From NBC to a New UniverseWright's arrival at NBC ushered in a new era of investing in the businesses 4/20/2007 08:00:00 PM Eastern
When GE bought NBC, the network was just about at its peak of popularity, and there was a feeling it was being taken over by “the suits.” Also, there was the perception you didn't know much about the television business. Were there a lot of basics you didn't know?
I would say there was a great deal more about television that I did know, that people didn't understand I knew. And there was also a lot that I didn't know. But there was a lot more that I knew that people didn't [realize].
My stint at Cox was also followed by my stint at GE Capital. And, people forget that, during that period when I was at Cox—it was 3½ years—I was executive VP of broadcast as well, and I was CEO of the cable business. So that was a period, I would say, of enormously steep learning. But it wasn't just cable.
Then, when I left and went to GE Capital, we were more engaged than people would've guessed in financing media companies.
It is amazing to remember how bad NBC was in the late '70s and early '80s. Then, when NBC got good, how exciting it was for people at NBC.
The difference was, and people don't really understand this, that Thornton Bradshaw was appointed the chairman of RCA when NBC was at its death. And he was responsible for bringing Grant Tinker in to run NBC. And in that process, Bradshaw took most of the pain. Grant was the guy that came in to fix it.
But Bradshaw felt that NBC was not a broad enough company to stand on its own and that it should be sold. He couldn't spin it off, and he couldn't create a public stock around it. He just felt that it should be owned by a larger entity. He felt that RCA itself could not exist by itself, and it was going to be bought up in a leveraged buyout. And that's how NBC came to GE.
So he wanted GE to save NBC and RCA, in a way.
He knew GE would sell portions of RCA, but he felt that GE wouldn't be forced to. GE could do it in a more attractive way, and that was a better idea. There was a lot of synergy with the defense businesses at the time, which was pretty big and important. And he felt that NBC could stay with GE. Our CEO Jack Welch led him to believe that GE had no interest in selling it and that GE would give it a really fair shake and wanted to have it.
The other thing I should mention: Bradshaw was not in a position, let's put it that way, to significantly invest in NBC. RCA had no checkbook at NBC for any significant ventures, and that was the issue that hit us at GE, and me in particular. I felt like I was on a mission from God to come there and to expand that business while we could and not to look at the success of primetime as the end-all.
It's a great thing to happen. It gave us strength, it gave us cash, but it also gave us the will to make investments, to make it a bigger company for many of the reasons that others thought that it couldn't really succeed just being a broadcast company.
So you knew from pretty much the get-go that you needed to get NBC into cable?
Absolutely. I probably overplayed that hand with the executives. I told them that we were going to do a lot of different things, and they were highly skeptical. They had lived through a period having no investment, and they somehow got used to it. They hadn't had any investment from RCA in, I don't know, 20 years.
They were used to RCA auditing everything and having all kinds of financial controls and not putting any money into the business. Then I came along and talked about doing all these things, and I think a lot of them looked at each other and said, “Jesus, why is he talking about that?”So that was probably a little overplaying the hand.
You've said before that late NBC Entertainment President Brandon Tartikoff helped you a lot when you first got there.
He was very honest about talking about programming. He wasn't patronizing, he wasn't cute, he wasn't political. He really was trying to help me understand exactly what he was going through without preaching and without setting me up into little situations. And he was always willing to respond to requests that I had. If he thought they were not appropriate, he would sort of wince a little bit.
When I first went out there [to Burbank], I said I want to have some meetings, I want to talk about a strategy for Saturday morning and the strategy for daytime. And he said, “What do you mean?”I said I want to talk about the program performance, which he said was fine, we'll talk. I said I want to talk about the margin generated. I wanted to talk about what competitors are doing, what are the options on Saturday morning, as an example, and the same thing for daytime.
I said we'll have finance people in the meeting and we're going to try to look at what the strategies are and so forth. That wasn't part of what he did, you know, have finance people in the meetings talking about programs.
He said okay, I can do that. I think Jack [Welch] thought Brandon was terrifically flexible because he set up a meeting along the lines that I just described, and Jack said, “Jesus Christ, you're pretty good at this.”Brandon said, “I really don't know about that, but it's what you wanted.'
What did he tell you about programming?
