NBCU Overview

NBCU Overview
Merrill Lynch Media Conference
September 30, 2004
NBC Universal looks excellent
($ in Billions)
Update
Financials
~$15
Rev. +25%
OP +30%
~$12
~$7
$2.0
$2.4
Rev. OP Rev. OP
’04E
’03
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$3.1
Rev. OP
’05F
Solid Post-Merger Performance
• Entertainment Cable Strength
• Outstanding Olympic Games
Ratings, Financial & Production
Success
Synergies on Track
• $100MM in 2004 … ~90% Identified
• $300MM in 2005 … ~80% Identified
Six “Growth Drivers”
• Cable … Branding
• Film … DVDs
• TV Production … Cost
• Library … Utilization
• Parks … Marketing
• Promotion … X-Selling
2
1
NBC Universal …“Wow!”
*
*
*
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*
*
*
*Minority or JV Interest
Marketplace themes
Content
NBC
Packaging
Broadcast
*
TV
Distribution
Viewing
Stations
Free TV
*
*
Basic
Content
Consolidation
Cable
Basic
DistributionSystems Digital
Consolidation
Technology
Premium
On Demand
Film
Universal
Box
Video
HDTV
Premium
Satellite
Theaters
Consumer
Behavior Retail
Retail RentalChange
New Technologies Present New Opportunity…Content is King
*
Minority or JV Interest
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2
Tremendous new content machine
Annual Production
Network
Platforms
15 Films
Annually
4,000 Title
Library
*
4,780
Original
Network
Hours
Original
Content
2,740
Original
Cable
Hours
1,790
Original
Syndication
Hours
*Minority or JV Interest
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5
Valuable content libraries
Better Traditional Channels
7,500
NBC TV
Episodes
•Broader Content Packages
•Bigger US TV Presence
•Global Home Video/DVD
25,000
Universal TV
Episodes
•International Exploitation
New Channels / Ventures
•Spanish Language
150 NBC Movies
4,000 Title
Universal Film
Library
•Video-on Demand
•Multicast
•Portfolio Add-ons
Tremendous Asset Delivering Stable Revenue Base and Growth
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3
NBC Universal’s $15B revenues are split
~50/50 between advertising & fees ...
($ Billions – 2004 Pro Forma)
11%
Advertising
91%
• Broadcast
Network
• Local
• Cable
34%
• Subscription
• Licensing
• Direct-toCustomer
7%
12%
27%
12%
8%
54%
89%
Fees
9%
Revenue:
$8.2
$7.2
46%
$15.4
Revenue Diversification Strategically Positions the Combined Company for
an On-Demand Digital Future.
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Content players by revenue
(2004 $ in Billions)
$30
Revenue in Comparable Sectors
$26
$25
$7 Theme
Parks
$20
$8
$15
$10
$20
$11
$6
$4
$6
$6
$5
$19
$8
$8
$15
$13
$5
$2
$8
$1
$0
$5
Film
$3
Cable
$5
Broadcast
(a)
’04 OM %
’04 FCF $B
12%
$2.1
16%
$4.9
19%
$3.9
20%
$2.2
14%
$2.1
(a) Pro Forma full year revenue for VUE acquisition.
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4
US media revenue & NBCU position
($ in billions)
Increasing
+10% Home
Other
NBCU Businesses
Video
$27
VOD
$1
Video Games $9
Internet
$10
MSO/DBS
$72
0%
Volume
Parks
$11
Cable
$31
Box Office
$10
Broadcast $45
Books
$20
News
papers
$59
Magazines $24
Music $12
Radio
$20
Price
Decreasing
-10%
New Media
Wireless $2
Sat
Radio
$0
0%
Increasing
+10%
9 NBCU competing in attractive markets
9 Must organically penetrate new media
Source: Veronis Suhler July 2003 and Wall Street Estimates
(a) Includes national advertising revenue and program licensing revenue.
(b) Includes local and regional advertising revenue and consumer subscription revenue.
