(FORTUNE Magazine) – NBC TELEVISION owes Atlantic Richfield Co. a lunch, a debt incurred by Thornton Bradshaw early in 1981 as he was preparing to leave as president of the oil company to take over at RCA Corp., NBC's parent. ''We didn't have anything to drink,'' he says. ''And the food was pretty spare.'' The meal was served in an Arco private dining room, but the subject discussed was NBC -- for six years the ugly duckling of the three U.S. television networks, and an expensive drain on earnings at RCA. ''You're the fellow to turn it around,'' Bradshaw, 68, recalls telling his guest. ''Are you interested?'' The guest replied, ''As a matter of fact, I believe I am.'' A handshake signified a turning point in NBC's fortunes. The cost of the lunch vanished into Arco's corporate overhead. Bradshaw's guest was Grant Tinker, then 55 and head of MTM Enterprises, one of the most successful independent television production companies around. Immediately after Tinker became chairman and chief executive, NBC's profits bounced up (see chart). But the network languished three more years at the bottom of A.C. Nielsen Co.'s ratings -- the much vaunted industry measure that keeps tabs on how many U.S. households are watching particular network programs during each minute of transmission. Now the ratings have come back too. When the 1984-85 season ended in April, NBC had vaulted ahead of ABC in the household ratings race for prime-time (evening) viewers. And whereas CBS and ABC lost audiences over the season (CBS was down 6% and ABC, 10%), NBC's ratings increased 9%. CBS still leads in the number of households that tune in during prime time, but NBC gets more prime-time viewers per household and a larger total viewing audience -- 25.25 million per minute, vs. CBS's 23.8 million and ABC's 22.9 million. NBC enters the coming fall season as the clear winner in the chase after the big spenders whom advertisers treasure most -- and pay the most to reach -- particularly adults 18 to 49. Advertising Age, a trade newspaper, predicts that NBC could hit $1 billion in advance ad sales for the season -- a network first. All this is welcome news for NBC's 201 independently owned affiliated stations. To build a national audience that becomes the base for setting advertising rates, networks must rely on these stations to distribute their programs. They pay local stations to be part of the family, with fees based on the size of the audience delivered. For example, NBC pays its Philadelphia affiliate $2.5 million a year and the one in Albuquerque, New Mexico, $400,000. As NBC ossified in the ratings, 27 affiliates defected to other networks. Stations that stayed with NBC, dissatisfied with the fare offered them, often substituted programs bought from independent companies, such as MGM-TV's Fame, a fast-paced show set in a New York City high school for the performing arts. NBC's ratings suffered as local stations passed up the network programs and as network shows they did run attracted smaller audiences than advertisers had been promised. When audiences fall short, the network must shell out free time on other programs. From September 1983 to September 1984, before the Tinker magic had taken hold, NBC gave away time valued at about $63 million, says Pierson Mapes, 47, NBC's head of marketing and affiliate relations. For the year ending this September, Mapes expects the figure to be around $34 million. Much of the credit for NBC's comeback belongs to The Cosby Show, a situation comedy about a black doctor and his family. Cosby came to NBC by default: ABC turned down a proposal for a sitcom starring Bill Cosby. Last season, its first, Cosby ranked as the third most popular program in the U.S., after ABC's Dynasty and CBS's Dallas. In recent weeks reruns occasionally edged into first place. Last year NBC charged about $100,000 for a 30-second commercial on Cosby. For the coming season the rate has gone up to some $250,000. This means that Cosby will pull in revenues estimated at $80 million over the coming year for NBC. A fact of television life is that a good prime-time show benefits not only the rest of that evening (Thursday, when Cosby runs, is NBC's best night) but also late-night, morning, and daytime programs. NBC's Today is running ABC's Good Morning America a close second between 7 A.M. and 9 A.M. EST. NBC's soap 'n' game show daylight offerings, though still a distant third in the ratings race, are gaining viewers. So, too, is the often laggard NBC Nightly News. + All audience increases translate into growing profits. Last year the NBC network, the five TV stations it owns, and a relatively small radio business together made $218 million pretax on $2.4 billion in sales, a 40% increase in operating profit over 1983. Tinker hopes for another 40% climb this year. Industry analysts expect the pretax profits of CBS's broadcast group to go up just 5% from the $409 million it made in 1984 on sales of $2.7 billion. They predict that ABC's profits from broadcast operations will fall about 6% from 1984's $428 million on sales of $3.3 billion. ''Our momentum will carry us quite a distance,'' says Tinker. ''There's no horizon in sight.'' Advertisers, their agencies, and independent producers -- most of whom deal with all three networks -- credit the amazing NBC comeback to Tinker's hands- off management style, his steadfast support of what he deems quality shows, and especially his ability and readiness to leave his creative people alone. ''He brought a stability of thought to NBC,'' says Robert E. Igiel, senior vice president at N.W. Ayer Inc., who directs network buying for that advertising agency's clients. Stability at NBC was scarcer than peahen's teeth when Tinker arrived. In the course of a three-year reign his predecessor as chief executive, Fred Silverman, had induced a revolving-door culture with respect to both personnel and programs. Bradshaw's predecessor as RCA chief executive, Edgar Griffiths, seemed to indulge such whimsy, pouring in more cash as one Silverman idea after another foundered. Perhaps the biggest derailment was Supertrain, an expensive adventure series set aboard a high-speed train. It aired for only a few episodes. Even Silverman's detractors concede that this was a sad period for a man who, while at CBS and ABC, had won the sobriquet ''the man with the golden gut'' because of programming skills that divined what the U.S. public loved to watch. But managing a company required a golden touch that eluded him, NBC insiders say, and he could not prevent himself from tinkering -- with story lines, time slots, and people. ''It was clear that something was very wrong at NBC,'' Bradshaw says. In his last months at Arco, therefore, Bradshaw began to tap the network of television people he had come to know in Los Angeles. ''They all said the same thing. 