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GE Execs Bullish on NBCU Profits

Oct 17, 2005  •  Post A Comment

Executives at NBC Universal parent General Electric have apparently been paying attention to those news stories after all.

Against the backdrop of numerous press reports chronicling the precipitous ratings drop at NBC the past two seasons and calls from some camps for the ouster of NBCU Television Group President Jeffrey Zucker, GE broke from tradition last Friday and provided a more detailed look at NBCU’s financial performance for the third quarter.

The company’s message was clear: Despite prime-time ratings weakness at the broadcast network, NBCU overall is performing strongly-posting double-digit gains in operating profit for the third-quarter-and is poised to record similar increases for the full year.

GE sought to prove this point by breaking out the various businesses of NBCU in a way never seen before, isolating the problem businesses from those that are performing well and providing revenue and operating profit figures for both categories.

Beyond that, GE told investors that those problem areas-prime-time programming, television production and owned-and-operated television stations-account for just 32 percent of NBCU’s overall profit picture, while NBC News, NBCU’s cable networks, the film studio and theme parks account for 68 percent of NBCU’s profit.

NBCU’s third-quarter profit was able to grow 13 percent to $603 million, largely on the strength of news, cable and the studio, which reported a 31 percent surge in segment profit to around $410 million. The problem areas collectively reported an 11 percent decline in segment profit, resulting in a contribution of $193 million for the quarter.

Revenue for the entire NBCU operation fell 26 percent to just over $3 billion. The company said the decline was driven largely by the absence of $930 million in Olympics broadcast revenue. Excluding that figure, the company said, NBCU’s revenue would have been down 4 percent.

Providing such detail is unusual for industrial conglomerate GE. Despite its high profile, NBCU has never been a major contributor to GE’s bottom line and accounts for only about 10 percent of GE’s overall revenue. And while the company has offered some color on the entertainment unit’s performance during past earnings calls, GE previously has provided investors with only the revenue and operating profit for NBCU.

Speaking to investors during the company’s third-quarter earnings call, GE Chairman Jeffrey Immelt acknowledged NBC’s prime-time ratings declines and warned that the network would continue to face challenging times through the first half of 2006.

However, citing the more detailed financial figures, Mr. Immelt and GE Chief Financial Officer Keith Sherin each stressed that NBC’s woes would not have a profound impact on either NBCU’s overall results or those of GE. Furthermore, Mr. Immelt and Mr. Sherin assured investors that NBCU officials are working to improve the network’s performance.

“We are rebuilding our prime-time programming,” Mr. Immelt said. But he added, “It will be a journey.”

Mr. Sherin said the company believes NBC is “making progress in the fall lineup” and added that NBC News continues to perform well. He said that “Today” widened its lead over “Good Morning America.” However, Nielsen Media figures show that for the week of Oct. 3, that gap had narrowed once again, this time to around 150,000 viewers-the narrowest gap since May.

Looking ahead, Mr. Immelt predicted NBCU’s segment profit for the full year would be around $3 billion, representing a 15 percent increase over 2004. Profit for prime time, production and stations is estimated to be off by 25 percent, while profit for the rest of NBCU is estimated to be up 50 percent. In 2006, Mr. Immelt said, NBCU will be “flat-ish” on the profit side as the unit continues to deal with its prime-time challenges.

GE said its overall third-quarter profit rose 15 percent to $4.7 billion, while revenue rose 9 percent to $41.9 billion.