NBC Universal TV: Buyout Brings a More Global Focus

May 30, 2005  •  Post A Comment

When NBC completed its $14 billion merger with Vivendi Universal Entertainment on May 12, 2004, an international powerhouse was born, with overseas sales of content accounting for about $2.5 billion of the $15 billion in total annual revenue.

And if Roy Brandon Burgess, executive VP of international channels and business development, and Frederick Huntsberry, executive VP of NBCU Television Distribution and president and chief operating officer of Universal Pictures, have anything to say about things, that $2.5 billion is just the beginning.

Both men-Mr. Burgess in New York and Mr. Huntsberry in Burbank-said growing NBC Universal’s international presence is a top priority.

“The acquisition of Universal has made NBC a global business,” said Mr. Huntsberry, who served as chief financial officer at VUE before the buyout. “With the significant international presence that NBC Universal enjoys, the company also now has terrific growth prospects.”

Before the acquisition, NBC’s international presence boiled down to European and Asian versions of business-news channel CNBC and exports of selected NBC-owned series. The company’s main business was the broadcast network, and its focus was the United States.

After the deal closed, the newly minted NBCU also had a robust collection of cable channels, a booming DVD business, a movie studio and theme parks.

“NBC was a domestic packaging company, taking other people’s content and reselling for advertising and subscriptions in the United States,” Mr. Burgess said. “Now we are a fully baked content company … and going forward I think the vision has to be that if it’s 20 percent of the company, why not be 40 percent in five years, or 50 percent in the next 10 years?”

The timing for such dreams couldn’t be better. With NBCU’s broadcast network struggling in the ratings, NBCU’s growth has been driven by its U.S. cable channels as well as its DVD sales and the strength of the film studio. But in a mature market like the United States, that sort of growth isn’t likely to last forever.

The company can drive growth by selling in places such as Central Europe or Asia, and both executives are focused on identifying opportunities in each of their respective businesses.

Mr. Burgess’ efforts rest in launching new cable channels. Following the acquisition, NBCU’s international cable assets swelled to include eight entertainment channels distributed in Europe and Latin America. He’d like to grow that number by launching stations or networks in other countries and relying increasingly on homegrown content that perhaps could be imported to the United States one day. By doing so, NBCU faces less exposure to the growing resistance among international audiences to American programming.

He noted that many of the most popular reality series in the United States, including “American Idol,” originated in the United Kingdom, and if NBCU can get in on that action over the next three to five years, there could be even more upside.

“Just being an exporter [of content] is not being the end-all,” he said. “If you own businesses outside the United States, you are in the content-creation business.”

Mr. Huntsberry likewise is keen on developing homegrown content but pointed out that VUE was already doing a fair amount of international business before the acquisition through its sale of DVDs and the eight entertainment channels that were originally under the VUE umbrella.

However, now that the former VUE operation is part of NBCU, Mr. Huntsberry said his group has the tools with which to put into action ideas such as developing content for alternative distribution channels, such as digital terrestrial and broadband.

“Two years ago, [when VUE was controlled by French conglomerate Vivendi Universal, which was auctioning off its entertainment operation], we were in a situation where if we were analyzing an opportunity that required investment, more than likely that idea may not get pursued because we were in a cash-constrained situation,” he said.

Post-acquisition, “We are owned by a parent company [General Electric] that is driving us to achieve growth, to come forward with new ideas and is stepping up with capital to support those ideas.”