Mind the Gap: NBCU’s Burke Looks to Make Waves in the Upfront

Peacock poised to strike

After spending the better part of the last 10 years at the very bottom of the broadcast ratings hierarchy, NBC is on pace to claim victory for the 2013-14 TV season. As such, the network fully expects to make a killing during the spring/summer upfront bazaar.

Speaking to investors during Comcast’s first quarter earnings call, NBCUniversal CEO Steve Burke said the Peacock’s ratings turnaround was unprecedented in the annals of modern television.

“We’re going into the upfront with the best position we’ve had in over a decade, primarily driven by NBC,” Burke said. “Last year, NBC was 17 percent behind the leader, which was CBS; this year, we’re estimating that we’ll finish in first, about 12 percent ahead of No. 2 [Fox]. So … it’s a 29 percent swing. Which, we’ve gone back to the beginning of people meters [and] we can’t find any network that’s swung that much in a year.”

Through the first 30 weeks of the season, NBC is in first place with an average 18-49 rating of 2.8, up 17 percent from the year-ago period. Fox is in second with a 2.6, up 4 percent, while CBS is down 20 percent with a 2.4. Heading into the final month of the campaign, ABC will once again finish last among the Big Four, averaging a 2.1 in the demo (down 5 percent).

Although it’s only two-tenths of a ratings point, NBC’s lead over Fox is probably insurmountable. That said, a blockbuster performance by Fox’s 24: Live Another Day, which premieres May 5, could make things interesting.

While next season falls on a non-Olympic year, NBC will reap the benefit of hosting the Super Bowl in February. Manageable declines for Sunday Night Football and The Voice should allow NBC to raise its CPMs on its franchise properties, although pricing on its Thursday night comedies are likely to continue to lag.

Burke said NBC’s growth spurt should serve it well in the upfront marketplace. “[It’s] going to give us a much stronger hand as we go into the upfront, and we’re looking at this upfront as a chance to have a correction in that monetization gap,” he said. “It’s hard to precisely say how much that is going to be worth to us, but it’s going to be worth a lot.”

For all that, NBC has little chance of actually attaining parity with CBS and ABC, which last year booked some $2.65 billion and $2.5 billion in advance commitments, respectively. To catch up with ABC would require an uptick of 35 percent in upfront dollar volume, and swings of that magnitude generally only occur after a correction year/major downturn.

As scatter remains steady but unspectacular, look for a near carbon copy of last year’s upfront marketplace. According to RBC Capital Markets analyst David Bank, early indicators suggest that broadcasters are in for another year of mid- to high-single-digit CPM increases and volume that’s flat or down a tick or two.

The so-called monetization gap has been Burke’s white whale since he took the reins at NBCU in January 2011. Throughout the lengthy reclamation project, Burke has spoken candidly about the pressing need to improve the network’s ratings while boosting its prime-time ad rates.

In the first three months of 2014, NBCU put up some gangbusters numbers, raking in $1.1 billion in Sochi Olympics ad sales revenue—$846 million of which landed at NBC, while $257 million fell to the cable networks—for an estimated profit of around $125 million (less the $775 million rights fee and $200 million in production expenses). This marks the second consecutive Olympics on which NBCU didn’t lose a dime.

Q1 revenue grew 28.8 percent to $6.88 billion. Excluding Winter Olympics ad sales, NBCU’s revenue was up 8.1 percent in the quarter, to $5.77 billion.

Factor out the Olympics and NBC’s broadcast division grew revenue 17 percent to $1.78 billion, while the cable networks unit was up 1 percent to $2.25 billion. Setting aside the Sochi ad revenue, cable sales dropped 1.4 percent, as increases in pricing were offset by ratings shortfalls at USA Network.