The man who cajoled affiliates to embrace the concept of stripping station and network programming across cable and Internet platforms, previously considered competitive threats, is out to defy broadcasting's cyclical ratings fate.
When NBC's prime-time ratings hold is being threatened several years down the road, NBC's cable, international and new-media profits will significantly offset some of the lost ad revenue.
Furthermore, NBC's increasing program ownership will generate enough back-end syndication revenues to also help soften the economic blow.
EQUITY STAKE IN PRIME TIME
Based on its announced schedule, NBC will have an equity stake in more than 40% of its fall prime-time slate, nearly a $500 million investment.
"It's a defensive response to studio companies feeding their own cable services," Mr. Wright said. "In order to have continual access to certain talent pools, we must provide them overhead support. We can't rely on the studios to provide us with what we want or need."
The goal is to continue investing in key partnerships and acquisitions while sustaining NBC's $1 billion in overall earnings this year, even if it means redefining relationships and strategies, Mr. Wright said.
Most at risk is NBC's relationship with its 210 affiliates, which have been pressing for exclusivity of network programming and controlled use of their local news product in an increasingly fragmented, non-exclusive world.
NBC liberally uses affiliates' local news contributions and its own entertainment and news fare to fuel its CNBC and MSNBC cable platforms.
The big question is whether NBC's $200 million in annual paid compensation ultimately gives way to a more strict pay-for-play alliance in which stations help flip the programming bill.
UPSETTING DELICATE BALANCE
Practices such as NBC's regional sales of ad time through its major-market owned stations, which affiliates fear could cut into their spot sales, further upset the delicate balance as they head into this week's annual meeting in Phoenix.
With NBC expected to generate upfront ad sales 10% higher than last year, or nearly twice any of its broadcast network competitors, the practice makes NBC appear greedy, affiliates say.
NBC's direction reflects the strategic mandate of parent General Electric Co. A GE initiative dubbed "Six Sigma," designed to save GE more than $8 billion through the year 2000, will require $12 million in savings at NBC this year. In time, NBC could double its 10% contribution of GE's profits.
"It's all about squeezing and creating profits, and creating an additional $150 million in shareholder value by the year 2000," explained Nicholas Heymann, analyst at NatWest Securities. "NBC is a big part of GE's global plan. That's what makes it different from other broadcast networks."
NBC eventually will benefit from GE's plans to build a low-orbit satellite-based global telecommunications system, what it calls the next "blockbuster business."
GE is prepared to underwrite NBC's acquisition of existing cable program channels; its development of online interactive services; expansion of marketing and sales operations; and the purchase of more TV stations.
NBC's network and owned TV stations are expected to post a record $500 million each in earnings this year. But their collective 80% contribution to NBC's earnings could slip to 65% by 2000.
While NBC cannot mandate hits, it stands a better chance of developing them as it promotes series across a well-viewed prime-time schedule.
NBC's overall annual revenue growth is expected to remain steady at about 5.6%, though its annual growth in operating profits is expected to slow from 37% in recent years to about 12% through decade's end. Overall, NBC is expected to post more than $1 billion in earnings on about $5 billion in revenues in 1997. That will steadily improve to $1.47 billion in earnings on $6.3 billion in revenues by the year 2000.
NBC is expected to bid for Viacom's 50% interest in USA Network. And Mr. Wright said NBC will resume acquisition talks with International Family Entertainment if IFE's negotiations with News Corp. fail.
TALKS WITH DOW JONES
NBC also is in discussions with Dow Jones & Co. about a partnership that would give it access to Dow's business news-gathering and distribution services.
NBC's cable business is already hugely successful. CNBC could post $140 million in 1997 profits. Even MSNBC, its cable alliance with Microsoft Corp., will post about $40 million in operating profits on the NBC side due to Microsoft's $200 million investment in the business.
The recycling of news and entertainment programming across its cable, Internet and international outlets is key to sustaining NBC's financial muscle.
"NBC's ability to further leverage the distribution of CNBC's news programs is rapidly increasing this network's strength over its rivals," Mr. Heymann said.
NBC's 170 million viewer base outside the U.S. will grow threefold over the next decade as it builds international program platforms off its Olympics rights.
"To NBC, and all of GE, globalization isn't even a choice-it's a must do or perish decision," Mr. Heymann said.
Ms. Mermigas is financial editor of Electronic Media.