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NBC Universal's operating profit tumbles 41% in 2nd quarter

The media division of General Electric is hurt by the continued slump in advertising and weaker performance of its movies.

July 18, 2009|Meg James

NBC Universal, beset by the continued slump in advertising and weaker performance of its movies, is no longer quite the profit star in General Electric Co.'s universe.

Operating profit tumbled 41% to $539 million for the second quarter at the industrial giant's media division, which includes the NBC network; cable channels USA, Bravo and MSNBC; and Universal Studios and theme parks. NBC Universal contributed $3.6 billion in revenue to GE for the quarter ended June 30, down 8% from a year earlier.

In general, it was a brutal quarter for NBC Universal, still suffering from a weak advertising market, particularly at local TV stations; higher programming costs; and the box-office bomb "Land of the Lost," starring Will Ferrell. The weaker results, however, were offset by a higher performance among NBC's cable channels.

"Jeff [Zucker] and the team continue to work in a very challenging environment," GE Chief Financial Officer Keith Sherin told analysts in a conference call Friday.

The industrial giant's earnings also dived. GE reported second-quarter net income of $2.6 billion, or 24 cents a share, down 47% from the previous year, when it raked in $5.1 billion, or 51 cents. GE stock fell 75 cents, or 6%, to $11.65.

Within the media unit, GE erased from its books the entire value of its longtime investment in Ion Television, a Florida chain of broadcast TV stations. GE has taken $95 million in write-downs for Ion this year.

There was another difficult comparison. During the second quarter of 2008, NBC collected $113 million from the sale of its stake in the Sundance Channel. There were no asset sales to boost results this quarter.

Taking out those two items, NBC Universal's profit would have been off by about 24%, rather than 41%.

Broadcast television, which includes the NBC network, TV stations and its in-house television production studio, contributed $1.4 billion in revenue, which was 9% lower than a year earlier. Operating profit was $100 million lower than last year's second quarter. The company spent more money developing programming and "local media continues to be down," Sherin said.

GE said it was pleased with the late-night performances of Jimmy Fallon and Conan O'Brien, who replaced Jay Leno at 11:35 p.m. Nonetheless, CBS' late-night owl, David Letterman, and ABC's news program "Nightline" have surged in the ratings.

Universal Pictures, meanwhile, had a "tough quarter," Sherin said. "There were fewer significant film releases to DVD and our second-quarter movie performance was less than we expected."

Universal's high-octane "Fast and Furious" could not make up for "Land of the Lost."

The film unit contributed $950 million in revenue but its profit was down $80 million compared with last year, Sherin said. Despite the recession, Universal theme parks posted 13% higher operating profit. GE declined to break out its results for the broadcast, film and parks units

Cable television was another story. Sherin said those channels contributed $1.2 billion in revenue, up 3% over last year, for an operating profit of $595 million. That was 7% higher than in 2008.

"We think the second half of NBC Universal is going to be significantly better than the first half," GE Chairman Jeffrey Immelt told analysts. A key reason: During last year's third quarter, GE lost $150 million on its broadcast of the 2008 Olympics from Beijing. It won't have Olympics losses this year. "Easier comparisons," Immelt said.

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meg.james@latimes.com

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