NBC in Trouble
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Case Code: BSTR233 Case Length: 23 Pages Period: 1990-2006 Pub Date: 2006 Teaching Note: Available |
Price: Rs.400 Organization: NBC Industry: Media, and Television Broadcasting Countries: US Themes: Failure of Strategy, Revival, Competition, Trends |
Abstract Case Intro 1 Case Intro 2 Excerpts
Excerpts
GE Acquires NBC
In 1986, General Electric (GE) purchased RCA, mainly to acquire control of NBC, for US$ 6.3 billion. In 1986, Tinker announced his resignation. John F. Welch (Welch), then Chairman of GE, appointed Robert C. Wright, who had been serving as the President of GE Credit Corporation, as the President and CEO of NBC in August 1986...
Wright's Strategy
Wright, in a bid to focus solely on television, sold NBC's radio network operations to Westwood One in 1988. In the same year, he sold RCA's music network RCA-Victor to Germany-based media company Bertelsmann AG. He felt that NBC was overstaffed and laid off 150 workers. In 1987, he sold RCA's consumer electronics operations to Thomson. During this period, the cable television market was growing rapidly. Since its introduction in the late 1970s, cable television had grown to reach 56% of US homes in 1989. The cable channels were grabbing advertising revenues from television networks...
NBC in the Millennium
The year 2000 brought bad news for NBC. Due to the dotcom bubble bust, Internet advertising fell drastically. The US economy was experiencing a downturn, and a number of online companies were closed. NBCi, which had grown rapidly and employed about 800 employees, also ran into trouble. It lost US$ 662 million in 2000 and a number of employees were laid off...
Forming NBC Universal
Wright had long been interested in acquiring companies that created content. This was something he couldn't do under Welch. However, in mid-2003 when Vivendi Universal Entertainment (Vivendi), the French media and telecommunications company, announced the sale of its US entertainment business - Universal Pictures, Universal Parks, Universal Television and a number of cable channels, many US media giants were interested. Metro Goldwyn Mayer (MGM), Viacom, Liberty Media and NBC competed with each other to acquire Universal's assets...
NBC Slips in Ratings
The ratings woes for NBC started in February 2001, when CBS shifted its blockbuster reality series Survivor to Thursdays (between 8:00 and 9:00 pm) opposite Friends on NBC. To counter this, NBC increased the duration of Friends by 10 minutes (up to 8:40 pm) to affect the second half of Survivor. CBS also moved its crime series CSI: Crime Scene Investigation after Survivor to take on NBC's Will & Grace. When the ratings for the first week were reported, Survivor beat Friends convincingly even in the 18-49 demographics. Though NBC was still the winner with four of its shows featuring in the Top 5, CBS exposed NBC's vulnerability on Thursday nights. CSI had lost to Will & Grace, but its popularity rose continuously. Even so, NBC had topped the overall ratings for the year 2001-02...
The Turnaround Efforts
To revive its sagging fortunes, NBC turned its focus to sports. Zucker said, "Sports is going to play a critical role in the rebuilding of NBC prime time." On April 18, 2005, NBC finalized an important six-year deal with the National Football League (NFL) to bring back the NFL telecasts to the channel after having lost the rights to CBS in 1998. The deal was the result of ABC's, decision to not to renew the contract with NFL for the NFL season starting in 2006...
What Next ?
NBC's revenues for the year 2005 were down by 23 percent to US$ 5.1 billion while all other networks gained revenues. The year 2006 had not changed NBC's fortunes by much. NBC's hopes for the Winter Olympics in February 2006 were dashed as viewership was down 34 percent as compared to the 2002 Winter Olympics. Though the poor performance of the US athletes was one of the reasons, the viewership loss was primarily due to competition from American Idol, Desperate Housewives, Grey's Anatomy, Survivor, etc...
Exhibits
Exhibit I: Profile of Major Competitors of NBC
Exhibit II: Top Primetime Network (1994 - 2006)
Exhibit III: NBC Logo
Exhibit IV: Primetime Rankings (2005-06)
Exhibit V: The US Television Industry
Exhibit VI: Top Television Programs (1980 - 2005)
Exhibit VII: Must See Television
Exhibit VIII: Business Of NBC Universal
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