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High Quality Competitive
Platforms
-- The New Company --
5
Television … the most profitable network &
station group …
($ Billions)
Revenue
Key Brands
+ 10% CAGR
+5% ex Telemundo
$5.7
$4.9
Network
Stations
2001
2003
• 14 NBC & 15 Telemundo owned
& operated stations
• 200+ local affiliates
• ~25% operating profit margin
• #1 network across all dayparts
• #1 TV stations group
• #1 world sporting event ... Olympics
through 2012
• #1 TV news organization
• #1 fastest growing hispanic network
• ~3,750 employees
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The Big Drivers of the NBCU TV Group
• Stability and Strength at the network
• Cable entertainment networks
• Telemundo
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6
Network
Entertainment
• #1 in Primetime … past 8 of 9 seasons
• #1 in Comedy … past 12 seasons
• #1 in Drama … past 10 seasons
• #1 in Latenight
Leno (9 Seasons)
Conan (11 Seasons)
SNL (26 years)
• #1 in daytime…
past 4 seasons
• Premiere News franchise…
#1 rated Morning show,
evening news and Sunday
morning public affairs program
• Highest quality audience … 30%+ Lead in A18-49, $75K
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7
’03/’04 primetime performance
Weekly Wins This Season A18-49
Rating Adults 18-49
4.3
3.7
3.7
3.1
17
13
4
NBC
Advantage
16%
16%
39%
All Programs Ex-Sports Through 5/26/04
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All Programs Through 5/26/04
15
Most profitable TV network
($ Millions)
2004 Estimated EBITDA
$875*
$340
$(80)
$(250)
Source: Morgan Stanley, NBC Data Provided Internally,
* Ex-Olympics
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8
‘04 – ‘05 Primetime Season
Top 20
(A18-49 Rating)
4.4
4.1
3.9
2.3
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CSI
ER
Apprentice
Monday Night Football
CSI Miami
Survivor: Vanuatu
Without a Trace
Will & Grace
CSI NY
Extreme Makeover
Lost
Joey
Law & Order 9P
Everybody Loves Raymond
Law & Order 10P
Two and a Half Men
Law and Order SVU
Las Vegas
Crossing Jordan
Law & Order: CI
11.4
9.8
8.0
7.7
7.6
7.5
7.4
7.1
7.1
6.9
6.9
6.4
6.4
5.9
5.5
5.5
5.3
4.8
4.7
4.4
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The Big Drivers of the Network
Nearly half a billion in margin
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Late Night on NBC
NBC grip secure for next decade
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Competitive pressure…but still the leader
Continued Thursday Prime
Leadership
*
Optimizing Existing
Assets
Creating New
Value…
#1 Late Night
and Daytime
…and Programming YearRound
MEDIUM
* Successfully Developed #1
Upscale Show on Television
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Revelations
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10
Olympics strategic imperatives
• Defines the NBC brand…the best reflection of the power of network TV
• Most compelling event in TV…enduring driver of mass audience
• Delivers 3x underlying prime… Olympic rating higher vs. PT with each games
• Valuable promo platform…fall prime launch, Feb. sweeps win, Today Show…
• Drive cable distribution with compelling product
• Solidifies affiliate relationship
• Drive new media development… NBC pursuing a leadership role in exploitation
of new media platforms and technology
Winter Olympic Ratings vs. Prime
Summer Olympic Ratings vs. Prime
(Ratio of Olympic Rating to Underlying Prime)
3.0
(Ratio of Olympic Rating to Underlying Prime)
3.2
2.9
2.7
2.6E
2.7E
2.3
2.3
1.6
2.0
1.8
1.6
1.7
1.5
1988
Calgary
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1992
A'ville
1994
Lil'hmr
1998
Nagano
2002
Salt Lake
2006
Turin
2010
Vancouver
1988
Seoul
1992
Bar'lna
1996
Atlanta
2000
Sydney
2004
Athens
2008
Beijing
2012
TBD
21
Dallas/Fort Worth
Television
Stations
Philadelphia
11
NBC stations overview
• 29 u.S. Stations…34% coverage …#1 station in Puerto Rico
– 7 stations in top 10 general markets – 6 duopolies
– 9 stations in top 10 Hispanic markets - #1 station in puerto rico
• 39% coverage of US households with income of $100K+
• 11/14 NBC stations rank #1 or #2 in adults 18 – 49 in key dayparts
• Aggressive promotion strategy
• Recognized news and programming leader
A Tremendous Franchise
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NBC TV stations – digitization strategy
Before…29 Master Control Ops – 350 People
29 Graphic Ops – 100 People
WVIT
WJAR
WMAQ
SF
KSTS
KNSO
KNTV
KNBC
WSNS New York
WRC
KVEA
KNSD
WNJU
WCMH WCAU
KMAS
KDRX
WNCN
KWHY
Dallas
KHRR
WVTM
KTMD
KVDA
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WTVJ
KTMD
WSCV
WKAQ
Puerto Rico
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12
“Hubbed” operating model
After…
$30MM
of Savings
Since ‘01
Northeast Hub
10 Stations
West Coast Hub
7 Stations
Southeast Hub
6 Stations
9 Stations
Infrastructure Optimization
• Centralize Operations (Graphics, Master Control … 250 People Out)
• Drive Efficiencies (Lower Satellite Fees)
• Explore Remote Station Operations (Lower Capital Investment … $10MM ’03)
• Expand Service (NBC, Outside)
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Station financial performance
~55%
NBC Stations - A Margin Leader
~45%
NBC
~43%
ABC
CBS
~42%
Fox
~41%
Trib
~40%
HA
Source: Morgan Stanley and Deutsche Bank research
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*
*
*minority or JV interest
Entertainment cable
• Fastest growing cable group in
all of Television
• USA, Sci Fi, Bravo all showing
strong ratings growth
• 40% profit growth in 2004
• Strong Olympics performance
on cable
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Top 10 Entertainment Basic Cable
Jan – Sep.16 to date
2004 Primetime
% vs.
