NBC Chief Says No GE Plans for a Spinoff

Robert Wright, NBC Inc.’s chief executive, holds the record as the longest-running head of any broadcast network for good reason.

Since he took the helm in 1986--shortly after General Electric Co. bought its parent company, RCA--Wright has turned NBC into the nation’s most profitable network with a disciplined financial approach that often chafes against Hollywood’s free-spending style.

NBC was the first network to jump into the cable news business, and CNBC and MSNBC combined are worth an estimated $15 billion--about half the company’s value.

The company has established many practices that have become industry standards. NBC was the first network to demand equity stakes in its programs. It struck a novel deal to run episodes of “Law & Order: Special Victims Unit” on the network and USA Network in the same week. NBC has led the charge in getting affiliates to shoulder a share of the network’s increased programming costs.

But Wright could use an encore. The network has stood still amid a frantic media consolidation that has seen AOL Time Warner Inc., Viacom Inc., Walt Disney Co. and News Corp. grow into giants. NBC’s network rivals now belong to media conglomerates that control studios, cable channels, radio stations, theme parks and newspapers that collectively give them leverage over advertisers, consumers and Hollywood suppliers.

NBC has been restrained by corporate parent GE, which has prevented acquisitions that would dilute earnings.

In a wide-ranging interview spanning the failed XFL and the likelihood of an NBC spinoff, Wright acknowledged the challenge of maintaining NBC’s average 20% annual growth rate in this climate.

Last summer, Wright was named vice-chairman of GE to bring continuity and a media champion into the executive suite amid a changing of the guard. He recently named network news head Andrew Lack as NBC president, his first.

But the departure of NBC’s No. 1 protector, GE Chairman Jack Welch, has raised new questions about the future of the network.

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Question: Why did the XFL fail?

Answer: The XFL was not a bad idea at all. The ratings were very acceptable for sports. They were approximately the same as baseball, exceeded the NHL and exceeded the U.S. Open and the French Open. But for Saturday night network programming, they were low.

It probably should have started on cable before we brought it to NBC. But it was very expensive programming, so you needed the NBC network advertising to break even. If you started it out on cable, it would have taken too long to make money.

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Question: Why did NBC miss the first wave of the trend toward unscripted programming?

Answer: There’s no easy answer. We were very successful, and when you’re successful you tend to try to repeat your successes over and over again. Fox has always been very scrappy. CBS had problems so they were open to it. ABC was a little more open as well. It hasn’t killed us, but it cost us to be out of the beginning of that. Now we have something we are comfortable with. “Weakest Link” doesn’t play like a quiz show; the demographics look like a good comedy, with a younger, attractive audience.

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Question: “Weakest Link” airs multiple times a week. Is there a risk of running it into the ground?

Answer: It’s preferable to have a show like “Weakest Link” or “Who Wants to Be a Millionaire” on more than once a week. To keep the buzz, you have to have that reinforcement.

We couldn’t afford to produce two episodes of “Frasier” a week, but I think the audiences are ahead of us in wanting to see programs like that more often. Fewer people watch an original of anything anymore. Less than 60% watch all the episodes of the show they list as their favorite. Everybody has VCRs, so it’s not like they can’t catch up. We’re going to get to a situation where [scripted] shows appear more than once a week. It’s going to be looked at initially as a negative, but viewers will expect to have more than one opportunity and not have to rely on TiVo or a VCR to do it.

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Question: This spring you sent a letter to several industry people soliciting their views on HBO’s “The Sopranos.” What was your point?

Answer: It’s the question, not the answer. “The Sopranos” is in 50% of all cable homes. NBC does very well in HBO homes. That show has a lot of material that will not work on the network--issues we tend to believe are offensive, like stereotyping. Yet our audience is driving there. So the question is, what is that telling us? Is it telling us we should do that? Is it an aberration? Are mores changing and are we behind the times? The letter was to stimulate discussion because, unlike HBO shows of the past, this is getting huge ratings. In our surveys, people tell you they don’t really watch shows like that. But people are unabashedly watching it.

