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Making a Big Deal Of NBC's Cash Flow

Welcome, Comcast, to the problem Jeff Zucker faced before you canned him as CEO of NBCUniversal. No matter how well the company does, if the NBC Broadcast network is running fourth in the ratings and its profits are poor, that’s all some people are going to talk about.

Case in point: after Comcast released its earnings Wednesday, analyst Craig Moffett of Sanford C. Bernstein & Co. published a research note that said:  “The core of the programming business is NBCU’s cable networks unit, and results there were good. But the face of NBCU is the broadcast network, and while investors were braced for a weak result, they didn’t disappoint in disappointing.”

How much red was in the Peacock’s tale?  The broadcast unit-including the network and the stations-had negative cash flow of $7 million, compared to positive cash flow of $70 million a year ago. According to the company, “the loss reflected increased investment in primetime, news programming and local stations, as well as acquisition-related accounting revisions totaling $24 million.”

According to Moffett, NBC’s “revenue of $1.5B was in line [with expectations]… but the network barely turned a profit on an EBITDA basis, and managed to miss even its paltry 2.8% consensus margin expectation. Meanwhile, some big 2011/12 season bets like Playboy Club have already flamed out… and early ratings of replacement programming are even worse. Lest anyone harbor any illusions to the contrary, turning around a network can take a long time.”

NBCU CEO Steve Burke said that the advertising business continues to be strong, particularly national advertising. “We’re 90% sold out for the Super Bowl. We’re seeing lots of demand for all sorts of cable and broadcast advertising, so that continues to be a bright spot,” he said.

But while ad sales at NBCU’s cable networks were up 9.5%, sales were flat at NBC, reflecting higher pricing that was partially offset by weaker primetime ratings plus lower political advertising at its TV stations.

To be fair, Comcast, from CEO Brian Roberts on down, seem intent on making the investments necessary to make NBCU, including the broadcast network, successful.

Asked by an analyst during Wednesday’s earnings call if Comcast would be making more than the $300 million in investments in NBCU that the company talked about at the beginning of the year, Roberts said there might be more good reasons to spend and we “certainly don’t want tobox ourselves into not being able to make those investments when they present themselves.”

One such investment was spending $600 million for the Spanish language rights to the World Cup in 2015 through 2022. “This investment should be profitable for Telemundo, a real game-changer for that business and an opportunity for our company,” Roberts said.