Cable unit is bright spot for NBC Universal
EmptyThe departure of David Zaslav will leave NBC Universal without a key exec at the conglomerate's secret weapon: its cable group.
While the company might appear wobbly on the heels of a massive restructuring plan announced last month that will result in 700 layoffs and $750 million in cost reductions, NBC Universal Cable Entertainment has been a bright spot for parent company General Electric.
NBCUCE accounts for nearly a third of the company's profit and almost half of the entire TV division. Although NBC Uni reported a 10% decline in operating profit for third-quarter earnings released this month, NBCUCE is up 23% by the same measure.
Together with MSNBC and CNBC, its struggling counterparts in cable news, NBCU cable is valued at least $20 billion, according to Kagan Media. Its growth has been a given since the synergistic success of NBC's 2004 merger with Vivendi Universal, which brought aboard channels USA Network and Sci Fi Channel (worth an estimated $7 billion along with other cable assets in the deal).
"I have to say that the NBC Universal cable group has been incredibly strong ever since the merger," said Jeff Zucker, CEO of NBC Universal Television Group. "There's no question about it: This really has become the strongest cable group in the business."
Jeff Gaspin, president of NBC Universal Cable Entertainment, Digital Content and Cross-Network Strategy, credits aggressive cross-promotion between the channels as key to their success. "Because the (NBC) network gets so much attention, I think people are surprised at how successful and strong this cable network group is," he said.
Integrating cable acquisitions can be a tricky business, as indicated by the bumpy roads such networks as ABC Family and Spike TV have traveled to reach stability at the Walt Disney Co. and Viacom, respectively. But NBC Uni has seen smooth sailing for USA, which is the reigning No. 1 basic cable network in all key demographics, and Sci Fi, which has rapidly expanded its original programming.
And then there's Bravo, which NBC acquired from Cablevision Systems Corp. in 2002. After rising and falling on the back of breakout hit "Queer Eye for the Straight Guy," the network has renewed its strength with a fresh fleet of successes including "Project Runway" and "Top Chef."
"NBC really ignited Bravo's growth," Bravo president Lauren Zalaznick said.
Some of the recent successes at the networks include "Runway's" third-season finale Oct. 18, which drew a network record of 5.4 million total viewers. The July 18 series premiere of "Eureka" was Sci Fi's highest-rated series telecast ever with 4 million viewers, with the first season bringing in more than 5 million new viewers to the network.
Bonnie Hammer, who has been president of Sci Fi Channel since 2001 and added the title of USA president in May 2004, takes advantage of her position heading two creative teams and schedules monthly meetings between the groups to offer constructive criticism.
"The USA folks criticize the stuff on Sci Fi before it gets the greenlight, and Sci Fi criticizes USA," she said. "Everybody discusses the positives, the negatives, what they love and hate -- but it stays in that room. It's a forum where people can be honest and critical in a positive way, and that helps eliminate mistakes."
Postmerger synergy efforts also have brought NBC's sister studio to the aid of its cable brethren. Before the merger, cable and network development were separate; now scripted series ideas developed internally are always presented to the studio first to gauge their interest in producing a project.
"I really wanted them to feel they were going to be served by the studio as much as the network was," said Angela Bromstad, president of NBC Universal Television Studio. "It's really been a big priority."
Close ties between the studio and the cable group have helped develop companion pieces to existing hits. For years, USA had been unsuccessful in finding a series to match up with "Monk." But that changed in July with the introduction of another detective series, "Psych," which was carefully crafted to fit the "Monk" mold as well as USA's "Characters Welcome" brand. "Psych" debuted in a slot immediately following "Monk" and went on to become the No. 1 new cable series year-to-date.
Now the studio is looking to replicate its success, working with Sci Fi on a prequel to the network's series "Battlestar Galactica," titled "Caprica."
Also fueling the channels' success, according to all of the NBC Universal executives, are their digital-media components -- an area that spurred that recent restructuring plan, which has been dubbed NBCU 2.0. When Vivendi holdover Trio couldn't hack it as a digital cable channel, it was relaunched at the beginning of the year as an Internet-only service, one of many such digital extensions under the Bravo umbrella.
"Pretty definitively from a research prospective, we know that our viewers are huge Web users and use our digital initiatives -- like onscreen voting and text messaging and Web site -- and that drives our ratings," Zalaznick said.
As for the changes outlined under NBCU 2.0, Gaspin said the cable networks already had been moving its resources from the traditional business to the digital area and cutting costs by keeping jobs open that had become vacant. Although NBC had said it will stop scheduling scripted programming in the 8 p.m. hour, Gaspin said USA and Sci Fi won't stray from scripted.
While most cable groups have pretty much sworn off new linear channels in favor of digital plays, NBC Uni still is keeping irons hot in that fire. Sleuth, which features crime and mystery programming, launched in the first quarter, and Universal HD, which offers programming in high-definition, launched in fourth-quarter 2004. Both channels keep costs low by featuring TV programming and theatrical titles from NBC Uni's library.
"I think we have been more successful than any other group in attacking the emerging networks and generating profits," Gaspin said. "You can't spend the money you might have spent 10 years ago when launching a channel."
What remains to be seen is how the departure of Zaslav will impact the momentum of the cable group. He was NBC Uni's lead negotiator in the never-ending, complex talks with cable operators, satellite services and other new distributors getting in the space. The company declined comment on succession plans.
Zucker is quick to credit the cable entertainment group's executives with its success. "The last two years have certainly been difficult for the broadcast network," he said. "But the cable group has been a real highlight for the company, and it's terrific leadership that has put us in this great position."