Bob Wright's Post-Vivendi Schmoozathon
By Ronald Grover
NBC Chairman Bob Wright is one hot property, having slogged through Vivendi Universal's three-month auction to strike the deal of his life. General Electric's (GE ) NBC unit will merge with Vivendi's (V ) studio, theme parks, and cable channels to form a media behemoth valued at north of $42 billion, with annual revenues in the range of $13 billion.
Now everyone wants some time with the slender, balding media mogul. Rumbling through the cavernous NBC studio in Burbank, Calif., on Sept. 3, he's headed for a three-minute spot on KNBC's 5 p.m. newscast. Jay Leno wants a few minutes before he starts filming The Tonight Show. Even an NBC cameraman, rolling equipment into position as the newscasters banter, has a request. Thrusting a white baseball hat emblazoned with the GE logo at Wright, he asks for –- and gets –- his autograph.
The aftermath of a big deal, as Wright's whirlwind pace suggests, can be as arduous as the crafting of it. His job now: selling the virtues of the deal to the constituencies that can kill it –- the press, investor communities, even the executives who work for the company that will be merged into NBC.
CUTS TO COME.
The odds are this deal won't come unstuck, though. The benefits for both sides are just too good. NBC gets cable outlets for its programming, a massive library of older films, and a film and TV studio. Vivendi gets a blue-chip operator for assets it admitted it didn't have a clue how to run.
Wall Street seems to like the merger, too. In the days after the deal was announced, the stocks for both Vivendi and GE traded up, a rarity in the aftermath of the AOL-Time Warner (AOL ) hookup. "The combined entity enjoys a complementary set of assets with an opportunity to unlock significant value on each side," Merrill Lynch analyst Jessica Reif Cohen wrote in a Sept. 3 report.
Just the same, Wright & Co. aren't taking any chances. Campaigning just as hard as one of the 135 candidates seeking the California governorship, he chatted up the press in New York right after the deal was announced Sept. 2. He then jumped aboard GE's Gulfstream jet with Vivendi Chief Operating Officer Jean-Bernard Levy to do it all over again in Los Angeles. There, meeting with 175 of Vivendi Universal's top music, film, and TV executives, Wright did his best to calm the nerves of troops who know that at least some of them will be facing the ax.
"We don't own the company yet, so I'm not getting into the games of what we're going to do," Wright tells me as he hustles through the NBC corridors on his way to his KNBC gig. Even so, the exec says his team has identified roughly $400 million in cuts that can be made over the next three years. Some 75% of the $400 million are likely to come from reduced overhead, figures Merrill's Cohen. Wright won't quibble with the number.
What about the talk of cutting at least $100 million by consolidating NBC's in-house TV production with the operations of USA's TV studio –- home to the Law & Order shows that air on NBC? Wright won't go there. "If I start talking about things like that, very good people start walking out the doors," he says.
The big question is what will happen to Ron Meyer, the super-smooth Vivendi Universal president who has had a hot summer with such money-earners as the Jim Carrey smash Bruce Almighty and car-racing hit 2 Fast, 2 Furious. Meyer says he's staying, and as if to prove his point, he made the rounds with Wright during the NBC chief's tour of the Burbank digs. By Ronald Grover
Ah, but just how long will Meyer, known to be openhanded with stars and staff, really stick around? His generous ways may not mesh with GE's cost-cutting culture. "If Ron wants to stay, we'd be thrilled to have him," says Wright, who met with the Universal production team only days before Sept. 2. "If I went out to draft a team, I don't think I could do better than those guys." Still, GE is famous for squeezing money from acquisitions, so the warm, fuzzy feelings may not last forever.
Indeed, NBC is only now being allowed to take a good, hard look at some of Universal's more complex contracts, including those in which the studio shares profits with third parties or sold off foreign rights to help finance big-budget movies. That could mean the 5,000-odd films that NBC gets as part of the deal are far less valuable than Wright may think, say sources with knowledge of Universal's finances.
Both Wright and Vivendi's Levy insist the review of Vivendi Universal's books is largely pro forma. "I don't see a deal-breaker in there anywhere," says Wright. So confident are both sides that they allowed for less than a month to do the review, and neither insisted on a breakup fee. True, Wright says there are tons of tax and other agreements that he wants his team of lawyers and accountants to look at more closely because "those are not the kinds of things that you can examine in the heat of battle." Does that mean some wrangling over details before a final deal? You bet.
RULE OF LAW.
Among the things to sort out before the month is over is NBC's relationship with Dick Wolf, the vinegary producer of the Law & Order programs. Wolf and Universal, which makes the shows for NBC, had wanted a big increase in what NBC pays per episode -- from $1.5 million to $4 million. The NBC-Vivendi merger changes the nature of those negotiations, for sure. One possibility that could keep Wolf from the door: a Law & Order channel in which he would have a stake.
For its part, Vivendi has to make nice with Barry Diller, the media mogul whose Interactive Corp. (IACIW ) owns a 5.4% stake in Vivendi's Hollywood assets, which gives it the right to block portions of the deal. Vivendi's Levy says his company will find a way to "monetize" Diller's position –- code for finding other securities he could take instead. Wright, who spoke with Diller hours before announcing the merger, says Diller is "very happy with this deal." But anyone who knows Diller knows tough roads could still lie ahead.
Wright doesn't disagree with the notion that the Universal theme parks don't fit NBC's profile, but he says this isn't the time to sell. As for the inherently risky nature of the film studio, he says the merged company will be big enough to withstand a money-losing bomb, a near-certainty for any film studio. The wrangling with Diller has to happen in the next few months for the deal to close. And a regulatory review by the feds that could gum up the works is a possibility, though remote.
Still, don't expect the devil –- or a deal-breaker –- in the details. For all his low-key demeanor, Wright is intent on making this merger happen. He has been laying the groundwork for a media empire in recent years, with the purchase of the Telemundo Hispanic network and the Bravo channel to augment the Peacock network. Vivendi offers the missing pieces –- film production, more cable channels, and a massive library of older films and TV shows to show on them.
It may be too early for a victory lap, but Wright's romp through Burbank sure makes for a good rehearsal. As 6 p.m. approaches, he bolts from the KNBC studio and races down to the hall to find "Jay," as he calls The Tonight Show host.
The jut-jawed comic jabbers with his boss in the empty studio, moments before the audience is shown to its seats. "Hey, parlez vous français?" Leno jokes. Then Leno has a brainstorm. How about telecasting from Vivendi's Universal City Walk shopping area to show off the place?
That's synergy, folks. And these days, synergy is what show biz is all about.
Grover is Los Angeles bureau chief for BusinessWeek. Follow his weekly Power Lunch column, only on BusinessWeek Online
Edited by Patricia O'Connell