NBC’s Wright Shares Insights

Jul 21, 2003  •  Post A Comment

This is the second part of the two-part conversation with Bob Wright, chairman and CEO of NBC and vice chairman and member of the Corporate Executive Office of General Electric, conducted by TelevisionWeek Editor Alex Ben Block and business reporter Jay Sherman in New York City.
TelevisionWeek: NBC recently won the rights to the 2010 and 2012 Olympics with a record bid. Some competing executives believe NBC overpaid by as much as $900 million. Can you help us understand why you were able to bid so high?
Bob Wright: Well, probably not, but I’ll try. Two hundred million of that is a [GE] sponsorship … that stands on its own legs. Part of the sponsorship entitles the sponsor, and that is the top sponsor, to have global use of the [trade]marks of the Olympics around the world. And you are automatically a sponsor of every international event and every international Olympic group, and GE is a global company.
Secondly, you are also entitled to preferential dealings in terms of expenses paid by the various Olympic organizing committees at each of the next five Olympics, and they spend a lot of money-$2 billion or $3 billion a game. In the case of Beijing there will be significantly more, probably five or six times that. GE makes products that fit those categories. So they will have a more than adequate opportunity to cover themselves. So that’s off the table.
It’s really about being the incumbent, though. We have been doing this for quite a while. We have relationships. The people who would be coming in to replace us for those Games would have to start from scratch to establish those relationships. I think for them that would mean that they would probably have to upset some of their other relationships. And for them I think that’s a tough cut. For us it is difficult, but it is not impossible. That’s the one advantage of being an incumbent in this situation. It isn’t simply economics. We have incumbent relationships in terms of the way we use the Olympics. For us, that is what gets us the $300 million, between basically $1 billion and $750 million.
TVWeek: Do you feel confident that ultimately you will make money on that deal?
Mr. Wright: I feel confident that we won’t lose money. And something that far away is hard to forecast. Our goal is not to lose any money on that situation, and I think we can get that.
TVWeek: Can you address rumors that ad sales for the Athens Games aren’t where you’d like them to be and that NBC may lose money?
Mr. Wright: That is completely wrong. We are actually ahead of our estimates on Athens. And that’s really a pleasant surprise, given the market over the last couple of years. I think that Athens really doesn’t sell off of Salt Lake City, because it was domestic. We are doing fine on the sales side. That’s good news. It’s better than I might have thought at this time, and considerably better than planned.
TVWeek: Is there any concern at all about security in Athens?
Mr. Wright: Security was a big issue at Sydney, and it’s always an issue.
TVWeek: More so in the post-Sept. 11 world?
Mr. Wright: Well, Salt Lake City was shortly after Sept. 11. There was more activity in Barcelona than there is in Greece. Yes, it will be important, but you know, life goes on. The world isn’t stopping because of that, and it certainly hasn’t stopped in the Mediterranean countries post-9/11.
TVWeek: You recently hired Kevin Reilly in an expanded position under Jeff Zucker to create programming. What does that mean to Mr. Zucker’s future?
Mr. Wright: I’ve given Jeff two additional assignments, which makes it a little tricky. He has Telemundo, which is a major assignment, and he has Bravo. And Bravo is mostly with Jeff Gaspin [NBC’s executive VP of alternative series, long form and program strategy], but he has to be involved with that. You can’t get synergies with the network unless you have the person who’s running the entertainment division involved in it. So [hiring Mr. Reilly] is sort of recognition that Jeff’s hands are pretty full and we just need to do other things in entertainment so it will continue to grow.
TVWeek: Some critics say Mr. Zucker has not come up with hits to replace aging shows such as `Friends.’
Mr. Wright: Well, nobody’s come up with the next `Friends.’ It’s a fair comment … but it’s not for lack of trying. It’s just very hard to do. I think Jeff has done a fine job dealing with all of the balancing of trying to do development on the scripted side and nonscripted side. And we probably have made mistakes along the way in terms of being late with some of the reality-type programming. But we’ve gotten on a fast pace to catch up and probably now are as well-positioned as anybody in that.
The focus will continue to be on the scripted side. [Mr. Zucker] is unique in the sense that he has spent all of his career up until the time he went to Hollywood on live programming. But not just live programming-highly competitive topical programming. And that to me was a real attraction with him. That gives him a unique point of view on crossover elements of music and news and entertainment. The `Today Show’ itself represents the best of that.
TVWeek: Do you see reality TV as being a continuing part of network TV, or do you think there is a question of taste here in how far to go?
Mr. Wright: Reality TV certainly has its detractors and opponents, and most of them turn out to be viewers. It has performed a unique service by validating the whole concept of broadcasting. The thought that `American Idol’ and `Joe Millionaire’ could attract audiences of 20 [million] to 25 million viewers per episode … does tell you that if you give the audience something that we were not giving them, they will respond.
`American Idol’ is teenage girls. Where were they? All of a sudden they came together and brought a lot of people with them as well. … `Fear Factor’ brings young men and women, and we do 12 [million] to 14 million people on that show. It is an easy concept to understand; they can anticipate what different tricks are going to have to be played on people.
