Burke: NBC Is Leaving $1 Billion on the Table

Network exec vows to gain equal footing with rivals

NBC is consisting on crumbs while its broadcast television rivals dine like kings, and Steve Burke is fed up.

Speaking to investors Thursday at the Bank of America Merrill Lynch 2012 Media, Communications & Entertainment Conference, the NBCUniversal CEO said the Peacock doesn’t generate anywhere near the operating cash flow of CBS, ABC and Fox. 

“There are four companies that each have the same infrastructure and yet one company is making on average $1 billion a year less than the other three,” Burke said. “Each of our competitors makes somewhere between $700 million…and maybe $1.5 billion more than we do, and there’s no reason for that, other than we need to make better shows and we need to schedule them better.”

Of course, introducing higher-quality ratings bait to the TV ecosystem has never been merely a matter of applying one’s nose to the grindstone. But a new programming hierarchy is in place under second-year entertainment president Bob Greenblatt, and NBC will consider 2012-13 a success if it can simply leverage its Sunday and Monday night deliveries to help build a crowd on Tuesday and Wednesday.

Still, there’s no way of understating how profoundly Zucked-up things were when Greenblatt first arrived at 30 Rock in January 2011. In delivering two modest hits in Smash and Grimm and a pair of comedies that earned renewals (Up All Night, Whitney), Greenblatt earned a passing grade in his first year on the job.

Already things are looking up for NBC this season. Through three episodes, the third cycle of The Voice is averaging 11.5 million viewers and a 3.9 in the 18-to-49 demo; moreover, the new comedies have been well sampled. The Matthew Perry vehicle Go On has had the greatest impact thus far, averaging 9.73 million viewers and a 3.4 rating on Tuesday, Sept. 11.

Full-on network competition won’t begin in earnest until the week of the 24th.

“You need to have patience and put the right people in place, but broadcast is a tremendous opportunity,” Burke said. As such, Comcast is rebuilding the broadcast unit—a catchall that includes the NBC network, the owned-and-operated stations and the syndication business—brick by brick, and already some progress has been made on the local front.

“Our stations got all the way down to making less than $150 million a year, and this year they should make well over $400 million,” Burke said. And while he acknowledged that the station business undoubtedly is seeing a lift from election and Olympics dollars, progress is progress.

NBCU’s advertising and distribution partners should get ready to dig a little deeper in the coming years, as Burke’s team will be wrangling for higher CPMs and carriage fees at the cable networks and more taxing retransmission consent fees.

“NBC currently makes essentially no money on retrans, and there’s no structural reason why we shouldn’t make the same amount of money as CBS,” Burke said. CBS currently hauls in more than $250 million per year on retrans and expects to hit the $1 billion mark by 2016.

Turning to the cable unit, Burke noted that the 15 networks generate about 80 percent of NBCU’s operating cash flow, but even there he finds plenty of room for improvement. “USA Network is the No. 1 cable channel, and yet its affiliate fee is substantially lower than TBS or TNT,” he said. A disparity exists on the advertising side of the ledger as well, as CPMs for some of the larger NBCU nets are, in many cases, 30 percent below rates secured by rival channels. 

In a bid for pricing parity, USA and Bravo pushed hard in this year’s upfront, securing what Burke characterized as “cable industry-leading CPM increases.”

It has taken the better part of a decade for USA to drag itself out of the hole it dug back in 2002 when the network tried to turbocharge volume by slashing its upfront CPMs by 13 percent.

“Even if you believe you have an entitlement gap of 25 percent, you can’t [get it back all at once],” Burke said. “You chip away 2, 3 percent per year, but it’s real money. It can be frustratingly slow…but over time there is significant ground to be made.”

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