Why Comcast Shouldn’t Fire Stephen Burke

by Jonathan Berr | April 2, 2013 3:26 pm

Veteran media pundit Michael Wolff recently urged Comcast (NASDAQ:CMCSA[1]) Chief Executive Brian Roberts to fire NBCUniversal head Stephen Burke[2].

Wolff argued in USA TODAY that Burke was to blame for the sorry state of the Peacock Network. But what Wolff and the media elite fail to appreciate is how unimportant NBC’s struggles are compared to the rest of NBCUniversal’s performance (and, ultimately, to Comcast).

To be sure, the network is a train wreck. Not only are its prime-time ratings dismal, but there also are self-inflicted public relations disasters brewing at both Today and The Tonight Show. Its morning star Matt Lauer has turned into a pariah with fans over the poorly executed ouster of his co-host Ann Curry. Relations between NBC and Jay Leno have soured as well.

Analysts are concerned, rightly so, about the capital Comcast has to allocate for NBC content. It’s especially an issue with sports programming, which is costing Comcast and the rest of the media world billions of dollars.

But the NBC headaches are manageable ones for Comcast. NBCUniversal is gigantic company tucked into an even bigger company that includes a host of businesses including theme parks, cable channels and a movie studio. Acquiring the business from General Electric (NYSE:GE[3]) has worked out better than many on Wall Street expected.

Comcast earned $8.15 billion (13%) of its $62.6 billion revenue in 2012 from its Broadcast Television business in 2012. But remember, Comcast’s Broadcast Television business also includes the Spanish-language network Telemundo and its 10 local television stations. Although I don’t know the exact breakdown of the contribution of the different businesses, the Spanish network and TV stations are hardly inconsequential.

It seems reasonable to assume that NBC doesn’t make or break Comcast in any particular quarter. According to published reports, Today earns about $500 million in advertising revenue annually and The Tonight Show takes in about $150 million.

Sure, that revenue is counterbalanced by some huge salary costs. Lauer, who is being vilified for the ouster of Ann Curry, reportedly earns more than $20 million. Leno, who reportedly took a 20% pay cut to minimize layoffs on his show, makes roughly $15 million.

But for Comcast, whose market capitalization tops $111 billion, all of these figures are practically rounding errors.

Roberts, whose father Ralph founded Comcast, probably is pressuring Burke to bring some order to the chaos at NBC. The company’s profit margins might erode if it has to lower its advertising rates because of lower ratings, and he probably doesn’t appreciate the almost daily deluge of negative press that the network has endured for the past few weeks.

But firing Burke over NBC’s mess seems unwarranted … if only because it’s a drop in a pretty large bucket.

Besides, the rest of NBCUniversal seems to be doing just fine.

Telemundo is making inroads in the ratings against its longtime rival Univision. At a time when many cable networks are showing double-digit declines in ratings, MSNBC continues to hold its own. Bravo’s The Real Housewives of Atlanta also recently broke viewership records.

In the movie arm, Universal Studios has topped the box office in the first quarter, grossing more than $300 million, thanks to the popularity of the surprise hit Identity Thief. The new 3D version of Jurassic Park that’s about to be released should do well too.

And, as the economy continues to rebound, NBCUniversal’s theme park business should see an increase in its business along with rivals such as Walt Disney (NYSE:DIS[4]).

Bottom line: While Comcast is surely not pleased with NBC’s lackluster performance, it can afford to wait for things to get better.

As of this writing, Jonathan Berr did not hold a position in any of the aforementioned securities. Follow him on Twitter @jdberr.

  1. CMCSA: http://studio-5.financialcontent.com/investplace/quote?Symbol=CMCSA
  2. fire NBCUniversal head Stephen Burke: http://www.usatoday.com/story/money/columnist/wolff/2013/03/31/michael-wolff-someone-at-nbc-should-be-fired/2040775/
  3. GE: http://studio-5.financialcontent.com/investplace/quote?Symbol=GE
  4. DIS: http://studio-5.financialcontent.com/investplace/quote?Symbol=DIS

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