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NBC Universal

NBC Universal

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NBC Universal was created in 2004 from the acquisition of the Universal Studios movie and theme park business by television network NBC. For more than two decades, NBC had been a subsidiary of industrial giant General Electric, but disappointing performance by the merged business persuaded GE finally to cut its losses at the end of 2009. It agreed to transfer a controlling stake in the business to cable provider Comcast. That deal completed at the beginning of 2011, and Comcast bought out the remaining shares during 2013. NBC is still probably America's most celebrated television network but it rather lost its way after 2005. Historically the #1 or #2 network by ratings as a result of hit shows such as Friends, ER and The West Wing, NBC struggled for years to find new series to replace those long-running audience favourites. There has been a striking return to form under Comcast's ownership with NBC rebounding from bottom place among the Big Four networks to #1 in the highly prized 18-49 adult demographic. NBC Universal also controls a number of regional and cable stations which meshed well with Comcast's existing portfolio.

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In December 2009, General Electric agreed to transfer a 51% shareholding in NBC Universal, as well as management control of the business, to US cable operator Comcast. That deal was finally approved by regulators at the beginning of 2011. Comcast injected its own cable content assets into the jointly owned group, creating a business valued at $37.25bn. At the beginning of 2013, Comcast bought out GE's remaining 49% stake for $18.1bn including real estate and debt.

Broadcast Television

NBC is one of America's most celebrated TV networks, often nicknamed "the Peacock" in a reference to its famous logo. It is broadcast via 10 of its own directly owned regional television stations, and a network of around 200 affiliates. It operates through three main programming units of NBC Sports, NBC News and NBC Entertainment.

The main broadcast network is partnered by Telemundo, acquired in 2001, and now the country's #2 Spanish language network (behind Univision). It claims to reach 93% of Hispanic viewers in the US through 17 owned-and-operated stations, almost 50 broadcast affiliates, as well as a further 1,000 cable affiliates. Mun2 ("moon dose") is a niche Hispanic cable channel aimed at a youth audience.

NBC has a long-established reputation as a leader in News and Sports. Among the main broadcast networks it remains the leader by ratings in news coverage, with shows such as Today, Meet The Press and the Nightly News, though there have been some recent alarming wobbles in performance. Ratings began to slide in 2012, and the channel's editorial integrity was badly tarnished when anchor Brian Williams was found to have exaggerated stories about coverage in the field in Iraq. In 2015, the network rehired Andy Lack, previously head of NBC's news division for a decade until 2003, to restore its direction. One key move by Lack was to woo top news anchor Megyn Kelly away from cable rival Fox News in 2017. She has yet to prove her worth for NBC.

NBC's long-established reputation as the leader in sports coverage remains unchanged by any problems suffered by other parts of the network. In 2005, NBC Sports acquired rights to enormously popular NFL Sunday Night Football from Disney's ESPN cable channel at a cost estimated at around $3.6bn over six years. It is the network's single most-watched show by a considerable margin (averaging 21m viewers in 2014/15), and commands the highest ad rates of any broadcast show. NBC also hosts the vastly lucrative Super Bowl telecast every three years. It reported record revenues of $376m from the 2015. NBC will host the game next in 2018.

NBC has exclusive US broadcasting rights for another sporting benchmark, the Olympics, currently up to and including 2032. Despite fierce bidding competition from rivals Fox and ESPN, NBC secured rights to the 2014 to 2020 Games in Spring 2011 with a bid of $4.38bn, and extended its license in 2014 for a further 12 years to 2032 for an additional $7.8bn. The Olympics are a key revenue generator for the network. The 2008 Beijing Olympics proved an even bigger success than expected, generating additional advertising revenues of well over $1bn from a viewing audience which averaged around 30m viewers per night. At the time, the event set a new record as the most watched in US television history, attracting a total of more than 310m viewers in all. The London Olympics of 2012 did even better, and Rio 2016 better still, generating combined additional revenues of $1.62bn. The Winter Olympics in South Korea are expected to be another big draw in January 2018. Other sports rights include English Premier League football until 2016 and selected NHL, Nascar and PGA Tour fixtures. Sister channel Telemundo has Spanish language rights to the FIFA World Cup until 2022.

