Dinosaurs. That's what the three major networks were being called back in 1986 when General Electric bought NBC and named Bob Wright to run it.
It didn't help Wright's cause that he succeeded Grant Tinker, the widely respected producer-turned-executive who had shepherded NBC to No. 1 after a long dry spell.
At first, Wright was widely dissed by the network's old guard as a clueless meddler who wanted to change things. That's the thing about GE's culture: It thrives on performance and believes that change is the way to get there.
In short order, the old NBC guard was gone, and Wright was bringing NBC into the age of the multichannel universe. Since 1986, NBC has created two major cable networks: CNBC and, with Microsoft, MSNBC. It has invested in a slew of others (among them ValueVision, the Rainbow networks, A&E).
It has also bought a handful of TV stations, has a one-third stake in Paxson and expects to close its biggest acquisition to date, Telemundo, within two months. Wright and NBC have their share of detractors, but no one calls the former clueless or the latter near extinction. Quite the contrary.
As the network celebrates 75 years of making broadcast history, Wright sat down with BROADCASTING & CABLE Deputy Editor Steve McClellan to discuss how the next 75 years might unfold. An edited transcript follows.
As you prepare for NBC's 75th anniversary celebration, there's a lot of speculation about whether GE will still own NBC by its 76th. Much of the speculation was prompted by the court decision on broadcast/cable crossownership and the 35% ownership cap. How does that decision potentially change the landscape for the industry in general and NBC in particular?
It is not surprising on either count. There is a third case out there, with Sinclair, on duopoly. My guess is that's going to go the same way. But I think this was a perfectly forecastable result. Few industries have any kind of regulation that comes close to the historical regulation that's still left with television.
What do you mean?
The broadcast-television regulation, in many cases, is a product of competitive issues and battles that took place 50 years ago, when there was one or two stations per market. I think the court concluded—in the competitive landscape of video in the home, with satellite television and cable television and [various] forms of over-the-air TV, Internet with full-motion streaming video—that these rules are clearly arbitrary to be enforcing at this point in time.
Should all the ownership rules go away?
"Go away" is not the right term. But I think they all have to conform to the world that we're in as opposed to a world that existed 50 years ago.
What are the implications for NBC? Is NBC suddenly for sale, or, conversely, would GE consider a huge acquisition, like AOL Time Warner?
I don't think [either is] likely to happen. GE has always been happy with NBC and its performance. But it has never been eager to become substantially bigger in the business, under the theory that it's going to get in a lot of cyclical performance, which is what the movie business is. There's not a lot of interest to being in a business as cyclical as that.
Even if rules are adapted to the current environment as you put it, doesn't NBC have to grow dramatically or sell out?
There is a lot of pressure on NBC, as there is in every business in GE, to have a strong growth path. We've had that challenge all the way along. We have things on our plate now that we're working out. We have Paxson, and we have an investment in ValueVision Television. We have other programming ventures we're involved in.
How much more industry consolidation do you foresee?
These rule changes will bring about a lot more consolidation of one type or another or perhaps other people coming into the business. You'll see more programming and cable companies coming together.
Is there a point in media where bigger is not better?
Sometimes there are synergies because of size that are very compelling, and sometimes there aren't. I think it's a question of the texture and the tone of the company involved. Time Warner and AOL have gone through a lot of acquisition and growth pains over the last 15 years, and so the jury is always out on how it's going because they're always going through one of those periods.
The pure-play TV groups point to NBC's hardball tactics in the battle over KRON-TV San Francisco as an example of why the 35% ownership cap should remain in place. Is that a fair argument?
The cap is an inappropriate measurement. It doesn't measure anything that is important anymore. The concept of measuring something against potential viewers as opposed to actual viewers, there is no antitrust or FTC regulation that exists that does that. And there is no other FCC regulation that does that. If it was 35% market-share cap, then that's a different story.
So a market-share yardstick would be appropriate?
I think a market-share yardstick would be clearly appropriate. If you buy a stick [TV station] in New York City, a stick without a viewer, you're considered to have captured 8% of the national audience. It's just ridiculous. The market share in cable is 35%. If you had a [national] rule in radio, it'd be 40% more or less of listenership. So I think that there are clearly ways to have rulemaking in this area, but the cap, that concept which was a really late-'40s concept, just doesn't have any applicability anymore.
