Broadcast Boom Lifts NBCU in Q4

Cable unit lags on poor ratings, lower ad sales revenues

Hours after Comcast shocked analysts by announcing it would accelerate its buyout of General Electric’s remaining stake in NBCUniversal, Brian Roberts affirmed that “the opportunities for growth and value-creation available at NBC Universal are even stronger and better than we first anticipated.”

Speaking to investors during Comcast’s fourth quarter earnings call, the chairman and CEO of the nation’s largest cable operator said that now is “a good time to complete the acquisition,” as Comcast is able to fund the $16.7 billion deal “through a combination of cash from operations, proceeds from the sale of non-strategic assets, plus attractively priced public debt.”

Roberts said Comcast was “bullish about NBCUniversal’s future,” adding that the synthesis of distribution and content has created “real value” for shareholders.

In an odd inversion of what analysts have come to expect from NBCU, the broadcast business was the engine of growth for the unit in Q4. Revenues at NBC and its owned affiliates grew 8 percent to $1.99 billion, as prime time ratings were up as much as 24 percent versus the year-ago period. Operating cash flow increased $175 million to $95 million compared to a loss of $80 million in Q4 2011.

Comcast did not comment on NBC’s Q4 ad sales performance, nor did it offer guidance on the current scatter market.

Growth at the ever-reliable cable networks group took a bit of a hit, inching upwards by 1 percent to $2.22 billion. This reflected a 3 percent decline in distribution revenue and a 2 percent decline in ad sales dollars caused by significant ratings declines at USA Network, Bravo, Syfy, E! and Oxygen.

Per Nielsen, USA and Bravo in Q4 both saw their prime time 18-49 ratings drop 16 percent versus the year-ago period, while Syfy dropped 18 percent and Oxygen fell 14 percent. E! suffered a particularly rough stretch, losing 43 percent of the demo in prime time.

NBCU Cable ratings remain a mixed bag in the current quarter, as USA and Bravo have rebounded while Syfy, E! and Oxygen continue to founder. Ongoing ratings challenges at Bravo and Oxygen were a catalyst in NBCU CEO Steve Burke’s recent decision to hand the entire cable portfolio to Bonnie Hammer.

Meanwhile, the broadcast unit’s reversal of fortune appears to have been short-lived. After lighting up the competition last fall, NBC has been battered in the mid-season period, launching a string of failures and returning the sophomore series Smash to widespread indifference.

Burke told analysts that his goal for the near term was to grow carriage and retransmission consent fees while continuing to beef up cable CPMs. 

“Our affiliate fees are not what they should be both in terms of the cable channels and retransmission consent,” Burke said. “And on the advertising side, our CPMs are lower than some of the other people in the business who have lower ratings than we do.”

While NBCU in recent months has struck a number of carriage deals with operators like Cablevision and Mediacom, broadcast rival CBS has been far more aggressive in landing lucrative retrans agreements.

Despite NBC’s sudden downturn, executives have high hopes that the return of The Voice and the freshman drama Revolution will help bring in viewers on Monday and Tuesday nights. (Cycle 4 of The Voice will feature new talent in celebrity judges Usher and Shakira, who are subbing in for Cee Lo Green and Christina Aguilera.)

“The broadcast business continues to seem like a big opportunity to us, whether it’s the NBC network, our local stations or Telemundo,” Burke said. “I think all three of those represent a big opportunity.”

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