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Question: There has been speculation that when Welch retires, GE would spin off NBC because it doesn’t really fit and is restrained inside GE. Why should GE keep NBC?

Answer: The media business has been a great investment. In GE’s rankings of businesses, this is the fourth most profitable in terms of gross dollars. It also is a service-oriented business with very high margins, a great return on capital and on equity, so it is complementary to a manufacturing business. We’re at one of the low points of our cycle, while the aircraft engine business and the power business are excellent. You’re playing a portfolio.

The question will always be asked, “Does it fit?” But the only real question is, “Does NBC have to be a lot larger or more expansive to be successful in the future?” We agonize about that. If NBC keeps performing, it will be just fine here. Actually, having GE as an owner is great for a media company because you need a balance sheet. If we were public, we couldn’t do things like the Olympics because the liabilities would be too great.

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Question: And the possibility of a spinoff?

Answer: GE doesn’t want to get out of the business. The spinoff isn’t on the table right now.

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Question: Why appoint an NBC president at this instant?

Answer: With Jack leaving, I will spend more time on the GE side than I have over the last nine months. It’s not my interest or intention to leave here. But GE has these cycles. There are periods of the year we focus on people, there are other periods we focus on business plans going out three years and another period we focus on the year upfront. I only had to worry about mine, but now I have to participate in others and they are quite time consuming. Jeff Immelt [Welch’s successor] certainly has his hands full trying to follow Jack--it’s not an easy task for anyone. So a number of us has to pour ourselves into those activities. We have to support him. You can’t have lone rangers and hot dogs. This isn’t a sports team.

So this now gives me a legitimate way to participate without feeling like I’m cheating on NBC in the process.

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Question: NBC missed the consolidation wave. Now there’s little left to buy.

Answer: That is true, but it becomes untrue automatically because what happens is that some of the ones that consolidated start falling apart. Nothing stays the same.

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Question: So would NBC buy a studio, newspapers, more stations? What makes sense?

Answer: It’s a combination of those things. I don’t think any of us is smart enough to pick one thing and say, “This is it.” You need to bolster yourself locally, whether you are a newspaper or a television station or radio.

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Question: Most of your affiliates prefer station ownership limits to keep the networks from gaining more clout.

Answer: The cap is a lousy measurement. It doesn’t make any sense.

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Question: You like to say that NBC is a news and information company. Wouldn’t newspapers be the best fit?

Answer: Owning newspapers and stations in the same market would make some sense, but that’s a very expensive proposition.

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Question: GE looked at acquiring Hughes Electronics Corp. Why didn’t you pursue it?

Answer: Hughes is three separate companies: Panamsat, Hughes Network Systems and DirecTV. Our interest was [satellite television provider] DirecTV, but these two other companies have huge capital and cash demands. You have to assume a lot of risk.

DirecTV gives [suitor] News Corp. a much more serious programming platform around the world for years to come. But they are direct competitors with cable and it’s not clear how that will end up. Outside the U.S., satellite has an advantage over cable, but it’s not so clear in the United States, where cable has such a mature infrastructure.

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Question: What about the economics of the Internet?

Answer: Content is being withdrawn from the Web right now by the basketfuls. It’s going to come back later on a fee basis. The referee has been blowing the whistle for a year saying, “Content get off the field, people aren’t paying. No pay, no game.” The first content to come back on the field is sports--baseball and the NBA. They’ve taken the content off the radio for free and are putting it on the Internet on a subscription basis.

At NBC, we’re still coming off the field, dusting off and trying to decide how to get back on the field.

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Question: What’s your goal for NBC?

Answer: To have good economic growth. The challenge is to figure out how to do that. We’ve done a lot internally and with partnerships, and that’s where we have proven to be very good. With changes in accounting rules, it will now be more easy for us to make acquisitions.