NBCU Revenue Soars on Cable, Broadcast Ad Sales Momentum

Peacock closing the CPM gap

With the 2013-14 upfront receding in the rearview mirror, NBCUniversal CEO Steve Burke told investors this morning that the company’s broadcast and cable units have made “good progress” in their ongoing quest to catch up with the competition.

Speaking on Comcast’s second-quarter earnings call, Burke said that NBC and USA Network in particular had gone a long way to bridge the so-called “entitlement gap”—a term used to refer to the disparity between NBCU’s ad rates and what its rivals command.

“There’s clearly a gap between what we deserve to be paid and what we are paid,” Burke said. “In some instances there are networks that get over 20 percent more than we do on a CPM basis.”

By all accounts, NBCU’s sales team achieved significant rate increases for USA Network, which historically has lagged far behind rivals TNT and A&E. NBC’s prime-time rates are also more competitive, with upfront CPMs up 7 percent to 8 percent versus last year’s negotiated prices.

“We’re chipping away at the entitlement gap,” Burke said. “It’s a big opportunity for the company. It’s not something we’re going to fix in a quarter or even a year, but I think over the next two, three, four years you’ll see real progress there.”

Excluding the Olympics, NBC sold 13 percent more upfront inventory than it did a year ago.

NBCU also expects it will negotiate higher rates for carriage and retransmission consent. “On the affiliate fees side, we’ve reset 25 percent of those over the last year or so,” Burke said, adding that the remainder will expire within the next few years.

In Q2, the cable portfolio (which includes USA, Bravo, Syfy, E!, NBC Sports Network, Golf Channel, Oxygen and the soon-to-be-rebranded G4) generated $2.41 billion, an improvement of 8 percent versus the year-ago period. NBC’s broadcast business grew 12 percent to $1.73 billion.

Cable network ad sales were up 6 percent year over year, while the strength of The Voice helped boost NBC’s sales by 13 percent.

“Ratings pressure at some of our cable networks was more than offset by a strong scatter market,” said Comcast chief financial officer Michael Angelikas. Among adults 18-49 Q2 prime-time ratings were down 12 percent at Bravo and 9 percent at USA Network. E! was down 14 percent, while Syfy dropped 17 percent. Niche nets Style and G4 plummeted, as ratings fell 41 percent and 33 percent, respectively.

On the plus side, NBC Sports Network enjoyed its strongest ratings quarter, as deliveries of adults 18-49 grew 13 percent to 321,000. Oxygen was also up, improving 6 percent to 237,000. Golf Channel was flat versus Q2 2012.

On the broadcast side, NBC finished the 2012-13 TV season ranked third in the dollar demo, averaging a 2.4 rating. After leading the pack throughout the fall, the loss of Sunday Night Football and a three-month hiatus for The Voice brought NBC back to earth.

When asked about the impact that Fox Sports 1 might have on NBCU, Burke offered the verbal equivalent of a shrug. “I don’t think it changes the playing field for NBC Sports too much one way or the other,” he said, adding that the sports landscape has always been highly competitive.

“Things look very good for NBC Sports, on both the [broadcast] network and the NBC Sports Network,” Burke added, noting that the NHL and the recent $4 billion Nascar deal give NBCU year-round access to top-tier professional sports content.

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