When I would call him about a program, he would give me a very not guarded response. He said, “Bob, that program isn't as good as you think it is”or “We were just lucky there”or “This writer is actually better than the episodes you saw.”Or this thing is going to take a while to get going. And that's not what you would expect a guy to do at the moment where everybody's cheering.
The other person that often gets forgotten in these things is Warren Littlefield. Warren was the last principal deputy that Brandon had. Warren was the head man there when Brandon left. And so he rode the hill. He rode it up, and he rode it all the way down to the bottom. Then he rode it back up to the top when Don Ohlmeyer came in [as president of NBC, West Coast], and that was a very rough, rough period for everybody—affiliates, employees. So he deserves a great deal of credit for all that.
NBC made three exceptional renewal deals: ER, Seinfeld and Friends. What can you tell me about making those deals? They all seemed to pay off.
ER was not a friendly deal. [Warner Bros.] just came and put it right to us. They came out of the blocks and said, you guys, we decided that this program is worth X, Y, Z to you, and you pay the money or we take the program.
The Friends negotiation was all about money, too. It was not as bad as [ER], but it was pretty bad. We did the best we could under what I would say were paralyzing circumstances. I give Zucker full credit for getting the maximum value out of it the last couple years.
With the super-sizing of episodes?
Yeah, and also working hard with the producers and with Warner Bros. to keep the negotiations on track. Mark Graboff [now president of NBC Universal TV, West Coast] was there at the time, too, trying to keep everything from blowing up all the time. So that was a hard issue, but it was a lot of money.
The Seinfeld negotiations were a different issue. I really did believe that, from the beginning with Jerry, there was more to it than the money. He was not a studio producer, even though he was the one that was going to make the calls. He was greatly caught up in the creative aspect to the show.
So, in that case, it was really a question of trying to understand where he was coming from and what he was prepared to do and not prepared to do and recognizing that it was not just going to be a check-writing exercise.
Now, a lot of money crossed hands, but it was not just that. It became very personal near the end, personal in the sense that he wanted to make sure that the show was meeting what he considered to be certain criteria. He had put himself in a situation where he was the principal writer and the principal critic, and I think it was taking a great deal out of him. When a man walks away from tens and tens of millions of dollars at his prime—well, I mean that doesn't happen in Hollywood. And he did that.
But NBC didn't have a choice about renewing those shows, right?
Oh no, no, we didn't have a choice. When you have a hit, when you're lucky enough to have one of these mega-hits, and the first one was Cosby, of course, you really are not in the position to walk away.
First of all, you have audiences. You should be trying your very best to use those shows to help you bring people's attention to new shows. And you have to start thinking that that's a principal value of the show to you economically, not just the amount of money you make from the show directly. It's hard to remember that, though.
Do networks have any leverage in those situations?
The only leverage you really have is [producers] can't really take that show and move it to another network. Just sticking the show on another network in that slot has never proven to be that effective.
Talk about NBC's entrance into new areas, like cable.
Rainbow Programming Services had Bravo, American Movie Classics and all of the sports channels. So we went into that as NBC, and we became the half owner. That was still with a great deal of controversy, and, in fairness, our broadcast people didn't really like it at all. They just thought it was terrible.
That cable didn't really have any great audience for any individual network?
They, quite frankly, didn't respect and understand the cable-programming business. And even our sports people didn't want any part of Sport Channel America. We had Sports Channel New York and Sports Channel America, and Sports Channel America at that time was in Columbus, Ohio; Florida, Boston, Pittsburgh, San Francisco, L.A. And every single one, except Sports Channel New York, was losing money.
[Rainbow and NBC] pledged to ourselves that, since there were only two of us, either partner could propose new channels. And you had to offer 50% ownership to the other partner, but the other partner was not obligated to participate and could cease participating at any time. And that was how we launched CNBC.
Chuck [Dolan, chairman of Cablevision] was originally the half owner. But he determined that CNBC was too expensive. They felt more comfortable with the sports properties. So they relinquished their 50% ownership in CNBC, and we basically started to work down our ownership of the sports channels.
The sad part about it is, we never found out what would have happened. The economics of developing sports channels was so negative that GE wasn't interested and our own sports people weren't interested. And it was Rupert Murdoch that came in and…
And really made a business out of it.
Well, he said I'm gonna do it, I don't care how much this loses.