It’s about broadcasting. I hate to see where we would be if we hadn’t seen `Joe Millionaire’ and `Idol’ and `Fear Factor,’ because we would still be struggling with trying to get scripts for shows with much lower ratings. I don’t think reality is going to replace the scripted shows, but it is an energizer. I look at our people in development on the West Coast and I gave them this speech. I said, `You know you have got to sit here and realize that you are not doing the job.’
Jeff put us in a unique world because he is different from the other people with his background. That same uniqueness is what makes him attractive in the Telemundo piece as well. Not only does he speak Spanish but he is from Miami; he has a sense of the cultural issues that we are trying to bridge and the issue of trying to deal with a Hispanic person who has come to this country a year ago and the Hispanic people who have been in the country for 25 years. And we wanted to integrate and give Telemundo the best access possible to our network resources, in entertainment in particular. So it’s a big deal to us, and we are going to be there for a very long time.
Telemundo is not a program. We are still integrating Telemundo into our own markets where we have a Telemundo station and an NBC station. The first one we did was in Miami and it was very successful. Miami NBC went from being the No. 3 biller in the market to the No. 1 biller in the market by having Telemundo as part of it. And I don’t think anyone will ever catch up with us in Miami. Because as good as Univision is, they are only able to tap into the Hispanic market. And as good as anyone else would be in the general market, they are not going to be able to tap into as huge a Hispanic market. And that same phenomenon is going on in New York, L.A., San Francisco, Dallas, Chicago, just to name some of the others.
TVWeek: In terms of Telemundo, are you still in the investment period or are you in profit?
Mr. Wright: We are in profit, but we are still investing in statio
ns, in entertainment and in production. So the model for Telemundo is not simply a license for programming. It is a production. So that is an expensive commitment.
TVWeek: What is your view of the recent changes in station ownership rules and other regulations that were approved by the Federal Communications Commission?
Mr. Wright: I think that people keep forgetting that the FCC was under a mandate from the district court of appeals to either get rid of almost all the [ownership restrictions] governing broadcast television or come up with a very complex justification for it. That always seems to get lost in this issue.
Chairman [Michael] Powell’s view was that he was not going to put forth a position which he didn’t think had a chance of meeting the criteria set forth by the courts. … The commission had two choices: do nothing and let all the rules expire or come up with a political proposition that the court would then subsequently strike down. They could say, `Well, we tried.’ And Powell said, `I’m not going to throw the towel in. I’m not going to do just anything and then try and justify it and then be embarrassed.’
He worked for the Department of Justice. He’s not going to go and put some silly proposal in front of the court and have them strike it down. So that began the process of the politics here. Now the reality is the court did some modest tinkering. There are no big winners on this event. Fox and CBS were already at 40 percent, so if it [were not increased] there would have been some problems. We [NBC] are below 35 percent, so that didn’t relate to us.
TVWeek: Do you see yourself over the next few years closer to 45 percent than 35 percent?
Mr. Wright: Perhaps, but we don’t have any immediate plans to do that. We’ve entered into long-term arrangements with most all of our affiliates, as have the other people. We already have our comfortable relationships with some of these places, and if people want to sell us their stations, then perhaps you’d need that relief. But it’s not directly apparent to me.
TVWeek: How do you explain the strong TV ad market at a time when the economy is struggling?
Mr. Wright: It’s not that difficult to explain. The people who advertise on NBC, the people who buy upfront time, our national advertisers, need reach and frequency. Reach is critical to them. Cable has given the world frequency. You can buy TBS 24 hours a day, and you are going to get the same viewers … time after time after time. You are not going to get reach, but you are going to get frequency. And frequency is a bit of a commodity. What is not a commodity is reach. So the uniqueness of the networks is reach and the ability to get a message out quickly.
The people we deal with, primarily, are people who are in the business of distributing their goods or services nationally. They have obligations to their business partners to be able to launch programs, new products, to get them out in front of customers quickly and in an orderly fashion. Not to start in California and take 10 months to get to Maine. They have had to cut back in the 2000-2001 period. They had to cut back their own marketing. So there’s a little bit of pent-up emotion there. And I think we were the beneficiaries of that.
We also have the kind of ratings to get the message out there in large numbers, and that’s what you saw. But when you get below that you don’t see that much money, and you learn there are people saying, `You know, I’m a regional guy, I have got plenty of places to go. I don’t have to do this. I’m not going to be this aggressive. I’ll take my chances buying local packages and things like that.’ And cable is very expensive locally. So somebody who says they are going to do this whole thing locally can find themselves getting to be in a very expensive campaign. It’s hard to measure. So what you saw is the value of the larger networks for national reach.
TVWeek: Some want a ban on drug advertising. What do you think?
Mr. Wright: There is no justification for banning advertising unless the product is illegal.
TVWeek: Does NBC have any responsibility to the public?
Mr. Wright: The successful stations are the ones that do the most local programming. The stations that do the most programming, including our own, are the best in embodying those principles. If we do not continue to figure out how to connect to the viewers locally, then we will not do well against the consolidating cable and satellite world. It’s that simple.