HOW GE MADE NBC NO. 1 WHEN HE BECAME NBC'S CEO IN 1986, BOB WRIGHT WAS DERIDED AS ONE OF GE'S DIM BULBS. BUT HE'S MADE THE PEACOCK NETWORK FLY--HIRING GREAT MANAGERS AND ROUTING THE COMPETITION. FOR HIS NEXT ACT, HE'S BUILDING A HIGH-TECH GLOBAL EMPIRE.
By MARC GUNTHER REPORTER ASSOCIATE HENRY GOLDBLATT

(FORTUNE Magazine) – Traditionalists at NBC were appalled. General Electric CEO Jack Welch had announced that he was changing the name of the landmark RCA Building at 30 Rockefeller Center to the GE Building. This was in 1988, two years after GE acquired NBC in its purchase of RCA, and unhappy network staffers feared the venerable old Peacock Network--famous for Huntley-Brinkley, Milton Berle, and Bonanza--was being destroyed, morphed into just another cog in the GE machine. Even NBC's own late-night star, David Letterman, loved to take nasty on-air jabs at Welch and his boys from Fairfield.

It turns out that those worried NBC staffers were wrong--and a good thing too. Since then, Robert C. Wright, the GE-trained lawyer chosen by Welch to run the network and the man once maligned as an industry know-nothing, has transformed the company into the powerhouse of the TV business. He has deftly expanded NBC beyond broadcasting into cable, new media, and global television, creating a diversified media company with strong prospects for growth. He has put together an all-star team of executives, probably the best ever to run a network. And he has driven NBC to its fourth consecutive year of record revenues and earnings, with more than $5 billion in revenues and an estimated $950 million in operating profits in 1996.

From Today at dawn through Tonight at bedtime, NBC is clicking. The network dominates in entertainment and sports and has all the momentum in news. And the 53-year-old Wright, derided for years as an uninspired cost cutter, is finally getting respect.

What's not well understood, though, even now, is the story of how Wright reinvigorated NBC. The secret: Wright did exactly what his critics told him not to. he imported GE's hard-driving culture to NBC, staying the course with Welch's unyielding support--and occasional nudging. He did so even as experts warned that television is a uniquely creative business, where rules that govern the rest of the corporate world don't apply.

That, it appears, simply isn't true. Welch says: "People say, Jack, how can you be at NBC, you don't know anything about dramas or comedies...Well, I can't build a jet engine, either. I can't build a turbine. Our job at GE is to deal with resources--human and financial. The idea of getting great talent, giving them all the support in the world, and letting them run is the whole management philosophy of GE, whether it's in turbines, engines, or a network."

Wright and his senior executives now run NBC the GE way. They think strategically, globally, and long term. They hire strong, self-confident people. They promote speed and simplicity. They decry bureaucracy. These may sound like management bromides, but they explain why NBC owns the rights to the Olympics through the year 2008, why NBC has mounted a successful cable news network when rivals Disney and Rupert Murdoch could not, and why NBC beat its rivals to the Internet and expects now to become a programming force in Europe and Asia.

"We have to be bigger than broadcasting," Wright says. "That worried me before I got here, that worried me the day I got here, and it's worried me every day since." Wright moved into new businesses to create a hedge against the decline of broadcasting. Today broadcasting still represents the bulk of NBC's revenues and profits, but that business is in a long, slow, seemingly inexorable decline. In 1986 broadcasting had 92% of viewers; now it's only 67%.

It's not just that the audience is shrinking. Prime time, especially, is a cyclical and unpredictable arena. A recession hits, and ad revenues wilt. Pick a few dogs, and, with a click of the wand, viewers will desert you in droves. "That's the horrible part about the business," says Wright. "You can't will the audience to fall in love with your shows." And even hit shows don't stay hot forever. Already NBC blockbusters like ER and Friends are in decline. Wright, too, is worried about Don Ohlmeyer, NBC's top programmer, who has just spent a month in the Betty Ford Clinic seeking treatment for alcoholism (see box). It was Ohlmeyer who over the past few years turned NBC's prime-time lineup around and helped make Bob Wright a hero, and it's Ohlmeyer--a man as volatile as the nightly Nielsens--who must keep the hits coming.

Wright's journey so far has been anything but smooth. When the Big Three TV networks changed hands in the mid-1980s, the conventional wisdom was that NBC got a rotten deal: ABC was sold to Capital Cities, a broadcasting company; CBS went to Laurence Tisch, who promised to rebuild; and NBC wound up with the light-bulb people. The reaction of NBC News anchor Tom Brokaw was typical. "My heart sank," he recalls. "GE people were engineers and accountants. They came from a different gene pool."

