Grow and prosper. That's what General Electric President (and Chairman-Elect) Jeff Immelt has told Bob Wright he wants NBC to do. Last week, to help carry out that mandate, Wright promoted Andrew Lack, the news division chief for eight years, to the post of president and chief operating officer at NBC.
Not that NBC hasn't been growing. Quite the contrary: It has been growing at a double-digit clip for the past several years, becoming one of parent GE's key profit centers. In fact, its profits have risen, on average, 21% a year since 1994.
Last year, NBC posted a record $6.7 billion in revenue, up 20% from 1999, making it the fourth-largest GE division. Operating profit for the year was approximately $1.8 billion, up 14%, with net income of roughly $955 million, up 14%.
But, in the public sector, it's a "what-have-you-done-for-me-lately world," and Immelt has challenged Wright, and now Lack, to come up with a plan to sustain growth in the future. This year will be particularly difficult, given the weakened economy and resultant soft advertising market.
Talking to reporters last week about Lack's appointment, Wright said Immelt "wants me to bring him some proposals on growth by acquisition or internal business development. He's quite anxious for that [because] NBC is a very significant earnings performer for GE and Jeff has no interest at all in doing anything to curtail that level of performance. Andy and I have a real challenge to use our resources to grow the business."
Lack, 53, said he'll meet the growth challenge by focusing on "what goes up on the screen. What are our best programs and how do we make them better? How do we get better people to join us and do them with us? That's the business we're in, and that's what our viewers expect from us."
Wright, 57, insisted that GE has no desire to sell, merge or break up NBC. That hasn't always been the case. In fact, during the economic downturn a decade ago, GE almost struck a deal to sell NBC to Paramount, but the deal fell through at the last moment. A couple years back, NBC was in fairly serious talks with USA Networks Inc. Chairman Barry Diller about some kind of link up, but no agreement was reached.
But analysts take Wright at his word. "This is the strongest that they've said that," noted Tom Wolzien, media analyst at Sanford Bernstein. "I think it rings true," he added, especially when the pending change in accounting rules is considered. Those changes, expected this summer, will allow companies to make acquisitions without factoring in amortization and goodwill, which is subtracted directly from profits.
Up to now, GE has not allowed NBC to make such deals because of the earnings dilution the parent company would suffer. That forced the network to stay out of the running for numerous cable networks and studios. Instead, NBC created its primary cable assets and production arms from scratch.
NBC has the financial wherewithal—with GE's deep pockets—to beome a Disney or a Viacom, said Wolzien. "They could buy Viacom. They could merge with AOL."
Wright has never had a clear No. 2—that is, a chief operating officer—to help run the company in the 15 years that he has been at the helm of NBC. Besides the growth issue, he said he needs help with the day-to-day because of his expanded duties at GE, where he has been a vice chairman for the better part of a year. While he's still mostly focused on NBC, a growing portion of his time is devoted to GE and advising Immelt on various matters, particularly on communications issues.
Enter Lack, who will have oversight of most NBC divisions: news, entertainment, MSNBC, the TV stations, operations, sales and affiliate relations, NBC Cable, and CNBC. Wright will continue to oversee sports and Olympics, CNBC International and all of NBC's corporate staff operations.
"Andy and I both have to live by the sword in terms of our ability to meet objectives," Wright said. "We live in a meritocracy; this isn't a family-owned business."
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