He had a philosophical view that sports and television were, like, bonded together forever, and he didn't trust scripted programming. He said, “Scripted programming comes and goes. I can't figure it out. I don't know why one show works and another doesn't. But I know sports will always work; it's just too expensive.”
He still seems to believe that.
Yeah, he does, he does. So he took on an enormous obligation to try to build up Fox Sports, hundreds of millions of dollars. We weren't prepared to do it. So that's the one loss we had: We never got into the sports business on cable. And we've given up a great deal for that. We've given up a lot of position as a result of that.
You competed with the titans of the business; Murdoch, Viacom Chairman Sumner Redstone...
They're all different personalities, but none of them can be taken for granted at any level. [Liberty Media Chairman] John Malone is right up there at the top. John Malone is a very smart, very shrewd negotiator. Not as interested in programming per se as the others might be, but, boy, what a dealmaker, and focused.
I met Murdoch with Chuck Dolan in October of 1986, and I was very impressed with him. He had a great grasp for global media, and none of us did. We were all kind of U.S. guys. So he was very impressive. He has a very interesting management philosophy, not one that you could really translate for others. He knows exactly what he wants to know.
It seems that, whatever it is that he wants to buy, whether there's a regulation against it or not, it's “I'll buy it and figure it out later.”
He's a macro buyer; he has macro beliefs, and he just pushes them through despite the fact that, internally, he may have endless numbers of micro naysayers. He just goes ahead and does it.
It's funny because Redstone's office is closer to me. But I never had that much of a day-to-day dealing with Redstone. But he's obviously very shrewd, very focused on what he wants to be and very Wall Street-oriented.
The first time I met him was at [the annual media conference at] Sun Valley, Idaho, in '86 or '87, I think. One of the Allen & Co. executives wanted me to meet him to talk about candidates to run Viacom. He had just done the leveraged buyout.
He was looking for new management. I never quite figured out whether he was looking for me, but he knew that I wasn't available. I had a real commitment to GE and NBC, and I was thrilled to be there. But he had a list of people he wanted me to talk about. I thought it was very, you know, kind of brassy.
Allen & Co. had compiled a list, and they said, “Okay, what about him? What about him? What about him? What about him?” I stopped in the middle of this thing, and he was, like, “How about number 23 on the list?” I don't even know if he knew who these people were, but he wanted to know about 23. I said, “You know, I'm not a consultant to your company. I'm not a paid headhunter here.”
And the meeting kind of ended. But I saw in Redstone that incredible determination. He was then 60 years old or maybe even a little older.
Now, going back to the cable thing, I do want to ask you about Telemundo, which was a surprising deal for NBC to make. I don't think many thought a major network would get into the Spanish-language–TV business.
I would never give up Telemundo. The only issue we've had with Telemundo is that we came in there with a licensed-programming model and we had to abandon that to go to a production-programming model, which is a different animal.
I think we've made a very good transition from one to the other, but that was not the original plan. And so that's a bigger challenge. But I mean, having said that, we seem to be pretty good at it. [Telemundo President] Don Browne has done an excellent job.
We looked around, and it seemed to me that all of our large markets had big Hispanic populations. We thought the Hispanic population, at that time, was 30 million. Turns out it was 38 million when we got the census two years later. It's the fastest-growing population in the country.
Yeah, and young.
Also, when I got into it, it had profiles that were very attractive to broadcasting. It's the most broad. (So is the African-American community, by the way.) But they like to watch television, they're loyal. They're also very brand-oriented, Hispanic people; they're very family-oriented. So they watch in groups, and they are good consumers. They are what broadcasting is all about.
There's a bigger gap between the general market and the Spanish market than there ever should be. It has not been as easy as I ever would've guessed it should be to have a lot more of the major retail-oriented customers. They should be advertising on Telemundo in Spanish. In New York in particular, they're still kind of holding out and trying to handle their business on a general-market basis, car dealers in particular.
When you look now at the multiplatform opportunities that are out there, DVRs and new Nielsen ratings that are going to measure commercials minute by minute…
Yes. As though we don't have enough trouble trying to get people to watch the programs. Now we have to get them to watch the commercials.
Well, that really to me sounds like it's going to be exciting but a real mess trying to see where this is going. How do you see the near future for NBC?
