New York/ Boston: Chief executive officer of General Electric Co. (GE), Jeffrey Immelt resisted pressure from investors to sell NBC Universal for years. He may be about to show them it was worth keeping.
The entertainment unit, stigmatized by shareholders for its TV network’s last-place showing since 2004, has served up seven quarters of earnings rises through cost-cutting. Now, NBC Universal CEO Jeffrey Zucker is ready to deliver on promises to lift its value through investments in the US and international cable operations and the global exposure from NBC’s coverage of the Olympic Games.
“The challenge that NBC had is that it has done poorly in the ratings,” said analyst Scott Davis with New York-based Morgan Stanley. “NBC has made investments in Internet, cable and international—the combination should help to offset the declines in domestic broadcasting.”
NBC Universal’s market value may jump as much as 50% to $45 billion (Rs1.9 trillion) in two years, Davis said. That would vindicate Immelt’s contention that holding on to the division helps GE. The NBC network, although a shrinking contributor to that value, may also climb out of last place.
Over the past year, Zucker has bolstered NBC’s cable holdings. In the US, he partnered with Bain Capital Llc. and Blackstone Group Lp. to buy the Weather Channel for $3.5 billion and paid another $925 million for Oxygen Media. He has also agreed to buy the UK’s Sparrowhawk Holdings, Jupiter Telecommunications Co.’s JSBC2 unit in Japan and 26% of the entertainment division run by India’s biggest news broadcaster, New Delhi Television Ltd.
Even before these buyouts, cable’s contribution to the division had been growing, thanks to top-rated shows such as USA Network’s Monk. NBC Universal’s cable networks rai-sed 54% of the unit’s $3.1 billion in pre-tax profit last year. Cable profit should rise 15% this year, up from a 5% rise in 2007, according to a February report from JPMorgan Chase and Co. analyst Stephen Tusa.
The Olympic Games, starting this week in Beijing, will provide NBC chief programmer Ben Silverman with an audience of 200 million to promote new fall shows such as My Own Worst Enemy, starring Christian Slater, and a remake of Knight Rider.
NBC will pull in an estimated $1 billion in revenue from the 17-day Olympics, GE said last month.