NBC Uni tightening belt in wake of upfront loss
NBC Uni begins tightening belt
Aug 16, 2005
The peacock has begun nipping at its nest.
With NBC Universal Television Group suffering through a fiscal downturn, the division's president, Jeff Zucker, is implementing cost-cutting measures affecting everything from travel expenses to the snacks served at meetings, according to an internal fiat obtained by The Hollywood Reporter that sources say he issued to key execs this month.
In addition, a second memo sent companywide this month by Zucker and Ron Meyer, president and chief operating officer of Universal Studios, indicated that NBC Uni is evaluating its real-estate needs at its 100 Universal City Plaza headquarters, prompting rumors that the peacock could leave the perch it has called home -- its 44-acre campus in Burbank -- since the early 1950s.
"There's a lot of speculation that that's the ultimate plan," said a source within NBC Uni. "From every division you hear people whispering that that's what they're hearing."
An NBC spokesman would not address any memos, commenting only, "Just as we said at the press tour, we are cutting back on discretionary spending as part of doing business."
In a press conference with reporters in July, NBC Entertainment president Kevin Reilly disclosed that "belt-tightening" was looming.
"There's going to be some natural attrition, I think, in areas, probably some freezing in areas where we would maybe have added heads," Reilly said.
Increasing efficiency is nothing new at NBC Uni, with disciplined parent company General Electric always trimming financial flab under the patented Sigma Six strategy to which it subjects all of its assets. The company also has been particularly aggressive about the integration of operations at its entertainment division since NBC's $14 billion acquisition of Vivendi Universal in May 2004.
But NBC executives acknowledged publicly last month that they were under pressure to rein in expenses in the wake of the broadcast upfronts in May, when the network was thrown for a projected loss of nearly $1 billion in advertising revenue after seeing its ratings plummet throughout the 2004-05 season.
The first memo sent by Zucker addresses mandatory "cost controls" within the TV Group aimed at "reducing our discretionary and noncommitted expenses for the remainder of 2005 and all of 2006." In the memo, Zucker notes he is taking his cue from NBC Uni chairman and CEO Bob Wright.
The measures, which are effective immediately, impact a broad range of areas. Travel and entertainment expenses "unrelated to productions or sales activities" are prohibited. The memo encourages meetings to be conducted via conference calls or video teleconferencing and warns that "discretionary travel" must be approved by a division chief financial officer and "strictly adhere" to corporate guidelines.
Howard Averill and Andy Warren, chief financial officers at NBC Uni, also are mentioned in the memo as the source of approval for "outside professional fees," including consultants, lawyers and accountants. In addition, they are charged with reassessing any open jobs at NBC Uni TV, with all hirings requiring their imprimatur for the remainder of the year.
"Approval preferences will be given to positions that drive revenue growth or maintain the integrity of critical operations," the memo reads.
Curtailments also are called for on overtime (the memo discloses that the TV Group spent $10 million here in the first half of the year), with overtime not related to production eliminated.
In classic GE style, no line item is apparently too small for excision, with prohibitions ordered on the acquisition of any office supplies, furniture and electronic equipment including BlackBerrys for the rest of the year. The memo also stipulates that any food or snacks served at off-site meetings would be restricted to "those in which an outside guest or customer are present."
Even car services and magazine subscriptions will feel the squeeze. "There is surprisingly real money here when managed effectively," the memo notes.
A second memo from Zucker, which is dated Aug. 4 and co-authored by Meyer, turns its attention to NBC Uni's real-estate holdings. The memo announces that a team of advisers was hired to help the company "analyze the future operational business needs of our Universal City property" and "gain an in-depth understanding of the Los Angeles real estate market and to evaluate our future options."
The memo has triggered speculation that GE might be looking to pull stakes out of Burbank. GE already put one property from the campus on the block, an 875,000-square-foot office tower informally known as the Catalina building, located off Burbank's Alameda Street. Many of the estimated 1,000 employees based there have since relocated to Universal City.
One scenario being tossed around envisions NBC Uni's Burbank-based operations moving to 100 Universal City Plaza as well as other Universal Studios-owned land. Much of the 400-plus acres at the disposal of Universal Studios remains undeveloped; the company eyed a billion-dollar expansion during the 1990s that never materialized.
Zucker's memo anticipates and attempts to discourage the rumor mill from addressing NBC Uni's plans. "You may hear or read speculation about our real estate assessment. ... While we will be looking at many different strategic options, the company has made no decisions and we are taking our time to consider many different possibilities for the property."
Burbank has been the heart of NBC's operations for decades, home to everything from "The Tonight Show" and "Access Hollywood" to local station KNBC and Spanish-language station Telemundo. However, sources indicate that an ambitious long-term expansion plan for Burbank approved in 1997 has barely been realized.
Should GE rethink how far-flung its entertainment division's operations are across Southern California, it wouldn't be the first media conglomerate to do so. Walt Disney Co. plucked ABC out of its Century City headquarters and tucked it into its own Burbank bailiwick not long after acquiring the network from Cap Cities.
NBC Uni's projected upfront haul this season is about $1.9 billion, down from $2.9 billion in 2003-04. However, NBC Uni still reported profits of $979 million in the second quarter of this year, up 27% from a year ago on the strength of a newly diversified set of assets contributed by Vivendi, which still owns 20% of the division.