'You need somebody like Grant Tinker. Of course, you'll never get him. But somebody like him.' I got curious. I'd never met the fellow, but I wanted to.'' Tinker, contacted by Paul Ziffren, a top entertainment attorney, agreed to meet Bradshaw and offer his brains for picking. Their first meeting took place at Perino's, a fashionable Hollywood eatery, lasted more than two hours, and was far from spare. Tinker talked about television in general and zeroed in on a favorite theme: the need to leave creative people alone. His words made excellent sense, says Bradshaw, who had some two months left before taking up his new job as chairman at RCA. About three weeks after the lunch at Perino's, Bradshaw invited Tinker to Arco's headquarters, ostensibly for a second brain-picking session. By then, though, Bradshaw knew what he wanted. Tinker asserts he had no thoughts of returning to NBC -- he'd worked there as a management trainee in 1949 and as head of West Coast programming in the 1960s. Nonetheless, he took the job. Bradshaw, he says, ''played me like a fish.'' Says Bradshaw: ''Maybe I did.'' Tinker had one main problem with the NBC job. He prefers to live in California. Bradshaw told him he was free to move the entire operation to the West Coast. Tinker didn't. He still calls Bel Air home, preferring a transcontinental commute. Most Mondays he leaves on a commercial flight for New York, and he works in his sixth-floor Manhattan office Tuesdays, Wednesdays, and Thursdays. He bought some suits and neckties and keeps them at the hotel where he stays during this part of the week. Thursday nights he flies back to the Coast. He puts in a full day at Burbank, tieless and coatless, on Fridays. A potential problem was not even raised at that second meeting -- Tinker's salary. Says Bradshaw: ''The subject never came up. So I called Ziffren, named a figure, and soon got the reply 'OK.' Now that's unusual. Most people would send in three lawyers and start arguing.'' Without doubt, Tinker took an enormous cut in pay when he made his move. He won't say how much. At MTM, he says, he paid himself living expenses and left as much as he could in the private company. Tinker concedes that selling off his interest to his partners, who included Mary Tyler Moore, his ex-wife, was ''expensive.'' In selling when he did, Tinker had to forgo big profits that producers earn when shows are sold as reruns to local stations. ONCE TINKER accepted the position as chairman and chief executive of NBC, Bradshaw ''went through the various steps of loosening our bond with Fred Silverman.'' It was not long before rumors of Silverman's imminent ouster and his replacement by Tinker began to circulate at NBC's Burbank studios. They soon reached Brandon Tartikoff, president of the entertainment division and, as it happens, a onetime protege of Silverman when both had worked at ABC. Not surprisingly, Tartikoff, now 36, pondered his future. Fifteen minutes after the rumor about the Silverman-to-Tinker handoff became official, Tartikoff says, he got a phone call from Tinker, who was in the South of France. ''He told me the first official thing he wanted to do as an NBC person was have lunch with me. He said he didn't want me to go anywhere else.'' Once again, Tinker outlined his plans and ideas. Tartikoff agreed to stay on. Tinker also called Silverman, whom he had known for years. The conversation was amiable, he says. Nowadays, says Tinker, the two have ''nothing in common'' other than patronizing the same Beverly Hills Hotel barbershop. The partnership between Tinker and Tartikoff proved the cornerstone on which NBC's recovery was to be built. To Tartikoff, Tinker's readiness to let the creative people do what they do best came as a total reversal of Silverman's style. Silverman called him four times a day, he says, and was very much a ''hands on'' boss. In contrast, ''I'm lucky to get two calls a week'' from Tinker. Tinker also leaves Tartikoff to handle producers in his own way, treating him, he says, ''like a big boy. I respect and treasure that.'' The pair discuss new shows and pilots, and Tinker occasionally ''plants a seed'' in the form of an idea for a show. Recently he expressed an appetite for a program about lawyers. One now is in the works, Tartikoff says. Only once have the two had a major disagreement. NBC had bought White Dog, a movie based on a Romain Gary story about a dog raised to attack blacks and later ''deprogrammed'' by a black trainer. Tartikoff, who describes the movie as antiracist, wanted to run it. Tinker didn't. NBC did not show the film. Despite the pair's smooth relationship, NBC stayed third in the ratings for three more seasons. According to Tartikoff, it takes that long to assemble the different ''building blocks,'' programs that when properly put together make a strong prime-time schedule. Ratings don't change instantly, but Tartikoff's early efforts to build up NBC's prime-time audience went nowhere. In the 1983-84 season, all nine of the new programs that he selected and Tinker went along with were canceled. Perhaps the story lines suggest why. For example, Manimal had as its protagonist a psychologist with the ability to turn into various forms of fauna, a quick change he employed to bring criminals to justice. Mr. Smith starred an orangutan that was doubly gifted -- it could talk and it possessed an extraordinarily high IQ.

