Comcast hopes to breathe new life into Shrek and crank out as many as four animated movies a year following its acquisition of DreamWorks Animation, NBCUniversal chief Steve Burke told an investor gathering today.
The goal is to create characters that will lead to theme park attractions and licensed merchandise to take “the low-single digit returns of the movie business and turn it into a different kind of business,” he told the Guggenheim Partners TMT Symposium.
Comcast agreed to pay $3.8 billion for DWA, a steep price. But Burke says the corporate synergies, and ability to consolidate costs, will enable it to pay off.
The deal “advances our consumer products agenda by five years” and puts NBCU into TV animation.
Illumination Entertainment’s Chris Meledandri will have creative control and “he is creatively going to try to help us figure out how to resurrect Shrek and take a lot of the existing DreamWorks franchises and add value as we create new franchises.”
DWA has $250 million worth of overhead costs now and, with just two releases a year, “those films have to be spectacular.”
The addition also should help NBCU’s efforts to generate profits from China. Universal Studios now “routinely sees films do more business in China than in the United States.”
That will pay off at theme parks. “The city of Beijing has said, ‘Well, Shanghai is Disney and Universal is Beijing.’ They basically cleared the land 10 years ago, and it’s going to be an important part of our company.”
The comments about DWA and Universal were part of a broadly upbeat assessment of his company’s prospects a little more than five years after Comcast bought NBCU.
In addition to his optimism about the DWA deal, Burke told the group that NBCU’s seeing “very strong” sales in the upfront market with its effort “more than half way done.”
The company lost about $150 million from the 2010 Winter Olympics in Vancouver, but expects to “make a lot of money in Rio” with the Summer Olympics in August. Indeed, he believes NBC will to beat the record audience from the 2012 London games “because this is a live Olympics.”
“America for 17 days basically puts other things aside and falls in love with the Olympics,” Burke says.
Still, he has a nightmare that “we wake up one morning and the ratings are down 25%.” If that happened, it would be because the network lost young viewers. As a result, “we spend a lot of time and energy trying to make sure younger people are as aware as everyone else.”
To that end, he agreed to pay Buzzfeed to create a Snapchat channel. Folks at NBC Sports were “beside themselves.” But the greater risk was that “you’re not relevant and not there.”
That concern extends to other programming. “Increasingly we have to get it on Facebook in a way that makes sense and monetize it,” he says.
He says that he’s closing in on a deal with Snapchat to funnel content from E! and The Tonight Show Starring Jimmy Fallon.
“It’s a big cultural change. You can’t just take a clip. It’s the reason Buzzfeed is doing our Olympics. You can’t just say to NBC News, ‘Cut up Nightly News and send it to Snapchat and have it work.’ You have to hire people who make bespoke content. You have to work closely with Snapchat. You have to figure out how to sell the ads and everything else.”
But for a company as large as NBCU it’s “a huge, huge opportunity which we’re only at the beginning of monetizing.”
Meanwhile he sees a winnowing process for weak pay TV channels as competition intensifies from services such as Netflix, and cable and satellite companies try to reduce price increases to fight cord cutting.
“We have channels that are vulnerable,” Burke says. “We own two or three channels that don’t make a lot of money. We’re constantly going back to cable and satellite companies and saying ‘We want more money.’ If we can get an extra dime from Dish [Network], I’d rather have it on USA than have it on a channel that isn’t getting traction from consumers. So we’ll go back and say, ‘OK, you can drop this one.'”
On the programming side, NBCU’s adjusting to the new environment by favoring shows that might also appeal to streaming services such as Netflix and Amazon Prime.
“We have a show, Mr . Robot [on USA], where we make $1.5 million per episode just from our [subscription video on demand] deal — without even airing the episode. That is a profitable show, year one, by a lot because Amazon wanted it.”
NBC is also starting to make tens of millions a year from ad sales on clips from The Tonight Show that get picked up across the web.
“Over the next five years you’ll see a lot more of that,” Burke says. “You’ll see companies make things that are different lengths, produced directly for mobile, do serialized shows that you pay $1 for five minutes and the next day you pay another $1….The business models and monetization haven’t caught up yet. But it will, because it has to.”