For NBC executives, it has been an unfathomable TV season. Historically, the network has been a prime-time powerhouse thanks to hits such as ER, Law & Order and its spin-offs, Seinfeld, Frasier, and Friends. The prime-time crown was a point of pride even at NBC parent General Electric Co. (GE) But this year honchos have watched their network slip and have been forced to play catch-up in the prime-time ratings race against ABC (DIS) and CBS (VIA). Who would have believed that the longtime darling would turn out to be the first headache of the newly created entertainment giant NBC Universal Inc.? "We're not as strong as we've been, maybe," concedes Jeff Zucker, president of NBC Universal Television Group. "But we're only one breakout hit away from being there again. Of course, breakout hits are harder to come by these days."
So executives may be excused their extra butterflies as they prepare to take the stage at Radio City Music Hall on May 16 to unveil next season's prime-time lineup to advertisers. The so-called upfront presentation will be a crucial test for NBC as it tries to spin to Madison Avenue that it will be back on top in the fall. But some advertisers may no longer be willing to pay the 5% to 20% premium they say they have shelled out to NBC in the past. "It's something we will need to address during this year's upfront," says Andy Donchin, director for national broadcast at media buyer Carat USA. Network execs, who say they will maintain a premium on rates, have the new shows under wraps. But they have made no secret in recent weeks of what they are willing to do to help the network and promote their prime-time shows, from shaking up management at the Today show to paying big bucks to gain the NFL's mass audience.
When NBC went after Vivendi Universal's (V) movie and cable-TV assets, the notion was that the broadcast network would serve as the essential core for the expanded entertainment conglomerate. But that thinking may have been turned on its head. In GE's first-quarter earnings report, released on Apr. 15, execs acclaimed almost every business at NBC Universal -- except NBC's prime-time performance. DVD sales of Ray and the box office for Meet The Fockers, as well as strong showings from the Sci-Fi Channel and USA Network cable channels, were all noted for their role in a 20% jump in operating profits on a comparable basis for NBC Universal. By contrast, NBC prime-time ratings, execs said, faced tough comparisons following the final seasons for Frasier and Friends. While operating profits in the quarter were up 5%, revenues at the network dropped 3%.
Rivals' prime-time gains haven't come easily, however. The ratings differences among ABC, helped by Desperate Housewives, CBS, with its CSI franchise, and third-place NBC amount to less than a percent. "Yes, we are disappointed," says Carat's Donchin, particularly with The Apprentice and The Office, which fell short of expectations, and LAX, canceled after three months. "But we realize the sky isn't falling." NBC's Zucker likes to point out that his network's offerings reach a larger number of affluent viewers, households with income of $75,000 or more -- the kind advertisers in the past have ponied up to reach. Beyond prime time, NBC Nightly News with new anchor Brian Williams is the top evening news show, and Jay Leno consistently wins late night. Still, Zucker knows he needs a "game-changing hit."
Meanwhile, he isn't just waiting around for one. After watching the Today show's perennially wide lead over ABC's Good Morning America erode over the past six months, Zucker took action on Apr. 19 by replacing the show's executive producer. Today, with an average of about 6 million viewers daily, is a great platform to promote NBC's nighttime lineup. "I didn't like the way it was being produced. It was getting soft," says Zucker, "and we had to get that turned around while we were on top rather than later." Also at risk could be the estimated $350 million in revenues and $250 million in operating profits Today generates, making it one of the most valuable businesses under the NBC Universal umbrella.
A day before the Today show shakeup, NBC announced it would pay a hefty $600 million a year for the right to broadcast NFL games starting in 2006. The network abandoned football in 1997, saying it could no longer afford the league's high fees. But now the logic was compelling: A guaranteed young male audience tuning in to NBC every Sunday night in an increasingly fragmented media world began to make strategic sense, particularly given NBC's current prime-time predicament. "This is such a great opportunity to cross-promote other shows," says Deane M. Dray, an analyst at Goldman, Sachs & Co. (GS). Having the NFL certainly won't hurt vs. ABC's Desperate Housewives in the same time period. "Our Sunday nights, with Crossing Jordan and Law & Order: Criminal Intent, were doing all right until Desperate Housewives came along," says Zucker. "Now we can move them to other nights, where they can also help us out."
The first lesson of prime-time television is that nobody stays on top forever. Sooner or later the underdog gets to wear the crown. But NBC Universal, the newest media combo on the block, is still working out the kinks even as it continues to sell investors and advertisers on the merger. The last thing it needed was having to answer for a prime-time slide.
By Tom Lowry in New York and Ronald Grover in Los Angeles, with Diane Brady in New York