More than the GE factor was working against Wright when he was named NBC's CEO in 1986. The CEO he replaced, Grant Tinker, was a classy, stylish former producer, well liked by colleagues. By comparison, Wright was a stiff, colorless outsider whose best qualities--his brainpower, integrity, and decency--weren't immediately apparent. NBC, meanwhile, was in its best shape in years, thanks to prime-time programming wiz Brandon Tartikoff (the Bill Cosby-led Thursday night lineup was his creation). NBC's employees wanted to be applauded, but Wright came bearing bad news.

Sure, he would say, the ratings are great for now, but NBC's costs are too high, and viewers are fleeing to cable. This was a message few at NBC wanted to hear. "They were totally consumed with broadcasting" and thought of cable as "television with training wheels," Wright recalls. "They certainly weren't interested in hearing about diminishing shares." But he felt obligated to deliver the unpleasant news. Doing so was a cornerstone of the GE way, preached often by Welch: Face reality (even when it's uncomfortable), communicate candidly (even when it stings), and embrace change (it's an opportunity, not a threat).

Professionally, Wright was a product of GE and protege of Welch, his close friend, who'd brought him back to GE in the early 1970s after he'd left briefly to practice law. He toiled in GE's plastics and housewares divisions, but then left again to spend three years in Atlanta as president of Cox Cable in the early 1980s. In the mid-1980s he returned to run the ultimate station of the GE cross: GE Capital. Though Wright had never worked in broadcasting, he was hardly the TV neophyte his critics believed, having witnessed at close hand the growth of Ted Turner's cable empire while he ran Cox.

Personally, Wright was well armed for the cold rebuff he received upon arriving at NBC. He is a man shaped by close family relationships and a strong sense of self. Like Welch, Wright was the only son of a stable, hard-working, and religious Irish Catholic mother who believed in him at every turn; his father, an engineer by trade, was an entrepreneur who, Wright says, "was always looking to be a millionaire but never made his fortune."

Again, like Welch, Wright got a Catholic education, at Chaminade High School on Long Island (where his classmates included actor Brian Dennehy and IBM CEO Louis Gerstner) and at Holy Cross. The other crucial relationship in Wright's life is his 29-year marriage to college sweetheart Suzanne Wright, mother of their three children. She is as spunky, outgoing, and irreverent as Bob Wright is proper and reserved. And because they're very much a team, the NBC transition was tough for both of them. She remembers inviting senior NBC executives to their Connecticut home and being stunned at how chilly some were.

But tensions were running high at the office, as Wright pushed his two-pronged strategy: Cut costs and find ways to get into cable. Neither course of action was popular, but Wright had no choice, particularly on the cost side, where Welch was pressuring him along with the rest of GE to eliminate layers and root out waste. "NBC was 20 years behind GE on that issue," Wright says. The bureaucracy was so bad, recalls Dick Ebersol, then a producer and now president of NBC Sports, that "someone who wasn't qualified to produce a bowel movement could slow you down for months." Wright attacked NBC's bloated work force, cutting it from 8,000 to fewer than 5,000 full-time jobs, saving close to $120 million a year in overhead.

To many, Wright was foolish to curb spending on profitable broadcast operations so he could invest in risky cable deals. But Wright believed fervently in cable, more so than his counterparts at CBS, who sold cable assets, including a sports channel, and ABC, which passed up a golden opportunity to take sole ownership of ESPN. (For $175 million, ABC could have bought the 20% of ESPN that it doesn't own. Today ESPN is worth at least $3 billion.)

Wright pressed on with his cable portfolio, buying stakes in regional sports channels and such networks as Court TV, Bravo, and American Movie Classics. Nearly all now make money. But his biggest cable gamble was CNBC. NBC created this business news channel in 1989 and later ensured its survival by outbidding Dow Jones and Westinghouse to buy a money-losing rival, Financial News Network, for $155 million, far more than it was worth. Since then NBC has pushed CNBC into 60 million homes, despite lackluster programs. (Its prime-time fare has run the gamut from a sex call-in show to Geraldo Rivera's O.J. Simpson talkathon to Conan O'Brien reruns.) Never mind: the channel is now worth about $1.3 billion, say analysts.

Far from getting credit early on for his cable strategy, Wright instead took a beating in the early 1990s when NBC's prime-time ratings tumbled. To make matters worse, the collapse came just as the TV advertising market fell into its worst slump in two decades. Says Wright: "The hundred-year flood hit on the day we were having our boat repaired." NBC's profits plummeted from a peak of $603 million in 1989 to just $204 million in 1992. At the time a former NBC executive told the New York Times, "General Electric has not contributed a single idea that has worked."