A25-54
PY
NET
(000)
TNT
1,293
4%
USA
1,090
21%
#2
TBS
906
7%
Lifetime
713
-14%
Discovery
699
14%
656
5%
#6 SCI FI
FX
640
13%
TLC
596
-18%
Spike
580
2%
History
520
15%
….
#1
301
45%
Upscale Bravo
28
14
Entertainment cable
Summer 2004
A25-54 Avg. Viewers
Summer 2004
3 of Top 10 Basic Cable Shows
4400
A25-54
(000)
3,124
Monk
2,671
+23%
2671
2177
Nip Tuck
'03
'04
Disc
'04
1,996
1,788
FX
Stargate SG-1
'03
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Rescue Me
2,379
2,054
Stargate Atlantis
2054
1622
Dead Zone
Am. Chopper
+27%
FX
1,864
1,603
The Grid
TNT
1,499
Strong Medicine
LIFE
1,049
29
Entertainment cable
Summer 2004
2 of Top 10 Basic Cable Shows
Ratings
+100%
'99
'04
4400
A25-54
(000)
3,124
Monk
2,671
Nip Tuck
FX
Dead Zone
• Doubled ratings in last 5 years
Am. Chopper
• Spectacular launch of Stargate
Atlantis – highest rated series in
Sci Fi history
Stargate Atlantis
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Rescue Me
2,379
2,054
Disc
1,996
1,788
FX
Stargate SG-1
1,864
1,603
The Grid
TNT
1,499
Strong Medicine
LIFE
1,049
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15
Entertainment cable
• Fastest growing basic cable network in
primetime…+45% vs. last year
• Audience getting younger…average
viewer age at acquisition in December
2002 was 49…now 44.
• Breakout hits
A25-54 viewers (VPVH)
RANK NET
1.
2. TLC
3. ESPN
• Queer Eye wins Emmy for
outstanding reality program
• The most affluent cable network
and ranks #1 in concentration with
A25-54 viewers (VPVH)
• Celebrity Poker broadens network
audience
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Entertainment cable…cross platform success
• Cross-platform promotion and programming a
key part of our strategy
• Launch of 4400, highest rated basic cable series
in history
• Monk and Dead Zone double digit growth, Monk
highest rated season ever
• Launch of Stargate Atlantis, highest rated series in
Sci Fi history and #6 overall Summer 2004
• Launch of breakout hits Queer Eye for the
Straight Guy and Celebrity Poker Showdown drive
Bravo growth
• Olympics drove strong ratings at
USA and Bravo
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16
New channel opportunities
Broadest and deepest content offering to enhance the Cable industry’s
digital/HD package
Thematic
Channels
+
VOD
• Thematic Channels
• Comedy
• Drama
• Action /
Adventure
• Thriller
• Westerns
• + 200 Hrs/month of
VOD
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HD
Channel
• 1700 hrs available
• 35% of Primetime
schedule
• Includes:
- Apprentice
- Las Vegas
- LAX
- Hawaii
- Nightly News
• Best of USA, SciFi
& Bravo
• 700 hrs available
• Includes:
- Monk
- Queer Eye
- Battlestar
Gallactica
- Sliders
• Best of Novelas
• Includes:
- Te Voy a
Enyerar a
Querer
- Laura
- Anita No Te
Rajes
• Best of Noticias
• Re-branding Bravo
HD+
• Best of NBCU in HD
• Significant
investment in HD
content
- US Open
- 160+ movies
- Best of cable
series
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The network market opportunity
Demographics Highlights
% Primetime TV Viewing to Spanish TV
•39MM Hispanics / 14% of total U.S.
