Improving Broadcast Network a $1 Billion Opportunity at NBC, Burke Says
Comcast’s NBCUniversal makes about $1 billion a year less on its broadcast network than its three main competitors do, a gap the company hopes to close, President Stephen Burke told investors during a Bank of America conference Thursday. “Each of our competitors makes somewhere between $700 million more than we do, up to a billion and a half,” he said. “There’s really no good reason for that other than we need to make better shows.” That gap represents a huge opportunity for NBC’s profitability, he said. The owners of broadcast-TV networks each have the same infrastructure, “and yet one company on average is making a billion dollars a year less than the others,” he said. “That’s a great opportunity.” NBC’s station group was earning about $150 million a year in profit recently, which has since climbed to about $400 million, he said. That number can continue to improve, he said. “It’s hard to find many [business] priorities where you can find a billion dollars in operating cash flow just by doing things better."
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Telemundo is another area Burke identified where NBCUniversal can improve profitability. That Spanish-language network is making less than $50 million a year, he said. Univision, the main competitor, has a roughly 80-percent share of the Spanish-language broadcast market, he said. That leaves Telemundo with plenty of room for growth, he said. “The beauty of these businesses is once you start to get the ratings, there’s no increased variable cost at all."
One way NBC can improve profitability is through higher retransmission consent fees it collects from distributors, Burke said. “NBC currently makes no money on retransmission consent,” he said. “And there’s really no structural reason why NBC shouldn’t make the same amount of money that CBS makes on retransmission consent.” Both networks have football games, NBC has the Olympics every other year while CBS has better prime-time ratings, Burke said. “I don’t think any distributors relish the idea of doing business without CBS or NBC.” At the same conference a day earlier, CBS CEO Leslie Moonves told investors his company expects to hit $1 billion in retrans revenue by 2017. During a separate presentation Thursday, Chief Financial Officer Jay Rasulo said Disney expects between $400 million and $500 million in retrans revenue and reverse network compensation from affiliates of its ABC network in 2015.
Burke said 25 percent of NBCUniversal’s distribution agreements expire this year, and 100 percent will be renewed in the next four years. By that point, NBC should be getting retrans on par with other networks, he said. “All of the networks are going to get about the same amount once everyone flows through their deals,” he said. But it will take time. “You can’t snap your fingers.” NBC was also delayed in its ability to reach such deals while its takeover by Comcast was pending, he said. “There was no way to advance the ball too much … during the pendency of the deal.”