CEO Steve Burke brings turnaround at NBCUniversal
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Chief Executive Steve Burke, who acknowledges being a bit of a taskmaster, is in unfamiliar territory.
He took over the top job at a time when NBC Entertainment was hemorrhaging $600 million a year. Now the network is poised to end the current prime-time season on top among coveted 18- to 49-year-olds — the first time in 10 years that it will finish in first place in the ratings war.
NBC’s broadcast of the Olympics from Russia in February unfolded without a hitch — and made money. The International Olympics Committee even handed NBCUniversal the U.S. broadcast rights to the Games for 18 more years.
And the most pleasant surprise was Burke’s high-stakes transition at “The Tonight Show,” with Jimmy Fallon replacing Jay Leno, and a relocation of the show to New York from Burbank. The switch worked better than anyone had anticipated.
“It has been an incredible few months — we are firing on all cylinders,” Burke said to NBCUniversal’s nearly 30,000 employees during a town hall meeting.
The turnaround comes at the perfect time.
The television networks this month are beginning to sell their commercial time for the upcoming season in the annual advertising auction known as the upfront market. Advertisers are expected to commit as much as $11 billion for network TV time, with about $8.5 billion of that earmarked for prime-time shows.
NBC hopes to strengthen its lineup even more this fall with the addition of new shows including the political thriller “State of Affairs” and the romantic comedy “Marry Me.”
The ad market this year has been weaker than expected, so NBC’s dramatic improvement strengthens its hand in negotiations. NBC hopes that its newfound edge will help it grab ad dollars away from ABC, CBS, Fox and other competitors.
NBC’s prime-time spots had been selling at a discount to the rates at CBS, Fox and ABC, which enabled the other networks to collect $500 million to nearly $1 billion more a year in revenue. Burke is determined that NBC will make strides in closing the revenue gap during this ad market.
Burke’s town hall meetings take the form of lessons, rather than a rousing pep talk. And in his three years as CEO, Burke has earned a reputation among his underlings for pointing out the company’s shortcomings.
“I’ve had people accuse me of being too tough of a grader,” Burke told his employees during Friday’s town hall. “But my job is to paint reality versus telling people what they want to hear.”
A couple of Decembers ago, Burke displayed a Christmas tree decorated with red, yellow and green during one of the company-wide broadcasts of his talks. Green was good and red represented the disappointments, such as failed TV shows and movie box-office bombs. The tree was awash in red that year.
“People would say, ‘You can’t say negative things about the company,’” Burke said later during an interview. “But you have no credibility if you can’t tell people that they need to do better.”
Emphasizing the importance of results has been a key ingredient of Burke’s plan to transform NBCUniversal and its corporate culture. He started when Comcast Corp. took over the entertainment company in January 2011.
Previously, NBCUniversal was known in media circles for its elaborate public relations spin to gloss over missteps.
For example, the old regime declared the broadcast TV business as less important to the company when its revenue plummeted. But after Comcast took over, Burke noted that other networks were making money — just not NBC.
Burke has installed new leaders at NBC. Companywide, only four senior executives are holdovers from the previous regime.
“Historically NBCUniversal had brilliant people, but some of them didn’t do a very good job of working together,” Burke said. “Now we have people who are working well together.”
One of Burke’s biggest challenges was to repair the damage to late night after the disastrous move of Jay Leno to prime time and the short-lived tenure of Conan O’Brien at “The Tonight Show.”
Early last year, Burke began laying the framework for the switch. He called Leno and asked for his help coming up with a transition plan, and met with him to garner support. The host agreed to do the handoff during the Sochi Olympics.
“We wanted to do the transition in a graceful way,” Burke said. “Jay was fantastic. His last words on the show were ‘Watch Jimmy Fallon.’”
Fallon’s ratings have been 76% higher than Leno’s in the 18-to-49 demographic, and larger than the combined totals for CBS’ David Letterman and ABC’s Jimmy Kimmel. In his first three months, Fallon has brought in 30% more viewers — an average of 4.4 million a night — than did Leno in the previous year.
Not even NBC’s most optimistic projections had Fallon winning so big.
Darcy Bowe, a vice president of video at Starcom USA, an advertising buying firm, said advertisers were expecting that many of Leno’s older viewers would flee and that there wouldn’t be enough younger viewers to replace them.
“But that hasn’t happened,” Bowe said. “I was surprised to see the time period grow so quickly. There has been a renewed interest in late night.”
But Burke had one high-profile setback at this year. The bid that he and NBC Sports Group Chairman Mark Lazarus put together to nab the new Thursday night NFL Football package was rejected. Instead, the league picked CBS to broadcast the Thursday night games.
“The competitive side of me really wanted it,” Burke said. “I felt like I let everyone down.”
Under Comcast, NBC has increased its investment in Spanish-language television and theme parks.
At Universal Studios in Los Angeles, the company is building a Harry Potter attraction and a second Harry Potter ride at the Orlando, Fla., theme park. The theme parks have nearly doubled their operating cash flow since 2010 to nearly $1.1 billion last year.
Burke last fall transferred a longtime television executive, Jeff Shell, to run Los Angeles-based Universal Pictures. The studio is off to a surprisingly strong year with several films, including “Neighbors,” surpassing expectations.
Some analysts believed that Shell, who previously ran NBCUniversal’s international television operation from London, was a risky choice.
“Jeff had never made a movie,” Burke acknowledged. “But what Jeff does really well is that he asks the right questions and he doesn’t have an ego.”
Since Burke has taken over, the company’s annual operating cash flow, a measure of profitability, has swelled to $5.5 billion from $3.1 billion.
“We have the opportunity to create a really great media company,” Burke said.
Then, at the end of his 45-minute town hall broadcast Friday, he turned to the nearly 100 employees who had gathered in Studio 8G.
“Now get back to work,” Burke instructed.
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