NBCU’s Burke Sees Big Retrans Upside

The TV side of Comcast’s NBCUniversal enjoyed a robust second quarter (revenue up 17.3%), and, according to CEO Stephen Burke, it will be able to do even better as it brings its retransmission consent and advertising pricing  in line with that of its Big Four peers.

Retrans revenue, which comes directly from the NBC O&Os and indirectly in the form reverse compensation from NBC affiliates, was up 63% year-over-year in the quarter, Burke told security analysts following release of Comcast’s second-quarter results.

“We’ve grown retrans very, very substantially over the past five years, but we still lag the other Big Three broadcasters, based on what we know.”

“We still have some major contracts where retrans is going to take significant step-ups,” he said. “And we’re still hundreds of millions of dollars less than some of the other comparable peers and we think we deserve the same amount for retransmission consent.”

“We have the Olympics, we have the NFL, we’re the No. 1 network in the demo, and so I think over time that will be a number that continues to grow nicely.”

Burke noted that NBC makes “slightly more from our affiliates as a share of their retrans [reverse comp] than we make from our O&Os.”

Burke said NBCU has largely closed the gap when it comes to CPMs over the past five years. While work remains to be done, most of the difference, which once amounted to 20%, is gone.

And Burke likes what he’s seeing in the scatter market. It’s “extremely strong — as strong as we can remember it being.”

Burke said a consolidated approach to sales has helped make it an upfront leader. “We had previously sold cable separately from broadcast, and sports separately from primetime and news. We put everything together. So now if you want to buy from any part of  the company we have a discussion about every part of the company.”

“Because we’re the largest provider of television advertising in the country, people come to us first, so for the last couple of upfronts, we’ve really led the discussions and led the negotiations in price-setting of the entire market.”

The strength of the scatter market has helped with sales in the upfronts, Burke said.

“We sold about 10% more on the broadcast side, about 5% overall, and we turned away a lot of volume.

“The percentage sold as a percent of the total is roughly comparable to previous years so we still have, depending on the network, 20%-25% of the volume available for a strong scatter market.”

Burke said he has no fear of the move to OTT and other channel bundling platforms. “I think the key there is making sure that we’re in every bundle, and I think we’re going to be. We have more channels and eyeballs than anyone else, we’re pretty much essential to those bundles.”

One effect of the move to skinnier bundles will be the demise of weaker channel offerings — NBCU has already jettisoned some, including G4 and Style.

Burke sees this trend continuing within its own portfolio and those of its competitors. “There’s just too many channels.”

Burke also said is bullish on the prospects for the Olympics. “For the first time since we’ve been here we’ve hit our advertising budget for the Olympics three weeks before the start of the Olympics.

“Normally we would hit the budget right about the time the Olympics started or shortly thereafter. And our budget was about a 20% increase from London so we’re very, very happy with how we’re doing in terms of Olympic sales.”

The company, he believes, is insulated in the event that significant make goods are required. He expects to easily exceed the $120 million in income generated during the London Olympics.

Comcast CEO Brian Roberts noted that NBC’s key programming strategies is to swing for the fences. “Our ‘big night’ strategy is compelling. If you aggregate big nights on TV in 2016, defined as a 10.0 household rating and a 5.0 in the 18 to 49 demo, we project that NBC will own 70% of those nights.”