GE forecasts deeper Olympics losses
NBC Universal won’t be capturing any financial gold medals this year.
General Electric Co. said Friday that it would lose more than previously indicated -- about $250 million -- on its coverage of next month’s Winter Olympics in Vancouver.
The new disclosure came as GE reported weaker fourth-quarter results Friday that were accompanied by a stronger outlook for 2011. But operating income at the Fairfield, Conn.-based industrial giant’s entertainment and media unit continued to decline despite higher profits among its cable TV channels, including USA and CNBC.
Overall, GE posted a 19% drop in net income to $3.01 billion for the quarter that ended Dec. 31, forced down in part by ongoing real estate losses in the company’s financial services division. Revenue fell 10% to $41.4 billion.
At NBC Universal, profit fell 30% to $602 million from the same period a year earlier. Revenue slipped 4% to $4.26 billion.
GE is in the process of selling majority control of NBC Universal to Philadelphia-based cable TV operator Comcast Corp. The deal is not expected to close for a year as it faces a lengthy review by federal regulators.
Previously, GE said its loss from the upcoming Olympics would be a “couple hundred million.” The company said a recent improvement in advertising demand would not be enough to offset losses.
“It’s an expensive property that they are selling in a tough economy,” said Paul Swangard, managing director of the University of Oregon’s Warsaw Sports Marketing Center. “However, there are other benefits of having the Olympics for GE and its NBC family of television channels.”
It was NBC’s pricey NFL football contract, for the right to broadcast “Sunday Night Football,” and Universal’s lackluster DVD sales that put a drag on NBC Universal’s earnings. The company’s network struggles were compounded by weakness at the Los Angeles-based movie studio.
“The toughest part of NBC, and the thing that has driven our earnings all year long, has been film,” Keith Sherin, GE chief financial officer, said in a call with Wall Street analysts.
The Universal Pictures studio generated $1.2 billion in revenue for the quarter, down $400 million from the fourth quarter of 2008. “We didn’t have any big films in the fourth quarter, in terms of theatrical, but we had very tough DVD comparisons,” Sherin said.
For example, in the year-ago period, Universal stocked store shelves with such popular movies as “Mamma Mia,” “The Incredible Hulk” and “Wanted” and sold 33 million DVDs. But consumers bought only 12 million Universal DVDs during the recent holiday season.
The film unit’s operating profit fell $200 million in the quarter compared with the same period the previous year, Sherin said. “That was really challenging.”
Despite improvements in the advertising market, the company’s broadcast unit slogged through another mediocre quarter.
Broadcast, including local television stations and Spanish-language network Telemundo, reported revenue of $1.6 billion, down 2% from the previous-year period. Sherin did not provide operating profit but said that it was “driven [down] by NFL sports fees and new programming investments that we’ve been making.”
NBC has been spending heavily to go into business with top producers, including J.J. Abrams, to come up with dramas to plug holes in its prime-time schedule, including the 10 p.m. slot to be vacated when Jay Leno returns to late night.
Again, cable channels were the stars of NBC Universal. The group generated $1.3 billion in revenue, up 8% from the previous year. Profit for the unit also rose 8%, and Sherin said that USA Network, Bravo, Syfy and Oxygen all had profit increases of at least 20%.
“Cable had another great quarter,” Sherin said.