NBCUniversal CEO: 'Despicable Me 2' Will Be Most Profitable Film in Universal's History

Steve Burke
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"The real key to turning around NBC is not necessarily increasing the investment. The real key is making better shows."

Steve Burke also tells the Comcast quarterly earnings call that there is more upside at the entertainment company and explains why the studio's Legendary deal is so important.

Despicable Me 2 will be Universal's most profitable film in its long history, NBCUniversal CEO Steve Burke said Wednesday.

The animation feature "is going to end up being the single most profitable film in the 100 year history of Universal Studios," he told analysts during an earnings conference call. "We love Illumination," he added about the animation producer behind the hit franchise.

Burke also lauded the recent Universal deal with Legendary Pictures as giving the studio "a very coherent strategy." He added: "It is a very important element of our strategy."

Universal now has Illumination as its animation partner, while Legendary will provide a focus on the "riskiest" and hardest part of the film business with its interest in big fanboy releases, he said. "And Universal will concentrate on everything else," Burke explained.

Meanwhile, NBCUniversal said it is accelerating its investment plans in its theme parks and is starting to chip away at the gap in advertising and carriage fee revenue compared to competitors, executives said Wednesday.

The theme park business is a great business," Burke said during the second-quarter earnings conference call of cable giant Comcast, which owns the entertainment company.

Comcast CFO Michael Angelakis said on the call that the entertainment firm would move up its investments in more theme park attractions. "We are now accelerating NBCU's capital investment plan, primarily driven by the theme parks investments in new attractions, such as Transformers, an expansion of Harry Potter in Orlando as well as Despicable Me in Hollywood," he said. That will bring NBCUniversal's capital expenditures for 2013 to $1.1 billion, up 50 percent from 2012.

Burke predicted the company would beat its tough financial performance targets for the new theme park investments after previous returns on upgrades have yielded strong returns.

Asked about the impact that 21st Century Fox's new Fox Sports 1 network would have on NBCUniversal, Burke predicted  it wouldn't have a major effect given that his firm has always had much competition. "Things look very good for NBC sports on the network and the NBC Sports Network," he said, lauding a recent NASCAR deal as "very important." Explained Burke: "It basically gives us 20 weeks a year when the NHL is not playing," ensuring the company has highly rated sports year-round.

Discussing the upside for NBCUniversal, Burke also said that about 25 percent of affiliate fee deals with pay TV companies have been "reset over the past year," with the rest coming up over the next few years. "There's clearly a gap between what we deserve to be paid and what we are paid," he said.

Burke added that "the same opportunity" exists in ad revenue. With some cable and broadcast networks getting over 20 percent "more than we do," the company wants to "eliminate or start to chip away at that gap" over time and made "good progress" in the upfront ad selling season this year.

Excluding the Olympics, NBC sold about 13 percent more ads in the upfront amid its best ratings performance in years, the CEO said. Cable upfront sales also brought in "good results," he said. "USA and Bravo did very well."

Primetime ad prices were up 7 percent to 8 percent in the upfront, plus the company sold a bit more inventory, said Burke. He lauded the fact that "we sold all of our properties together" as the key driver of success.

Asked how quickly NBCUniversal could close the carriage fee and ad gap to peers, Burke said he expects "real progress" over the next two to four years.

Comcast chairman and CEO Brian Roberts on the call lauded the "strong momentum" at NBCUniversal, including "steady progress at the theme parks and at broadcast." Comcast acquired full control of the entertainment company earlier this year, making the second quarter the first quarter of full Comcast ownership.

"i feel really great about the timing and the structure" of the deal, Roberts concluded.

He also lauded the performance of various cable networks, including USA and Bravo, the NBC Sports Network and Golf Channel, which he said had its most watched second quarter ever.

In the film business, "our focus is to continue to build franchises," although he acknowledged that "we have had some ups and downs."

Roberts lauded the box-office performance of Fast & Furious 6 and Despicable Me 2. And he, too, lauded "the talented team at Illumination."

Asked about possible cable mergers and acquisitions amid recent industry chatter and whether Comcast could also make further acquisitions, management didn't make clear comments beyond highlighting that the company has always been disciplined in its deals. Asked if Comcast would be allowed to get bigger by buying more cable systems, executives said that was really a grey area.

E-mail: Georg.Szalai@THR.com
Twitter: @georgszalai