Burke: NBCU Will Close ‘Entitlement Gap’

Network Chief Says Affiliate Fees, CPMs, Retrans Fees Lower Than Peers

NBC Universal CEO Steve Burke told analysts and investors Wednesday that the company will continue to move towards closing what he called the “entitlement gap,” or the disparity between the ad rates and retrans fees the programming giant receives compared to its peers.

On a  conference call with analysts to discuss second quarter results, Burke said that some cable and broadcast channels received as much as 20% higher CPMs for their networks than NBCU. The programming giant has said in the past that its retransmission consent fees for its NBC broadcast stations and affiliate fees for its cable channels like USA Network, Bravo and SyFy are below its peers. Burke said NBCU is beginning to close the gap on the advertising side – it recently completed its upfront ad sales, raising CPMs at its cable networks by about 7% to 8%. He added that its broadcast network sold about 13% more advertising in the recent upfront than last year. He added that CPMs and ratings for the broadcast network were better than they had been in nine years.

One of the catalysts for the increases, he said, was the programmers approach to selling advertising across its properties together.

“We’re chipping away at the entitlement gap,” Burke said on the conference call. “We think it is a big opportunity for the company. It’s not something we are going to get in a quarter or even a year but I think in the next two , three, or four years you will see real progress there.”

On the affiliate fee side, Burke said NBCU has renewed about 25% of its deals in the past year or so, with the remainder coming due over the coming years.  

Overall, NBCU had a good quarter, with total revenue up 8.9% to nearly $6 billion and operating cash flow up 21.3% to $1.2 billion over the prior year. Driving that growth were strong increases at its cable networks (revenue up 7.7% and OCF rose 8.9%) and broadcast (revenue increased 11.6% and OCF up 6.4%).

Burke added that the coming Aug. 17 launch of Fox Sports 1  is not expected to have a big impact on NBC Sports, especially since NBC acquired rights to NASCAR programming.

Burke added the addition of NASCAR gives NBC Sports a full year of professional sports by filling out the schedule when the National Hockey League is not playing.

“I don’t really think that Fox Sports 1 plays into that too much,” Burke said. “It’s always been competitive, always will be. We think we have a unique way of looking at sports and a real place in the marketplace.”