With NBC Universal Television Group suffering through a fiscal downturn, the division's president, Jeff Zucker, is implementing cost-cutting measures affecting everything from travel expenses to the snacks served at meetings, according to an internal fiat obtained by The Hollywood Reporter that sources say he issued to key execs this month.
In addition, a second memo sent companywide this month by Zucker and Ron Meyer, president and chief operating officer of Universal Studios, indicated that NBC Uni is evaluating its real-estate needs at its 100 Universal City Plaza headquarters, prompting rumors that the peacock could leave the perch it has called home -- its 44-acre campus in Burbank -- since the early 1950s.
"There's a lot of speculation that that's the ultimate plan," said a source within NBC Uni. "From every division you hear people whispering that that's what they're hearing."
An NBC spokesman would not address any memos, commenting only, "Just as we said at the press tour, we are cutting back on discretionary spending as part of doing business."
In a press conference with reporters in July, NBC Entertainment president Kevin Reilly disclosed that "belt-tightening" was looming.
"There's going to be some natural attrition, I think, in areas, probably some freezing in areas where we would maybe have added heads," Reilly said.
Increasing efficiency is nothing new at NBC Uni, with disciplined parent company General Electric always trimming financial flab under the patented Sigma Six strategy to which it subjects all of its assets. The company also has been particularly aggressive about the integration of operations at its entertainment division since NBC's $14 billion acquisition of Vivendi Universal in May 2004.
But NBC executives acknowledged publicly last month that they were under pressure to rein in expenses in the wake of the broadcast upfronts in May, when the network was thrown for a projected loss of nearly $1 billion in advertising revenue after seeing its ratings plummet throughout the 2004-05 season.
The first memo sent by Zucker addresses mandatory "cost controls" within the TV Group aimed at "reducing our discretionary and noncommitted expenses for the remainder of 2005 and all of 2006." In the memo, Zucker notes he is taking his cue from NBC Uni chairman and CEO Bob Wright.
The measures, which are effective immediately, impact a broad range of areas. Travel and entertainment expenses "unrelated to productions or sales activities" are prohibited. The memo encourages meetings to be conducted via conference calls or video teleconferencing and warns that "discretionary travel" must be approved by a division chief financial officer and "strictly adhere" to corporate guidelines.
Howard Averill and Andy Warren, chief financial officers at NBC Uni, also are mentioned in the memo as the source of approval for "outside professional fees," including consultants, lawyers and accountants. In addition, they are charged with reassessing any open jobs at NBC Uni TV, with all hirings requiring their imprimatur for the remainder of the year.
"Approval preferences will be given to positions that drive revenue growth or maintain the integrity of critical operations," the memo reads.
Curtailments also are called for on overtime (the memo discloses that the TV Group spent $10 million here in the first half of the year), with overtime not related to production eliminated.
In classic GE style, no line item is apparently too small for excision, with prohibitions ordered on the acquisition of any office supplies, furniture and electronic equipment including BlackBerrys for the rest of the year. The memo also stipulates that any food or snacks served at off-site meetings would be restricted to "those in which an outside guest or customer are present."
Even car services and magazine subscriptions will feel the squeeze. "There is surprisingly real money here when managed effectively," the memo notes.
A second memo from Zucker, which is dated Aug. 4 and co-authored by Meyer, turns its attention to NBC Uni's real-estate holdings. The memo announces that a team of advisers was hired to help the company "analyze the future operational business needs of our Universal City property" and "gain an in-depth understanding of the Los Angeles real estate market and to evaluate our future options."
The memo has triggered speculation that GE might be looking to pull stakes out of Burbank. GE already put one property from the campus on the block, an 875,000-square-foot office tower informally known as the Catalina building, located off Burbank's Alameda Street. Many of the estimated 1,000 employees based there have since relocated to Universal City.
One scenario being tossed around envisions NBC Uni's Burbank-based operations moving to 100 Universal City Plaza as well as other Universal Studios-owned land. Much of the 400-plus acres at the disposal of Universal Studios remains undeveloped; the company eyed a billion-dollar expansion during the 1990s that never materialized.
Zucker's memo anticipates and attempts to discourage the rumor mill from addressing NBC Uni's plans. "You may hear or read speculation about our real estate assessment. ... While we will be looking at many different strategic options, the company has made no decisions and we are taking our time to consider many different possibilities for the property."
Burbank has been the heart of NBC's operations for decades, home to everything from "The Tonight Show" and "Access Hollywood" to local station KNBC and Spanish-language station Telemundo. However, sources indicate that an ambitious long-term expansion plan for Burbank approved in 1997 has barely been realized.
Should GE rethink how far-flung its entertainment division's operations are across Southern California, it wouldn't be the first media conglomerate to do so. Walt Disney Co. plucked ABC out of its Century City headquarters and tucked it into its own Burbank bailiwick not long after acquiring the network from Cap Cities.
NBC Uni's projected upfront haul this season is about $1.9 billion, down from $2.9 billion in 2003-04. However, NBC Uni still reported profits of $979 million in the second quarter of this year, up 27% from a year ago on the strength of a newly diversified set of assets contributed by Vivendi, which still owns 20% of the division.
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