The network's most serious problems from 2005 onwards were in Entertainment, the unit responsible for all other programme content. A string of hits kept NBC at the top of the ratings for almost all of the 1990s and early 2000s. However, two of the company's most popular shows, long-running favourites Frasier and Friends, came to the end of their runs in 2004, and NBC's previously unbeatable command of audience ratings on advertising-packed Thursday nights took a significant tumble. With no significant new hits to replace its past runners, NBC recorded a disastrous drop in performance for the 2004/05 season, finishing last by ratings not just in the key 18-49 age group, but also by total audience averages.

Another long-running audience favourite, The West Wing, ended in 2006 contributing to an even poorer performance for the 2006/07 season, in which NBC scored its poorest ever ratings, with no Top 10 shows. Performance improved a little for 2007/08 as a result of reality shows such as American Gladiators, Biggest Loser and Celebrity Apprentice. America's Got Talent was a big success in the summer of 2008, and it enjoyed critical successes such as The Office and especially 30 Rock, a series which also dared to bite the hand that fed it with its cutting, only partly affectionate, dig at NBC's corporate parent GE. However both of those shows came to an end during 2013.

Another long-running success, The Tonight Show, suffered serious damage during the 2009/10 season as a result of a misguided attempt to shake it up. Host Jay Leno was shifted to an earlier prime time slot in a different format, and replaced on The Tonight Show by late late show host Conan O'Brien. Disaster ensued as Leno was unable to attract audiences to his new slot, and O'Brien was unable to prevent The Tonight Show from slipping behind cross-channel rival Dave Letterman for the first time in 15 years. An equally cackhanded attempt to fix that problem by changing time slots led to the departure of Conan O'Brien with an alleged $40m payoff, and Leno's reinstatement. (A second attempt was made to replace Leno in 2013 with Jimmy Fallon, and this finally proved a notable success with audiences).

Despite the takeover by Comcast, NBC appeared to start the 2011/12 season in even worse shape than before, with audience ratings continuing to slump, and a resounding absence of any new hit shows. Without the benefits of the Winter Olympics' advertising sales, divisional revenues for fiscal 2011 slumped to $6.4bn (from $6.9bn in 2010). However, at least 2012 got off to a good start with the Super Bowl, which set new records as the most-watched broadcast in US history, and generated $259m of additional advertising revenues. NBC finished the season in 3rd place for the key demographic of 18-49 viewers, marking the first time since 2003/04 it didn't take last place in that segment, although it was still in the bottom position for total viewers.

NBC took an unexpected early lead among 18-49 viewers at the start of the 2012/13 season as a result of The Voice and scifi drama Revolution. Unfortunately that strong start quickly evaporated, and there was no overall change in the rankings by the end of the season with NBC last out of the big four for total adults (6.97m viewers), and #3 in the 18-49 segment. Only its two main football broadcasts and The Voice featured among the top 30 most-watched shows of the season, and only Revolution featured among the top 50.

Finally, all those years of struggle paid off in 2013/14, with NBC capturing and then holding the top spot among 18-49ers, and rising to #2 by total viewers with an average audience of 9.2m. Sunday Night Football was the top show of the season by average audience, supported by The Voice and scripted drama The Blacklist. The Winter Olympics provided another significant boost to performance in 2014.

For 2015/16, NBC was the #2 network in total viewers but slipped back to second place in the 18-49 demo after two consecutive years at the top. Sunday Night Football was once again the nation's most watched show at 21.4m "Live+7" viewers. The Voice ranked among the overall top ten with 13.3m for its Monday night slot, but Tuesday was lower at 12.6m. New talent show Little Big Shots attracted an audience of 12.4m, while Football Night in America was on 11.6m. These were followed scripted dramas The Blacklist (11.2m), new dramas Blindspot (10.8m), Shades of Blue (9.9m) and Chicago Med (9.8m).