+16%
– 25% of top 20 total U.S. markets
+14%
– 32% of top 20 Hispanic markets
8.6%
7.4%
6.4%
•Growing to 49MM / 16% by 2010
5.6%
•69% use Spanish as primary language at
home
•Increasingly better educated
•Hispanic population disposable income to
grow by 46% between ‘02 and 2010
•Hispanic population is driving growth in
home ownership, automotive,
entertainment, retail, QSR and financial
sectors over next 5 years
A18-49
02/03 Season
A18-34
03/04 Season TD
Primetime viewing to Spanish TV is growing…
“fair share” entitlement is $800MM network opportunity
Source: NHTI + NTI less Sp TV duplication factor thru 4/20/04
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Advertising market
($ in Millions, Gross)
Total Hispanic Network Upfront Revenues
CA
11%
GR
$1,025
$913
$714
$661
'00/'01
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$787
+11%
+16%
+10%
+8%
'01/'02
'02/'03
'03/'04
'04/'05
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18
Strategic focus - - network
• A secure future through a clear programming direction
• Shifting from buyer to creator of content
• NBC Universal enthusiastic for Telemundo’s control of
program destiny
Programming/Production Capabilities
• Build internal resources / Create talent
– Writers, producers, directors and actors
• Creating 1000+ hours of primetime programming per year
• Developing disciplines to create terrific content
– Creative “factory”
• Almost 1000 professionals in four locations in 3 countries`
The most dynamic force in Spanish TV in the world is Telemundo!
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Weekday prime trend
(Adult 18-49 Imp’s)
03/04 Season Final Performance
795
657
563
689
685
722
709
714
667
585
500
460
Sh of
Sp
18%
19%
20%
22%
24%
23%
24%
25%
23%
25%
25%
29%
Sept. 8'03
Oct'03
Nov'03
Dec'03
Jan'04
Feb'04
Mar'04
Apr'04
May'04
Jun'04
Jul'04
Aug 10'04
‘03/’04 season grows 73% during year…11 share points gain
Source: NHTI;
’02-’03 = 9/23/02 – 10/10/03; ’03-’04 = 9/8/03 – 9/30/04; ‘04 – ’05 = 8/30/04-9/21/04
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19
Fastest growing network for Hispanics
Weekday Prime
312
A18-49 (000) Increase
115
82
30
TEL
TF
NBC
UPN
17
CBS
13
9
WB
PAX
2
Uni
1
ABC
-28
Fox
Leading and outgrowing Univision…
Telemundo’s gain is more than twice Univision Comm’s
Source: NHTI; Sp TV (M-F 7-11P); Eng TV (M-F 8-11P);; Dec 30’02 – Sept 7’03; Dec 29’03 –Sept 5’04 ;
Impressions based
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’04/’05 season snapshot
7-8PM
LTC
Feb/March
8-9PM
9-10PM
10-11PM
Nov/Dec
Feb/March
February
‘04/’05 vs. ‘03/’04 Season Adult 18-49 Delivery
+96%
+48%
+27%
+13%
Significant gains vs. prior year
Successful line-up with predictable results
Source: NHTI;
’02-’03 = 9/23/02 – 10/10/03; ’03-’04 = 9/8/03 – 9/30/04; ‘04 – ’05 = 8/30/04-9/21/04
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20
‘04/’05 network upfront update
Description
Estimate/Pacing
Market Growth
+11%
Telemundo Volume
+32%
Pricing
+5 - 10%
Highlights
• 136 clients participated / 24 new vs. PY
• Strength in retail, wireless telco, auto, movies, packaged goods and financial
• Weakness in long distance telco
• Upfront moving faster and earlier than ever
• Primetime represented 19% more of the total Telemundo Upfront than
previous year
Positive results in market growth, Telemundo volume and pricing
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Stations - market and strategy
$ in Millions, Gross
US Stations
R
CAG
%
$761
10
$672
+8%
+8%
+13%
+13%
$593
$545
$889
$821
+9%
Growth Rates
2000
2003
2004
2005
TLMD
10%
18%
17%
Other
15%
4%
4%
Total Mkt
13%
8%
8%
2003
2004
2005
2001
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2002
Overview
• Through 14 O&O’s Telemundo controls
59% of its distribution
• Operates the #1 station in Puerto Rico
• Particular focus on Los Angeles with
Spanish duopoly - - - KVEA/52 and
KWHY/22
Reaching Into Our Communities
• 143 hours of local news production
weekly
• Local station community service good
works
• Preeminent community events attracting
