NBC Uni enjoys support of GE

Acquisition, new structure seen as success

It has been four years since General Electric bought Universal Studios. Has the acquisition worked? The answer, by and large, is yes.

From GE's point of view, studio chief Ron Meyer has been a proven success. "General Electric understands the treasure they have in Ron," says Jeff Zucker, president and CEO of NBC Universal, "and Ron understands the great strength that GE brings to this company."

Adds Jeffrey Immelt, GE's chairman and CEO: "The way NBC Universal is structured now, we've got enough diversity that we can put up with some of the volatility individual businesses might have. Movies can be volatile, but cable is more steady and we're able to blend them all together."

Like Immelt's predecessor, Jack Welch, who led the company from 1981 to 2001 -- during which time revenue, profits and stock price rose to new highs -- Meyer encourages Universal employees to collaborate at all levels. Like Welch, who invited everyone from the secretaries to his customers to call him Jack, Meyer is widely known as Ron.

But there are real differences in their approaches to business.

To get the best workmanship, in 1995 Welch implemented the quality initiative known as Six Sigma, originally developed at Motorola.

The Six Sigma system is designed to allow only 3.4 defects per million opportunities. As Six Sigma expanded from manufacturing to other businesses, its principles came to include understanding customer requirements, aligning key business processes using data analysis to minimize variation, and constantly driving sustainable improvements.

Although Six Sigma saved GE billions, it's far removed from Hollywood's business practices.

"I don't ignore it," Meyer says, "I'm very respectful to GE." But, he continues, "Six Sigma doesn't apply to the creative process. There are areas I agree with and think make some sense, but they have much more to do with the backlot functions of the buildings, or something of that sort. It's never been put into the creative process or expected to be part of the creative process.

"I've not attended any Six Sigma classes, although on my own I've read about it, so I understand the value," he continues.

Six Sigma is just one area where GE's corporate practice is somewhat at odds with Hollywood's.

Among the Hollywood eccentricities that GE has had to accept are not just pricey stars and overpaid moguls, but also the relatively high salaries of midlevel managers and the studios' tendency to sign them to multiyear contracts.

"They saw you can't apply the same metrics as in some of their other businesses," says Adam Fogelson, Universal Pictures president of marketing and distribution. "They came to learn our business and ask all the questions they could ask, to assure we were as smart about spending as we can be."

While relatively hands-off, GE now picks Universal's CFO. Since the acquisition, there have been two GE-appointed CFOs. "They both came in with strict rules and regulations about how we have to work," says Jimmy Horowitz, executive vp and co-president of production for Universal Pictures. "You have to live 'the letter and the spirit,' as they say. There is no gray area with them when it comes to accounting.

"Other companies are more comfortable taking certain risks, where they are not," he adds. "But even with those people, we get to tell them how we do things, and then we try and blend it together."

That's not always easy when corporations look for strict growth -- in GE's case, growth of 10% annually, a tough call given the unpredictability of any studio's releases.

"Every owner looks for a future plan," says Meyer, "and obviously most of (the movie business) is about placeholders because you don't even know the films you're going to make in the future."

But GE has been bold in supporting an expanded pipeline of product from Universal. At a time when many studios are pulling back, it has strongly encouraged Universal to provide content for a whole string of platforms and markets.

"In prior years, we've gone down to making too few (movies) to really drive the business, so we have to have more output," says Donna Langley, Universal Pictures president of production.

And the GE discipline has helped Universal operate more efficiently, she believes: "They are great partners actually, and again that's an area where Ron is invaluable, because the time he invests with our parent is time well spent. It enables us to do the jobs that we do without too much interference."

Speaking of some of the systems GE has introduced, Langley explains: "They're very human-resource based, so there are a number of things -- courses, personal evaluations, group evaluations. There's constant input from GE, and they require input from us to measure the performance of our team."

Meyer says the merger with GE and NBC has provided cost savings in operations, purchasing and personnel. He cites the synergy of the studio, network, parks and global operations -- something that was apparent with a recent ad campaign for the third "Mummy" movie, shot in China, which ties the horror picture closely to the athletes in the Beijing Olympics.

But, he insists, "they've never interfered with our process at all. We're given a budget, and they expect us to live within that budget and manage that budget. And as long as we do, they've never asked what film we were making, why we're making it or why it didn't work. They've allowed us to run our business, and we've been able to, in turn, deliver a profit."



By the Numbers -- Universal Studios

40 million Feet of film inventoried by film vault employees

1.2 million
Elements moved by film vault employees

500,000
Visitor passes issued

3,000
Screenings shown by the projection department

386
TV episodes mixed at Universal Sound in Studio Operations

155
Feature-length titles transferred by Universal Studios Digital Services for home entertainment and television distribution

100-150
Commercials shot on the lot

19
Feature films shot on the lot

18
Feature films mixed at Universal Sound

9
TV shows shot on the lot
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