NBC was the leader in primetime for the third time in four years in 2016/17, mainly as a result of its dominance in sports, and regained leadership in the 18-49 demographic. Its Sunday Night Football was the most watched show for the 6th consecutive season, with an average of 19.75m total viewers. The network also scored big hits with America's Got Talent and The Voice, while scripted drama This Is Us was the hottest new series of the year on any channel. Long-running late-night comedy sketch series Saturday Night Live made an unexpected return to prominence, and its best ratings for years, as a result of a seris of blistering satirical attacks on the Trump administration.

Combined revenues from the group's broadcast television business rose by a spectacular 19% in 2016 to $10.15bn, boosted considerably by the Rio Olympics. There was an inevitable decline in 2017 to $9.55bn. advertising accounts for around two-thirds of revenues, with the remainder split between content licensing (sales of content to other broadcasters) and distribution income from affiliate stations. EBITDA was $1.25bn.

For 2018/209, NBC led the 18-49 demographic segment for the 3rd consecutive year. 'Sunday Night Football' was once again the country's most watched regular show, with an average of 19.3m viewers. Other top shows for the season were 'This Is Us', 'Sunday Night Pre-Kick', 'Manifest', and 'AGT Champions' (all among the Top Ten), the trio of 'Chicago Fire', Chicago Med' and 'Chicago PD', and 'The Voice'.

Cable Networks

Even bigger and more lucrative than its broadcast division is Comcast's large collection of cable assets. The most important of these is USA Network. It is the most-watched ad-supported cable channel in the US, although it was overtaken for the first time in 2014/15 in total viewers by ESPN. USA Network had almost 2.2m average total viewers out of a total reach of around 92m homes in 2016. Top shows included WWE Raw, Suits and Psych. Another key asset is is business channel CNBC, which reaches 89m US homes and another 40m worldwide, supported by MSNBC (91m households worldwide). Previously a joint venture with Microsoft, NBC acquired control of the channel in 2005 and is integrating it into the main NBC News service. NBC bought full control of the MSNBC website in 2012. Bravo, acquired in 2002, carries upmarket arts and entertainment programming to around 88m US households. Original programming launched by the channel includes Inside The Actor's Studio and fashion shows Queer Eye for the Straight Guy and Project Runway.

The purchase of Universal added a clutch of other themed cable channels to the portfolio. Syfy (formerly The Sci-Fi Channel until 2009) is a genre specialist and home to the Stargate franchise and new Battlestar Galactica series. Another channel launched in 2006, offering crime-related movies and TV shows. Originally named Sleuth it was renamed Cloo in 2011, but was closed down in 2017. Horror channel Chiller launched in 2007 as a joint venture with Sony Pictures. Also in 2007, the group acquired UK-based Sparrowhawk Holdings, giving it control of a substantial further collection of cable assets including 18 regional versions of The Hallmark Channel, broadcast to more than 150 international markets (excluding the US), global kids network KidsCo, and two UK businesses, movie channel Movies24 and lifestyle channel Diva, launching in 2007. That purchase was followed by a $925m deal to acquire independent US women's cable network Oxygen, with a reach of 76m homes. The following year, the group agreed to pay a weighty $3.5bn for The Weather Channel. The deal includes the main cable channel, the third most widely network in the US, available in 96m US homes, as well as website Weather.com, which brings in 40m unique visitors per month, and a mobile phone services unit, Weather Services International.

As part of the Comcast deal, that company injected its own existing cable strands into the joint venture. The most important of these is E! Entertainment Television, which reaches around 90m US households. It is supported by The Golf Channel (78m US homes and sports and leisure channel NBC Sports Network (rebranded from Versus in 2012; 83m homes). Gaming channel G4 relaunched in 2013 as The Esquire Network in an affiliation with Hearst's men's magazine (58m homes). The group has shareholdings in several other stands including kids channel Sprout (59m homes). Asian American specialist AZN Television was shut down in 2008 because of a lack of interest from viewers. There are also four regional Comcast SportsNet channels, and the group has a 60% shareholding in two regional sports channels under the Fox Sports Net banner. E! and Style Network were originally jointly owned with Disney; Comcast acquired Disney's 40% stake in 2006.