over 2MM viewers per year
Revenue
• Dedicated business development group
• Delivering results to local advertisers
• Working to monetize the full potential of
these “young” markets
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21
Wrap-Up
The Telemundo of today
• Strong marketplace
– Population, economic vitality, advertiser investment
• NBC Universal enthusiasm
• Original content creators
– Currently creating 100% of weekday primetime
• Ratings momentum
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22
Film ... strong content, franchises & the
industry’s most profitable studio
($ Billions)
Film Types
Revenue
+ 10% CAGR
$4.1
$3.4
2001
2003
• Successful box office record
• Valuable library of ~4,000 titles
• 14-16 film slate per year
Tentpole
Event
Portfolio
Effects
Story/
Star
Niche
Key Partners:
• ~10% operating profit margin
• ~1,600 employees
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Motion pictures characteristics
($ Billions)
$4.1
TV Licensing &
Other
Home
Video
Theatrical
2003
Concern
Mitigant
•Library provides steady cash-flows…
Universal owns 3rd largest
•Multiple revenue streams… box office <
•Dependent on box office 25% of studios
performance… mature
– <10% of NBC Universal
•Strong operating disciplines
•Growing cost / capital
– Manageable # of releases
intensity
– Rigorous “green light” process
– Tightly controlled costs (adv.)
– Risk sharing strategies
•Great team with strong track record…
best in class box office per film
•Short cycle / limited
predictability
Traditional and new trends mitigate inherent volatility of film business
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History of success
• Current management has been in place since 1999
• During this period, Universal has undergone extraordinary growth
– Revenue growth up 50%
– Profitability growth from negative returns in 1999 to >$400
• Ongoing creative success
– 20 films over $100MM DBO
– $69MM average box office per release
– 56 Oscar nominations, 17 Oscars
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Domestic box office share
Average market share by domestic box office 1999-2003
MGM
3.8%
Dreamworks
5.5%
Other
6.1%
Disney
14.6%
Miramax
6.0%
Paramount
9.5%
Warner Bros
13.1%
20th Century Fox
10.3%
New Line
7.3%
Sony
11.3%
Universal
12.5%
Avg. Film Releases
Warner Bros
23
Sony
22
Disney
18
Paramount
15
20th Century Fox 14
Universal
14
Miramax
12
New Line
11
MGM
9
Dreamworks
7
Total DBO increased from $7.3 B in 1999 to $9.2 B in 2003
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24
Revenue drivers
Home Video has been a significant growth area
% of Total Revenues
U.S. Consumer Spending
$B
25
2001
Theatrical
27%
Home Video
44%
TV
Other
22%
7%
20
15
10
DVD
5
2004E
Theatrical
Home
Video
TV
Other
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18%
59%
20%
3%
VHS
0
97
98
99
00
01
02
03
04
05
DVD Pentration
Dom:
1%
9%
32%
66%
Int’l:
0%
3%
14%
35%
49
Capitalizing infrastructure - Focus
Cultivates valuable relationships
Sales operation enables effective spending
Utilizes Universal’s infrastructure
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25
Parks ... 3 parks w/ excellent crosspromotional opportunities
$Billions
**Includes JV Revenues
Park
Revenue
$1.7 **
Owner
Summary
100%
World’s largest
movie studio &
theme park
~$1.6 **
JV Interests
Wholly
Owned
2001
2003
• Effectively managed challenging
tourism market
• Owns 3 of top 8 U.S. Parks
• Consolidated operating profit of
10-12%
*
*
*
50%
fastest growing
park in world’s
largest theme park
market
24%
#3 theme park in
asia
• ~19,800 employees(1)
* Minority or JV Interest
(1) Includes Seasonal & JV Employees
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Overview
• Attendance up
• Cost control
• Great turnout/buzz around attractions
• X-promo w/local TV Stations and NBC Networks
• Financial restructuring where necesssary
Improving financial performance
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NBC Universal …“Wow!”
*
*
*
*
*
*
*
Minority or JV Interest
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27