Tale of two webs

NBC, Eye trumpet gains, roll with the pains

NEW YORK — NBC and CBS each claimed victory for the November sweeps in analyst presentations Wednesday, but admitted their gains are tarnished by the difficult climate for TV networks.

At separate PaineWebber media conference presentations, NBC prexy Bob Wright and CBS chief financial officer Fredric Reynolds warned that the economics of the network business have grown tougher, but said investments in cable, stations and program ownership would help fuel gains.

Reynolds outlined the need to “convert this growth in households into salable demographics (by adding) more urban, edgier programming,” NBC-style, to win younger audiences so the ratings win can translate to the bottom line. Wright trumpeted NBC’s continued leadership in those important 18-to-49 and 25-to-54 age demos, but conceded afterward that “we would’ve liked to have a lot more success than we had” this season.

Still, buoyed by a $2.15 billion take in the upfront ad market, NBC is wrapping up an excellent year. The Peacock expects to report 20% pretax profit growth, to a record $1.13 billion, a rate Wright admitted will be “difficult to sustain. … We know we have a challenge sustaining our primetime leadership and our margins.”

Revenues will be up slightly, topping last year’s $5.1 billion despite the absence of the Olympics ad bonanza in 1996. CBS wouldn’t disclose its own projections, except to predict that cash flow would rise 20% a year for the foreseeable future as high-margin radio stations become a larger piece of its total business. But analyst Jessica Reif of Merrill Lynch has estimated CBS will have a pretax loss of $103 million for 1997 on pro forma revenues of $5.75 billion, a 6% gain.

Reynolds and Wright reiterated plans to step up the ratio of program ownership, but said they wouldn’t compromise the ability to develop hits from outside suppliers to do so. Each said they’d be interested in a few key large-market station acquisitions, while Reynolds said CBS remains on the prowl for additional radio outlets and outdoor advertising companies.

And cable, enjoying a faster growth rate than broadcasting, is fast becoming an important profit source. CNBC profits will grow 50%, to $120 million this year, and Wright expects pretax earnings to reach $300 million by 2000.

The NFL loomed large as a necessary loss leader for the webs, but each seemed less hell-bent on getting football pacts as the negotiation season nears, with formal talks expected to begin as early as Wednesday.

“I don’t see that in our future,” Reynolds said. “We’re being realistic; I don’t know if any of the incumbents can afford not to pay the price” sought by the league, expected to climb by at least 50%.

“It’s very hard to make money on a lot of these sports,” Wright said. He’d be disappointed if NBC lost its AFC package, but at the same time added, “We don’t want to be reckless. We will do our best to retain what we have, and if we can’t, we’ll move on.”

With CBS at least potentially in the mix as a “shill” to drive up rights fees, Wright added, “Ultimately, the price is a function of the risk we want to take to prevent our package from going to the competition.” He noted that CBS’ loss of a Sunday NFL package in 1993 hasn’t hurt the web in the long-term, as Sunday now is its strongest night.

“There are huge issues facing us with (renewals of) ‘Seinfeld,’ ‘ER’ and negotiations with the NFL,” Wright said cheerily. “That’s part of the fun of the success. I’d rather have those problems that not. We’ll muddle through that.”