The company also maintains equity interests in Arts & Entertainment (25%, alongside Disney and Hearst) and The History Channel. It sold back its 32% stake in family reruns broadcaster PAX TV in late 2003 to parent Paxson, although it retains to buy the latter group outright. International holdings include CNBC Europe as a joint venture with Dow Jones, CNBC Asia with Dow Jones and Nikkei Group, and National Geographic Channels International with National Geographic and BSkyB/Fox. NBC Digital Media operates the group's various own-brand new media interests. In 2006, the group agreed a deal to acquire high-profile women's portal iVillage for around $600m. It acquired an initial stake in digital news and entertainment service BuzzFeed in early 2016 for $200m, and invested a second round of finance towards the end of the year to build its stake to 25%. NBCU also manages advertising sales for the site.

Even without the contribution from the Olympics, combined revenues from the group's cable networks portfolio continued to edge upwards in 2017, to $10.63bn, with EBITDA of $4.08bn. Transmission and distribution fees accounted for around two-thirds of revenues, and advertising for most of the rest, with an additional contribution from sales of TV content to other broadcasters. Despite a slow decline in the number of households receiving the group's channels, fees have been slowly increasing. Fees and advertising income both got an extra lift in 2016 from Rio Olympics coverage.

The NBC Agency is a dedicated in-house unit which handles all the group's creative advertising. NBC Universal Television Studios produces a wide variety of different series and one-off shows, not just for its own networks, but also under contract to rival companies. Current or recent hits include 30 Rock, Law & Order, Las Vegas and The Office, all for NBC, as well as House (for Fox) and Sons & Daughters (for ABC). In 2008, the group acquired UK-based drama producer Carnival.

The broadcast and cable businesses are partnered by the Universal Studios filmed entertainment and theme parks business. See separate profile.

Google's acquisition of video sharing portal YouTube in 2006 raised concerns among all mediaowners over copyright control. NBC Universal agreed a retrospective licensing arrangement with Google and YouTube to cover user-uploaded content in early 2007, but a few months later also announced a potentially groundbreaking alliance with News Corporation's Fox division to launch their own online video distribution channel. This service, Hulu.com, launched in October 2007, offering a wide range of professionally produced network TV and movie content. Content is free, supported by advertising, and the new service quickly established itself as the second biggest online video service behind YouTube. In Spring 2009, Disney's ABC network agreed to become the third content partner in Hulu, acquiring an equal stake for an unspecified sum. As a result of the purchase of NBC by Comcast, the enlarged group was obliged to surrender its voting shares to avoid a conflict of interest. The three content owners bought out finance partner Providence in 2012 and now split ownership equally three ways. A paid-for service was later added. Though it has rarely attracted the media attention won by streaming rivals Netflix and Amazon, Hulu achieved a startling and largely unexpected victory in 2017 when its first ever commissioned scripted series, The Handmaid's Tale, won the Best Drama Emmy, a first for any non-traditional channel.

Financials

The combined NBC Universal group generated revenues of $33.0bn in 2017, up 4% on the previous year. Stripping out the Olympics from 2016 figures, growth would have been 10%. EBITDA rose 14% to $8.25bn.

Background

The National Broadcasting Company was established in 1926 by Radio Corporation of America, then a division of General Electric. RCA was primarily a manufacturer of commercial wireless radio sets, which had become one of the fastest-selling products of the decade. NBC was formed to produce professional programming for this rapidly growing audience. A year later, the company set up a sister network alongside NBC, under the name The Blue Network, to provide an alternative choice of programming. However in 1930, as a result of an anti-trust ruling from the US government, GE was obliged to sell off its stake in RCA.

Under the control of mogul David Sarnoff, the newly independent company spent much of the 1930s exploring the television market, launching the first regular broadcasting service in 1939. However the government became increasingly concerned by NBC's dominance in this fast-growing market, and stepped in again, forcing RCA to sell off one of its two networks in 1943. The Blue Network was spun off as an entirely separate business, and was renamed the American Broadcasting Company (ABC), now part of Disney.