Of all the changes in the business since 1986, when you first took the reins at NBC, what's the most positive?
The most positive change is the tremendous influx of programming to the home. The availability at home of the volume of programming that exists today was just thought to be impossible 20 years ago or 15 years ago, 16 years ago. People that weren't close to it didn't believe that it was affordable to put on. Who would pay for it, they asked. How could you have all these channels filled? It's silly, nobody will ever watch. That sort of thing.
So the viewer has benefited.
I think the consumer has been incredibly well treated and rewarded over the better part of the last 20 years with entertainment news, information, sports at home.
If you could change one thing about the business, what would it be?
I do think that my concern from the moment I arrived at NBC, and it's still my concern today, is that broadcast television be given enough flexibility and, occasionally, protection to remain relevant and financially viable because I think it is a unique part of our history and it's free to the viewer.
Is the question "free for how long"?
It's a point that gets lost a little bit because so many people watch it on cable so they feel they're paying for it. But free television programming is clearly under pressure every day.
How surprised are you at all the high-ticket programming that has migrated to cable?
We have seen a lot of very expensive programming moving to cable simply because of the fee structure. And that's disappointing, but it's not shocking.
What's the solution?
I don't know that there is a solution. I think, in some respects, the cable operators have been picking up the tab for most of this stuff. And they've been doing it to grow their own businesses. They have great balances of programming today; they probably don't need a lot more.
But, as long as they are willing to pay for things like the NBA or the NHL or Major League Baseball to go to cable, then they're going to drive up the bills and basically take programming away from the broadcast entities, which are really not the enemies of cable. They should be friendly because it's the service that has the most viewers that doesn't cost anything.
Isn't that just marketplace competition?
But it isn't really. If you're a cable operator today, your best-viewed shows are all on broadcast television. You're bringing [them] into people's houses as part of your package, and you don't have to pay the broadcasters. It's a wonderful deal. If I was a cable operator, I'd want to see broadcasting keep every program it has because, if it came to me [directly], I'd have to pay for it.
Is the over-the-air television business viable over the long term as a stand-alone business?
It certainly is if
it can afford the programming. And it's both a creative issue and a cost issue. The creative issue is, you have to have attractive programming that really has appeal. And you should take advantage of the system of broadcasting, which is the local-national connection.
And the cost issue?
You have to be able to afford it, and that's going to be difficult because the fee structure of cable allows it to rely a lot less on advertising than a broadcaster has to. Then, I think, if we're creative, we should be able to do okay.
Affordability gets down to being a victim of your own success when you look at shows like Friends
and ER, doesn't it?
Yes. The history of hits is, you always stay longer than you intended. When something is working well, as a programmer, you don't want to lose it, and you probably become overly conservative at that phase of a program's life.
It's hard to predict. I've had shows in my 10 years where we have stayed too long and it's cost us dearly. And then I've had other examples where we've stayed longer than I thought we would and it's been fine. In that latter category, I would say Friends
are two examples. Law & Order
has been a wonderful show every year that we've had it.
Then there are some times you just get in the enthusiasm of trying to retain a star or a show, you make a bad deal, and you have to pay the piper for that.
Mad About You?
Mad About You
would fall into that category.
What does your gut tell you about the economy and the ad business?
Well, there are positive signs out there. At network level, we've seen good rates. We've seen a good pickup in advertising in the more recent weeks and months leading up to the Olympics. And we had good ratings. So we really are not in a position to complain. But I'd say that's the exception, not the rule.
What about industry-wide?
I think, for the media in general or television, it's been a rough go for about 18 months. The last time we had a period like this was in the 1991-'92 period. That stretched out over two years. I wish I could tell you that it's all over and everything is going to be great, but I think it's still going to be a slow recovery.
For NBC, in terms of revenues and operating profit, is this year going to be a record year?
I don't think it's going to be a record because we had such a great year in 2000. We saw some [downward] pressure on pricing through the upfront last year, and you can't get that back in one fell swoop.
Good year or not-so-good year?
It will be very hard to establish a record, but we'll do very well. I think we'll do extremely well against our traditional competitors and do very well against other media companies in general.
Are you confident that, among Big Four, you'll come out on top in '02 in revenue and operating profit?
I'm certainly not going to do a financial forecast, but I would say that it looks pretty promising.