Its cable portfolio has propelled growth at the company lately. But NBCU remains focused on upgrading the part of the conglomerate formerly known as the National Broadcasting Company.
“The challenge is to make the first three letters of our name as strong and viable as possible,” CEO Jeff Zucker said Tuesday at an investor event.
The principal Achilles heels at NBC: prime time and its station group. The network in the post-“Friends” era has sunk to fourth place, while its owned-and-operated stations — in line with industry trends — have suffered major declines over the past 18 months-plus.
Zucker invoked the concept of a “broadcast ecosystem,” the network and how it fuels the 10 stations, as an entity that needs some reinvention.
Prime time accounts for an estimated 10% of NBCU’s revenue and profit, although Zucker admits: “The last few years have been tough. We haven’t done as well as we needed to do.”
A much-discussed strategy is producing less expensive programming that could drive revenues through cost-cutting. “The Jay Leno Show” is an example, while the New York O&O has dropped a 5 p.m. newscast in favor of a lifestyle show.
“Lower cost doesn’t mean it’s any lesser quality,” Zucker added.
In the second quarter, the NBCU broadcast segment saw revenues fall 9% to $1.4 billion. Zucker did say, however, that flaccid ad sales at the stations may since have “bottomed out.”
NBCU’s cable business had revenues up 3% in the April-June period to $1.2 billion, partly because long-term affiliate deals kept revenue flowing even in a tough ad climate.
On cable, Zucker said NBCU supports the industry’s “TV Everywhere” movement, which is designed in part to keep those affiliate fees flush. Cable and satellite operators have threatened to cut them if cable networks continue to offer full episodes of shows free online.
Operators, in turn, are experimenting with systems that give people access to the shows on the Web if an authentication process ensures they also pay for TV service. Zucker said NBCU is participating in a “TV Everywhere” trial in New York involving its Syfy channel.
“If authentication can serve as the model” to keep lucrative affiliate fees coming, “we’ll continue to support it,” he says. But Zucker notes it’s unclear whether “TV Everywhere” could further lead to new business models.
Zucker said NBCU continues to pursue a profitable digital business, notably via its stake in Hulu.com. He said NBCU has made “incremental steps,” but has not found an economic model that would be a “panacea.” He added that he expects Hulu to continue to pursue an ad-supported model and there are no plans to explore charging for content.
Separately, Liberty Media CEO Greg Maffei said DirecTV is likely to also participate in “TV Everywhere” initiatives. Liberty controls 55% of the satellite operator.