The 1950s proved boom years for the television industry, as it finally became a mass medium, cracking the hold of the cinema on family audiences. advertising revenues soared. But after leading the way throughout the 1950s and 1960s, RCA's performance slumped during the 1970s as its NBC network was overtaken in ratings by rivals CBS and ABC. In the 1980s the network reinvented itself with a string of hit series including Miami Vice, Cheers and The Cosby Show. As a result of a change of regulations, General Electric was allowed to reacquire RCA in 1986, but as a result of continuing poor performance in the company's radio network, the RCA name and its radio stations were sold two years later. NBC experienced another slump in the early 1990s, but once again rebounded mid-decade with Seinfeld, Frasier, Friends and ER. Also in the 1990s, NBC established cable networks CNBC and MSNBC, and later took stakes in internet services Snap.com and CNET. However NBC Internet, a separate division spun off in 1999 to develop online content, was one of the first online businesses to suffer from the digital downturn, and was ultimately absorbed back into the main network in 2001.

Towards the end of 2001, NBC announced it would acquire US-based Hispanic broadcaster Telemundo Communications for $2.7bn in a mix of cash and stock. The following year the company achieved a long-cherished ambition, acquiring an arts and entertainment channel which it could use for programming considered too edgy or adult for its main network. It acquired the Bravo channel from Rainbow Media Holdings, a subsidiary of Cablevision, for around $1.25bn in cash and shares.

In 2003, the network extended its hold over broadcasting of the Olympics, agreeing a $2.2bn bid for rights to the Winter Olympics in 2010, and the Summer Olympics 2012. The fee was around 30% higher than the sum it agreed for the 2006/2008 games. But the group also faced the difficult task of finding replacements for its long-running hit comedy shows Friends and Frasier, both of which aired their final shows in 2004. NBC responded by broadening its offering, agreeing a deal to acquire the substantial film, cable and theme park assets formerly known as Vivendi Universal Entertainment. After several weeks of exclusive negotiations, the $14bn deal to acquire Universal was confirmed in October 2003, and closed the following May.

Long-serving chairman-CEO Bob Wright retired in February 2007 and was replaced by Jeff Zucker, formerly CEO of NBC Universal Television Group. Zucker held that role until the takeover by Comcast.

NBC Universal had long been one of the smallest reporting divisions within General Electric, contributing just over 9% of group sales in 2008. That fact, and the lack of fit with other GE units, had often led to speculation that the business could ultimately be put up for sale. There were rumours in 2009 of potential interest from Time Warner, although there was no firm evidence for those stories. However a deal was eventually agreed towards the end of the year with cable giant Comcast. Until that point, General Electric owned 80% of NBC Universal, while Vivendi retained a 20% shareholding. (For historic reasons, Matsushita Electric retained a small financial interest in the former Universal Studios operations. It sold its holding in 2006 for around $1bn to Vivendi.) Vivendi had the right to sell its remaining shares from 2007 onwards, and had begun to discuss this option with GE. That led to a decision to sell off the business.

After several months of talks, a price was agreed for the buy-back of Vivendi's shares, and the subsequent transfer of a 51% holding to Comcast. Under the terms of the deal agreed in December 2009, NBCU borrowed $9.1bn of cash and gave that sum to GE, which used $5.8bn to reacquire Vivendi's shares and kept the rest. Comcast then acquired a 51% shareholding for $6.2bn and injected its own cable assets into the now jointly owned business at a pre-agreed valuation of $7.25bn. GE held the right to put half its remaining shares to Comcast in 2014, and the final stock in 2018. Instead, Comcast took an option to complete the takeover early, in 2013. It paid $16.7bn for the GE shares plus an additional $1.4bn for NBCU's premises at 30 Rockefeller Plaza, New York, and in New Jersey.

Last full revision 3rd November 2017

* Archive page for historical reference only. This profile is no longer being actively updated. See active page here *


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