VIEWPOINTS : DOING DAMAGE AT NBC : The Wrong Approach by Mr. Wright
When General Electric took over RCA last year, it was like one whale swallowing another. GE has had an impressive several years, but RCA has not only had an equally impressive run lately, it is, thanks to its highly visible broadcasting subsidiary, NBC, better-known and more influential than GE.
It was not always that way. A few years ago, NBC was a wreck of a network. But it won the 1985-86 ratings wars, easily besting the once-imperial CBS and ABC, and it is off to a stunning lead this fall.
It’s taken every week, leading runner-up CBS by nearly three rating points, which translates into approximately 2.6 million TV homes and millions of dollars.
On the basis of this, analysts expect the television network to enjoy a sharp increase in operating profit from the $202.5 million it earned on revenue of $2.2 billion last year.
Principal Architect
The principal architect of NBC’s amazing renaissance, Grant Tinker, left the network shortly after GE took over.
Ironically, his successor, Robert C. Wright, a longtime GE hand, seems determined to pluck the peacock.
Recently, he asked each network division to come up with a plan to reduce its budget 5%. That’s standard operating procedure for GE, whose CEO, John F. Welch Jr., is called Neutron Jack because when he finishes streamlining a company, the buildings remain, but the people are gone.
Unfortunately, what’s standard operating procedure for GE may turn out to be fatal to the peacock, and the differences between GE-style management and Tinker’s leadership make up almost a casebook study on the distinctions between timid management and bold entrepreneurship.
In the past couple of years, the networks have lost viewers to more aggressive independent TV stations, cable TV and videocassette recorders, so ad revenue is down.
If revenue doesn’t grow and moderate inflation continues, along with such built-in cost increases as contractually binding pay raises, the network’s profits will begin to decline. Or so Wright believes.
He recently told the New York Times: “From my standpoint, we have no choice whatsoever but to look at the same future ABC and CBS are looking at.
“In the next 18 to 24 months, without advertising growth and only moderate inflation, we will not be able to do any better than we’ve done. Our organization has to understand that in order to have a successful business in five years.”
Wrong, Mr. Wright. First, it was Tinker’s willingness to see a different future than CBS and ABC did that led to NBC’s renaissance and the decline of ABC and CBS.
Second, a successful network, like any other business, is only as successful as its product. A TV network’s product is programs, and at NBC, according to one executive, fewer than 50 of the 2,000 West Coast employees are directly involved in creating and developing programs. In this light, an across-the-board reduction of 5% seems not merely foolish, but blind.
Pitiful Revenue
Faced with disastrous ratings and pitiful revenues when he took over, Tinker became the very model of an entrepreneur.
First, he understood that the principal capital now is human capital and encouraged the most creative people in the business to come to NBC with their ideas.
Second, he understood that the key to generating new wealth is innovation and he brought us a new kind of TV--a cop show without car chases, another cop show in which style and music are as vital as guns and bad guys, and comedies about an alcoholic bartender and four over-the-hill ladies.
“Hill Street Blues,” “Miami Vice,” “Cheers” and “Golden Girls” are contemporary TV--beautifully crafted, sophisticated, innovative and sometimes controversial.
None of these TV standards was an instant success, but Tinker stuck by them, in the best entrepreneurial fashion. He didn’t follow the audience, he led it and remade it, along with television.
Terrific Ratings
Faced with terrific ratings and soaring revenue when he took over, Wright is the very model of a dutiful manager, never looking beyond the bottom line, more concerned with cutting costs than improving the product and, above all, ranking careful management over creative entrepreneurship.
On the job only since September, Wright has already opted for the reflexive managerial approach, rather than the daring entrepreneurial approach, and thus would return the leader into a follower. CBS and ABC are cutting back, so NBC must cut back too. Instead of managing NBC’s money, Wright should be encouraging its talented programmers.
Entrepreneurs, like Tinker, who came to NBC not coincidentally from his own small, innovative and highly successful production company, know that human capital is the only capital that really counts now.
Managers like Wright, who’ve spent their corporate lives watching the bottom line, still haven’t gotten the message.
Until the Tinkers outnumber the Wrights, American business is destined to continue to lag, in vital ways, in the volatile world market.
