NBCU: Cable Soars, Broadcast Sinks

Another strong showing by NBC Universal’s cable networks wasn’t enough to offset declines at the broadcast network, as the media conglomerate’s operating profit dropped 15 percent in the third quarter.

NBCU’s Q3 profit added up to $625 million, down from $732 million in the year-ago period. Revenue was flat at $4.07 billion. Excluding impairment charges and adjusting for a $283 million gain from the deal that merged A&E and Lifetime, profit was up 5 percent.

During a Friday morning earnings call, GE vice chairman and chief financial officer Keith Sherin trumpeted the cable unit, which boosted revenue 8 percent to $1.2 billion and grew profit 22 percent. The group includes top-ranked USA Network, Bravo, Syfy and Oxygen.

Despite gains in NBC ad sales dollars, broadcast revenue dipped 2 percent to $1.4 billion, while profit dropped nearly $80 million as the network made significant investments in propping up its prime time programming lineup. Unfortunately, NBC has spent good money after bad, as new dramas like The Event and Chase have failed to catch on with viewers. Freshman legal drama Outlaw was canceled after four episodes, after flat-lining among the all-important 18-49 demo.

NBC’s biggest draw is also its most expensive program to produce — although it also commands the network’s fattest CPM. Sunday Night Football is averaging 21.8 million viewers through the first five weeks of the 2010-11 NFL campaign, marking the biggest turnout for prime time football since 1996, when ABC had the rights to MNF.

Scatter dollars continued to roll in throughout Q3, as NBC and the cable nets commanded premiums of around 20 percent over upfront pricing. Fourth-quarter premiums are trending in the double-digits, Sherin said. Local advertising was up 18 percent year-over-year.

In a memo to staffers, NBCU president and CEO Jeff Zucker characterized the Q3 results as “excellent … given that the economy, although improving, is still far from robust.” Zucker last month announced he would leave NBCU upon completion of the deal that would give Comcast a 51 percent stake in the business. He will be replaced by Comcast chief operating officer Steve Burke.

“We’re on track for a close of the transaction with Comcast, hopefully by the end of the year,” Zucker noted. “As I’m sure you know, the timing will ultimately be determined by the FCC and the Department of Justice. We’ll have a clearer idea about timing as we get into November.”

Bringing the Peacock back into the black will be one or the first orders of business for Burke and his Comcast crew. Last month, Wunderlich Securities analyst Matthew Harrigan rated USA Network as the most worthy piece of the NBCU puzzle, giving it a valuation of $11.7 billion. Harrigan priced the entire NBCU cable unit at $32.7 billion; in contrast, the analyst estimated the NBC broadcast network’s worth at negative $600 million.