NBC, the last-place broadcast network acquired by Comcast in January 2011, is off to a surprisingly strong start in the new television season.
Thanks to new hits like "Revolution" and returning shows such as "The Voice," NBC has been the top-rated network among 18-to-49-year-old viewers for the first two weeks of the season. Though NBC is unlikely to stay No. 1 as rivals bring back their popular shows, the performance signals the start of a comeback for a network that spent eight years near the bottom of audience ratings that help set advertising rates.
A revival would help Comcast Chairman and CEO Brian Roberts capitalize on his $13.8 billion gamble on NBC Universal. Comcast justified the purchase largely on the strength of profit from cable channels such as USA Network and CNBC, and a resurgent NBC broadcast business could add billions to the bottom line.
"We came in with a sober, realistic long-term approach," Mr. Roberts, 53, said in an interview. "In the last 90 days, we've seen a shift with some really good things taking off. Several major bets have started to pay off."
Comcast's broadcast business, including NBC and Spanish-language Telemundo, generated only $138 million in operating profit on revenue of $5.94 billion in 11 months of new ownership last year, filings show. By contrast, CBS, the profit leader, made $1.99 billion in TV and radio in 2011.
Comcast rose 0.7% to $35.39 at 9:40 a.m. in New York and had advanced 54% since acquiring control of NBC through yesterday.
A stronger NBC will lead to more than just advertising gains, said Steve Burke, NBC Universal's CEO. Local affiliate stations benefit, along with the company's own production studio. More popular shows equal greater sales of reruns later in domestic and international markets, including web services like Netflix.
"Turning around NBC is the single most important objective we have at NBC Universal," Mr. Burke, 54, said in a phone interview.
The network's importance was clear in the weeks leading up to the new season. Olympics fans on NBC, cable's Bravo, CNBC, MSNBC and NBC Sports Network were blitzed with promos for the fall slate. Spots were added later on the USA Network, Oxygen, Syfy, E! Entertainment and the Golf Channel.
The network took about 30 minutes of prime time during the Olympics to preview the Matthew Perry comedy "Go On," and ran a 4.5-minute clip of "Revolution," a dystopian drama from "Lost" creator J.J. Abrams.
"I'm not sure NBC has solved anything to make the network more profitable in the long term," said Porter Bibb, managing partner at Mediatech Capital Partners, a New York-based merchant bank. "They've put together a tremendous slate of pilots, but only a few are actually showing much traction."
Philadelphia-based Comcast has a lot to gain. For the new season, NBC won just $1.8 billion in advance advertiser commitments, compared with $2.7 billion for New York-based CBS, people with knowledge of the sales said in June. The company's other businesses, its cable networks, theme parks and film studios, collectively earned $3.98 billion on $14 billion of sales through 11 months of 2011.
NBC finished the 2011-2012 TV season in third place among the younger 18-to-49-year-old viewers advertisers target -- topping Walt Disney Co.'s ABC and marking its best standing in eight years. Only NBC and CBS posted gains in the group and total audience.
Two weeks into the new season, the network's audience in the younger demographic has increased 12% from last year, according to Nielsen data. It's third in total audience.
Those results follow the summer's break-even Olympics telecast and a series of high-profile commitments that Comcast, the largest U.S. pay-TV company, made shortly after taking control. According to Mr. Roberts, NBC in the first 100 days of Comcast ownership made $20 billion of decisions -- from buying out a minority investor in its theme parks to extending contracts for football, hockey and the Olympics.
This season's new shows mark the first full slate under Bob Greenblatt, who was brought in to lead NBC Entertainment after ushering "Dexter" and "The Tudors" at CBS's Showtime.
Greenblatt has benefited from a $200 million annual boost in NBC's production budget since he took over in November 2010. He unveiled 10 shows in May, after introducing a dozen a year earlier.
"It's about having enough money to develop a lot of things, given the situation we're in," Mr. Greenblatt, 52, said in an interview. "The programming was down to the bare threads."
Based on initial ratings , Mr. Greenblatt has placed full-season orders for "Go On," "Revolution" and "The New Normal," a comedy about a gay couple that becomes friends with the surrogate mother of their child and her grandmother.
The company still faces the task of rebuilding its studio. In 2009, under General Electric, NBC cut entertainment spending, shuttered in-house production and tried to draw viewers back to its lineup by moving Jay Leno to 10 p.m.
When that failed three months later, NBC raced to order shows. Under Mr. Greenblatt, the network has restarted making programs for itself and for sale to others, such as "The Mindy Project" on Fox.
"You've already seen the worst case," said Amy Yong, an analyst at Macquarie Securities in New York who has an "outperform" rating on Comcast. "The best case is they go to No. 3 overall and gain a billion dollars in incremental revenue."
As the network addresses entertainment shortcomings, it faces challenges elsewhere. This week, NBC named Willie Geist a co-host of "Today" at 9 a.m. and appointed a new executive producer for "Rock Center With Brian Williams," a prime-time news program. In the first week of the new season "Today" trailed ABC's "Good Morning America" in Nielsen ratings .
Comcast must also negotiate the purchase of General Electric's remaining 49% stake in July 2014. NBC Universal has begun to stockpile cash with the $3.03 billion sale of its stake in A&E Networks, Chief Financial Officer Michael Angelakis said at a Sept. 19 investor conference.
NBC is rebuilding prime time day by day, said Mr. Burke, who led ABC before joining Comcast in 1998. Each night takes a year. The network is using "Sunday Night Football," the most-watched show on TV, to promote Monday's "The Voice," a singing competition that regularly wins the night, and "Revolution."
"It's a long, long climb up the ladder and we're only on the second rung," Mr. Greenblatt said from his office in Los Angeles. "But at least we're not falling off the ladder."