NBC beheaded these turkeys, but Tinker remained loyal to Tartikoff and other shows that he believed had quality and would survive feeble ratings to win an audience if left in a regular time period. One of Tinker's MTM creations, Hill Street Blues, a tough and realistic cop show revolving around a big-city precinct, won early critical acclaim though minuscule ratings. Silverman bought Hill Street for NBC in his last days and kept shunting it from one time period to another, hoping to snare more viewers. Instead, he lost many. In the regular 10 P.M. Thursday time slot it has occupied for the past four years, Hill Street now has an audience share of about 27%, which puts it among the top third of programs. Advertisers like the program because it attracts young, affluent viewers. But at the end of the network season, the leader in Hill Street's time slot was still CBS's Knots Landing. NBC executives claim they remain happy with Hill Street, but they are considering fine-tuning the show with a speedier opening. Tartikoff, who is head of programming, has a flair for thinking up less tony audience-grabbing programs, such as The A-Team and Miami Vice. The latter stemmed from an idea Tartikoff had in 1983 of blending a traditional cops-and- robbers program with the look and sound associated with MTV, the rock-video channel. Vice got off to a slow start, but lately reruns have ranked among the top ten shows. The A-Team, featuring five Vietnam war deserters as modern-day Robin Hoods, resulted from a chance meeting at a boxing match with the mohawked and muscle-bound Mr. T (ne Lawrence Tero), a onetime bouncer and Sylvester Stallone's opponent in the film Rocky III. ''Magnificent Seven, Dirty Dozen, The Road Warrior, Mr. T drives the car,'' Tartikoff jotted in a notebook. He handed that ''outline'' to producer Stephen Cannell, who came up with the series. The A-Team provides a vehicle for advertisers in search of a young male market.

Tinker's biggest challenge is to move NBC out of the No. 3 position in daytime programs. Because they cost so little to produce, they can be the most profitable. In fact, being daytime's No. 1 could mean an additional $100 million in pretax profits, Tinker says. He also wants to boost NBC's share of prime-time viewing over the weekend, particularly on Sunday evenings, when CBS dominates largely because of the popularity of 60 Minutes. In addition, Tinker would like to buy more stations for NBC to operate itself, now that the Federal Communications Commission has relaxed rules limiting the number of stations networks can own. Executives at the other two networks are focusing on the suddenly vibrant NBC, but in different ways. CBS maintains that the real TV battle is between NBC and ABC, both of which are after younger viewers. Says David Poltrack, head of research at CBS: ''CBS has stuck to concentrating on adult-oriented programming'' -- shows like Dallas, Knots Landing, and Falcon Crest, all of which have the look of soap operas -- ''because the 18-to-24 age group is declining, the baby boomers are moving into their late 30s and early 40s, and the older population is growing increasingly affluent.'' Poltrack adds: ''The real focus of advertisers should be people in their 40s, and as we go on it should be people in their 50s.'' CBS launched a major marketing effort early last year to convince advertisers of this theory, though so far without results. At ABC, executives want to ease up on what they admit was a too heavy hand over producers and other creative people. ''It's an attitude change,'' says one. Lewis Erlicht, president of ABC Entertainment, said much the same thing to a recent gathering of television critics in Los Angeles. ''ABC will be giving creative people their heads to do what they do best,'' he promised. Says an NBC executive producer: ''That sounds more like Grant Tinker than Grant Tinker.''

CHART: TEXT NOT AVAILABLE BOX: INVESTOR'S SNAPSHOT RCA SALES (LATEST FOUR QUARTERS) $10.1 BILLION CHANGE FROM YEAR EARLIER UP 9% NET PROFIT $353.8 MILLION CHANGE UP 106% RETURN ON COMMON STOCKHOLDERS' EQUITY 14% FIVE-YEAR AVERAGE 8% RECENT SHARE PRICE $46.50 PRICE/EARNINGS MULTIPLE 14 TOTAL RETURN TO INVESTORS (12 MONTHS TO 7/5) 53% PRINCIPAL MARKET NYSE Explanatory notes: page 82