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Zucker: Worst for NBC Is in the Past

Jun 17, 2007  •  Post A Comment

NBC’s take from the upfront advertising market may be flat this year, but its corporate siblings in the cable, film and digital media business will help boost parent NBC Universal’s operating profit 10 percent this year, company President and CEO Jeff Zucker said last week.
NBC, mired in fourth place in the ratings, could take in about $4 billion in advertising commitments during the upfront, Mr. Zucker said. The company broke open this year’s upfront selling season last week with a deal with media buyer GroupM worth about $1 billion.
Mr. Zucker, speaking to financial analysts last week, painted a rosy picture of his company’s financial health, arguing the NBC broadcast network’s worst days are behind it. NBC’s operating profit dropped from $900 million when it finished first in the ratings to $100 million when it finished fourth in the just-wrapped season.
“That hit to the bottom line is behind us,” Mr. Zucker said.
He also said the network’s current stint in the prime-time cellar does drive perceptions about the state of NBC Universal and must be fixed. Still, the broadcast network’s woes are “not the drag on the bottom line you might think,” Mr. Zucker said. Cable, film and digital businesses account for about 80 percent of the company’s revenue, he said.
He declined to elaborate on the GroupM upfront deal, which was struck on the basis of ratings that measure how many viewers watch commercials plus three days of playback on digital video recorders.
Mr. Zucker’s assurances that NBC’s worst times are behind it are something the analysts who cover NBC Universal parent company General Electric have heard repeatedly from GE management about NBCU since it skidded from first to fourth in one season.
The analysts gathering was only the second in the two years since NBC merged with Universal. The first was held some six months after the merger to introduce analysts to the new company’s moving parts. Last week’s meeting reminded the analysts that the company has grown, fiscally and physically.
The event, held in “Saturday Night Live’s” fabled Studio 8H, may renew speculation that GE is considering spinning off NBCU, a possibility GE has denied.
In addition to the prime-time weaknesses — which in recent weeks prompted the departure of NBC Entertainment President Kevin Reilly — Mr. Zucker identified other headwinds his company is fighting. NBC Universal’s DVD library isn’t as valuable as it once was, and its outdated analog structure will be a drag on the bottom line until all the company’s operations are completely digitized, he said.
Mr. Zucker said new targets for cost-cutting will raise the total efficiencies achieved since beginning the transition to digital and other synergies to $1.5 billion.
“We’re going to continue to make necessary changes,” he said of the ongoing cost-cutting. “We are really clicking.”
NBC Universal revenue probably will grow about 5 percent next year, Mr. Zucker said. NBC Universal is expected to pull in $1 billion in revenue this year, said Beth Comstock, president of integrated media at the company. That’s a year ahead of the company’s internal timetable, she said.

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