pretty much complete, and they start selling the digital boxes, they will be formidable competitors with satellite.
TVWeek: So you think DirecTV is in for a period of slower growth going forward?
Mr. Wright: I do. … We looked hard at it. We were one of the founders
of DirecTV with [Rupert] Murdoch. It was News Corp., Cablevision, ourselves. We all ran out of money. Murdoch was a very enthusiastic supporter, as was I, so was Chuck Dolan. But that was 12 years ago. So a lot of time has passed on that project. But it’s a marvelous service; I don’t want to make it sound like it isn’t. It’s just more competitive.
TVWeek: What is your view of the changes in the news business?
Mr. Wright: Well, first of all there are two distinct worlds. The broadcasting news is very similar to what it has been, which is a much more traditional news-reporting presentation. The audience for that news has not really diminished much at all, surprisingly. Cable news has always been somewhat different, and the audience has always been somewhat different. They do crossover, but the audiences for the cable news have been generally a different audience than the audiences for broadcast news, and that was true with CNN for many years. It was true when we went on with MSNBC. We were trying to do a lot of crossover, and we were never entirely successful with that because it seemed that there was an audience that is very into cable news. Fox saw that, and basically what Fox did, and what Roger [Ailes] brought over, was `America’s Talking.’ It was part of the CNBC package. And that was news with a point of view. We were really calling it talk radio with pictures. We were trying to get Rush Limbaugh to be with us seven or eight years ago, nine years ago on `America’s Talking.’ All the demographics indicated then that talk radio was going conservative in the ’80s, and Rush Limbaugh was the leader of it, but he wasn’t alone. There were large numbers all over the country. And we put a number of those people on `America’s Talking,’ and some of them worked, some of them did not work. We tried that, as did Roger over at Fox.
TVWeek: Do you think Microsoft is a long-term player in cable TV?
Mr. Wright: Well, they certainly have a long-term commitment with us on our venture, and it remains to be seen whether they want to continue to do that. But the nature of the agreement we have is a long-term one.
TVWeek: Has there been a change in the mood with Microsoft from the time you first dealt with the company?
Mr. Wright: Well, I think that they are disillusioned about the way the Internet played out from the commercial standpoint. Bill Gates was very excited about it in the beginning, and I think he thought that the traditional revenue would come to the Internet very quickly, and he was right except for the timing. And that has disillusioned a lot of people. And we have a very big venture on the Internet with MSNBC.com. And that has been much slower to develop than I think he thought and we thought. We got the subscribers, but the markets have been tough for advertising for the last three years, so it is not quite as exciting as it was. But it has always made money. At least, it has always made money along the forecast that we had. But I think that the primary issue is that the Internet business has proven to be more expensive and had less revenue. But that will change. It’s just not here right now.
Part 2 will appear next week.