I think it's more of the same. The Internet is basically the driver of the next level of fractionalization. And it's also creating the cable and satellite operators' demand for video-on-demand, which is really a function of trying to compete with the Internet. There is going to be a lot of interference between different modalities. It should be almost happening today, but nothing happens quite as fast as you think. Your television set will undoubtedly be…
You're going to be able to switch back and forth, you're going to be able to watch television, watch the Internet on your television.
But I think there's plenty of time. It's not going to happen overnight. I think there's time to react and time, through focus groups and others, to really determine what people are more interested in. Also recognize that the Internet has not really taken time away from television the way people think. The research indicates that people are spending more time on the Internet, but it does not indicate that they're spending a good deal less time on television.
So it is a matter of trying to understand how the two coexist. I think we don't have a choice. Speaking of NBC, we don't have a choice but to respect the Internet. First of all, the economics have been used [as leverage]. You know, agencies and clients have used the attraction of the Internet to become very, very difficult negotiators when they're buying broadcast time.
They leverage that very well. And I think we just have to get settled in. There are clearly issues that have to be addressed, and you have to really believe in some of the properties that we have. Everybody has to believe. You can't put your head in the sand.
NBC fought the station-ownership cap forever. Do you think it will ever be totally lifted?
I think that battle is pretty much over. You know the old story of regulation: The government comes late and stays too long. That's how it works, and it'll always be that way, whether it's drugs or television or whatever, medical devices. In the case here, it is a political football that is available to any congressman or senator to have at their disposal at any moment. They can talk about content, they can talk about sex, they can talk about violence, they can talk about ownership. They have all these things they can talk about, and there are no consequences.
When content ratings were new, NBC held out on that.
We thought it was just the hole in the wall that was going to get bigger and bigger. We felt that the whole ability to regulate viewing with your set was already in existence [with the V-chip], and we saw that people just weren't doing it. We felt that taking broadcast programming—making these distinctions between TV-14 and TV-12—had such consequences for the advertising market. But we weren't sure that it had any consequences from the viewership market.
I do want to ask you about digital rights management (DRM) and international counterfeiting of product. Do you see the industry or government, here and internationally, taking this more seriously than a couple of years ago?
For people in the operations side of the business, it's hard to get their attention. But we have an obligation to fix some of the problem ourselves, and that means that we have to make sure that we offer films to an audience in a country at a price point they can afford. That means that you're going to have different prices in different countries. And up to a couple years ago, that was absolutely never the case.
You think people can afford $15 in India for a DVD? They have no HBO in India, they have no pay cable. So they have no way to watch these movies except by buying a DVD. And they can't afford that. So the argument is, who's the target audience? What are you trying to sell? Are you're trying to sell six units? Fine, then you won. Are you trying to sell 6 million? You're not going to sell them at $15 a piece.
At least, we've gotten agreement that discrete pricing for different markets, with an expectation of what that's going to achieve, is I think pretty much accepted.
In Russia, we sell DVDs for, like, $3 because the phony ones are $2. We have three times as much business today at $3 than we had at high prices. I mean, in terms of total dollars, we have three times as much revenue selling DVDs at $3 than we had at $15. We're at least pointing out to the government that our issue for protection is based upon the fact that we dropped the price from $15 to $3 and these other guys are selling it at $2 and you've got to help us. They kind of begrudgingly say okay.
The Internet stuff is a trickier game. But I think it's up to the film industry to constantly look for DRM [solutions]. We have to constantly try to put pressure on the consumer-electronics business because they will just give the goddamn stuff away. They're selling equipment. So that's a battle that can't be given up easily.
Finally, I want to ask you about Autism Speaks, the organization you're so involved with, along with your wife, Suzanne, that will occupy so much of your time after leaving NBC.
Actually, my wife is going to Qatar in three weeks. She's been invited by Her Royal Highness the Consort of the Emir of Qatar, who has built a facility called the Shafallah Center. “Shafallah” is Arabic for a plant where many of the blossoms don't open. The Shafallah Center was designed to be the preeminent center for the study of children with disabilities in the Middle East and training and advancement. It's been open for two years.
This woman has invited prominent women from all over the world, along with some men, to come. She runs a program; she pays all the costs. Suzanne was selected to come with the Ad Council to talk about how you create awareness among people.
[Autism} is really hard, That is really hard. This is a challenge that is up to my standards.