GE's Immelt: Zucker "As Good as Anyone Running a Media Company"by
Would General Electric CEO (GE) Jeff Immelt like to see NBC Universal CEO Jeff Zucker stick around, even if GE sells off majority control of its broadcast, cable and theme park businesses? “Totally,” the GE top man tells BusinessWeek. No, Immelt isn’t tipping his hand that a deal is imminent with cable giant Comcast(CMCSA, as is widely rumored, to swap assets for 51% stake of GE’s NBU Universal unit. And he wasn’t saying that Zucker has been chosen to continue to run the entertainment assets if – as is also rumored about – if GE hangs onto a 49% stake. Immelt’s PR folks put those questions off limits.
But the often criticized Zucker has an unmistakably strong ally in his corner if such a decision were to be made. And, from what I am hearing, Comcast is pretty close to making a decision to keep Zucker on if they can swing a deal to buy majority control of NBCU. That nugget, first published by Bloomberg, “is directionally true,” according to one insider conversant with Comcast CEO Brian Roberts’ thinking, Another source says that such a provision is already in a draft version of an deal document, although that couldn’t be independently confirmed.
In a brief, but wide-ranging, phone interview, Immelt also agreed with News Corp.(NWS) Chairman Rupert Murdoch that NBC’s one-third owned online site Hulu will eventually be forced to charge a subscription fee for consumers to see some of its streamed TV shows. And, while he laments the very public departures of the top executives at NIBCO’s two most well-known units – Ben Silverman at the NBC network and Mark Shmuger and David Line at the Universal film studio — the GE top executive refuses to fault Zucker’s management style. Instead, he credits the NBCU top man for hiring from within to minimize the disruption.
“Jeff has built a very deep bench,” says Immelt. “That’s good management.” Immelt wants clearly Zucker to stick around to manage the team. Whatever the outcome of the not-so-private deal making for NBC, Immelt went to great lengths to stress that he holds Zucker in more than the traditional high regard that CEOs trot out to publicly support their executives.
“He’s a smart, tough media executive who is not afraid of change at a very difficult time for the media industry,” says Immelt. “I think he’s as good as anyone running a media company today, and he’s only 42 years old.” (Zucker is actually 44 years old.)
Zucker, of course, gets a bad rap among critics for the continued ratings slide of NBC’s prime time lineup and Immelt can’t hide his disappointment at that – “do we like being 4th?? No, I hate it” – but he argues that it wasn’t that long ago that NBC was the top-ranked network and that a hit can turn around ratings quickly. Instead, he gives Zucker high marks for managing what he is says is an asset “in the middle of a transition.” Will the Leno experiment work? There, he sounds a lot less certain. “It’s only been two weeks,” he says of the show’s ratings that have begun to tail off after a strong launch.” Give it a chance.”
But where Zucker gets his highest marks from the boss is his nurturing of NBCU’s transition to its digital future, especially the aggressive programming of its cable channels. Those channels have become heavily profitable, generating revenues from both advertising and fees from cable operators today make up the bulk of the company’s entertainment earnings.
In GE’s most recent quarter, cable’s earnings jumped by 7% to $595 million, GE said in a conference call in July. GE’s broadcast business dropped by $100 million in what GE CFO Keith Sherin called “a tougher quarter,” but the company didn’t break out earnings or losses. Overall earnings throughout Zucker’s operations, including the film studio and theme park, were off by 24% in the quarter excluding one-time items.
“There’s the public perception and there’s the reality” says Immelt, who stresses that cable has helped cushion the blow of the broadcast network’s bleak performance. “Jeff has given us great exposure not just with the USA Network, but with Bravo and with Oxygen, and with MSNBC and CNBC. He’s got us in the sweet spot right now.”
How to squeeze more money out of broadcast TV? Down the road, Immelt says that online sites like Hulu will need to find added revenue for the TV shows they stream to consumers. And, while Hulu executives have made only brief comments about a change in the site’s advertising-only model, Immelt seems eager to revamp Hulu to be more like his company’s cable channels and to get both subscription and ad revenues. “We have a business model there that works,” he says. “The question is how fast we can change (Hulu’s) economics.”
So why not simply remake NBC as a cable channel as well? Other pundits have said that’s the way of the future for NBC and other broadcast networks. “I’ll let you ask Jeff (Zucker) that one,” says the boss.