Wright was partly to blame for the problems. GE had taught him to find the strongest person possible for each job, but here he faltered. When Tartikoff left to run Paramount in 1991, Wright turned prime time over to Tartikoff's deputy, Warren Littlefield, who was an astute programmer but didn't have the business skills to run a division. What's more, Wright had limited his spending authority. Wright also suffered from another personnel blunder--his choice of Michael Gartner, a respected newspaper editor, as president of NBC News. At GE's insistence, Gartner cut costs and curbed losses in the news division, but he did so at a price--NBC News presented cheesy specials on sex and weight loss and a lurid reality program called I Witness Video, while serious documentaries gave way to lighter fare like the Dateline magazine show. Gartner had no feel for programming. "I have to take the blame for bringing somebody in who did not have a television background," Wright says. The upshot was that, during the toughest of times for all the networks, NBC's entertainment and news divisions were in the wrong hands.

Wright, having lost patience with his own division heads, decided that what he really needed was executives with entrepreneurial drive. Early in 1993 he hired Ohlmeyer, a sports and entertainment producer who ran his own production company, to take over NBC Entertainment. Ohlmeyer had made millions on his own, but he longed to become a major player in Hollywood. An outspoken, fiercely competitive bear of a man, Ohlmeyer demanded full control over entertainment and more freedom to spend money on programming, giving him a more powerful perch than Littlefield, whom he kept on as his deputy.

Several months later, after a scandal at Dateline over a staged fire in a General Motors pickup truck, Gartner "resigned." "It was a dark moment," Welch says. But, ironically, a key turning point. This time, Wright hired Andrew Lack, an ebullient and innovative CBS News producer, to run NBC News. Like Ohlmeyer, Lack had an entrepreneurial spirit; he'd worked in advertising, produced a TV movie, and created the pseudo-hip CBS News magazine West 57th.

That Ohlmeyer and Lack were producers as well as executives was no accident. To run NBC Sports, Wright had already hired Ebersol, another executive who was as comfortable in a control room as in his office. Ebersol and Ohlmeyer, who were friends, had both worked for Roone Arledge at ABC Sports, moved into entertainment, and become independently wealthy by age 40. "Don and I aren't thinking about mortgage payments. We're thinking about winning," Ebersol says. "There's no fear factor." After hiring Ebersol, whose production credits included Saturday Night Live, a professional wrestling show, and Bob Costas' late-night NBC talk show, Wright realized that having executives around with an instinctive feel for TV production--something he lacked--was probably a good idea. It's called show business, after all.

Although his strategy had been sound all along, Wright concedes that he needed Ohlmeyer, Ebersol, and Lack to execute it and get the network on track. And it's to his benefit that Wright, an unassuming man whose charisma quotient is near zero, can share the NBC stage with three showmen, flashy guys with outsize egos who view themselves as executive-stars--little Roones, if you will. "We have a tolerance for big people," Wright says. "That can get you a lot in this business."

Wright gives his three top executives lots of running room--and demands that they move fast--tenets of GE management. Consider, for example, how NBC engineered a stunning coup--the $1.25 billion Olympic rights deal for Sydney in 2000 and Salt Lake City in 2002. Wright summoned Ebersol and Randy Falco, who organized NBC's Olympic coverage, to a meeting in August 1995, immediately after the Disney-ABC and Westinghouse-CBS mergers were announced. With the industry in flux, Wright and Falco came up with the unprecedented idea of launching a preemptive bid for two Olympics, which up until then had been auctioned one at a time. Welch, reached on Nantucket, gave the go-ahead--and a GE jet to fly the two to Sweden that night to present their plan to International Olympic Committee officials. "We had an answer within two minutes," Ebersol says. By the weekend, they also had a deal with the IOC. Says Welch: "Drive speed for competitive advantage...we breathe that." Later, Ebersol and the IOC negotiated an even grander deal, a $2.3 billion package that gives NBC the rights to all the Olympics through 2008. By the time ABC, CBS, and Fox woke up, the game was over.

The entrepreneurial spirit is also alive at NBC News, which now boasts the best collection of assets of any TV news operation. Today has a dominant lead in the mornings. Dateline has grown into a commercial, although not a critical, success, and NBC's Nightly News is mounting the first serious challenge to ABC's World News Tonight since the late 1980s. NBC's most significant victory was the successful launch last year of MSNBC, the 24-hour cable news network and Internet site jointly owned with Microsoft. Wright negotiated a favorable deal with Microsoft that enabled NBC to create the news channel with no cash outlay.

By contrast, Disney's ABC News, the longtime broadcast news leader, had to drop its plans for a cable channel because the startup costs were too high. Meanwhile, Rupert Murdoch's fledgling Fox News Network has been embroiled in a bitter public battle with Time Warner (the parent of Fortune's publisher). Murdoch wants Time Warner, which owns CNN, to carry Fox News over its cable systems; the company refuses. Whatever the merits, Murdoch's attacks on Time Warner and its vice chairman, Ted Turner, have alienated cable executives. Fox's news network, as a result, has stalled; it has distribution deals with fewer than ten cable operators, pays them all hefty carriage fees, and reaches only 19 million homes. MSNBC has made more than 70 deals, collects fees from the operators, and has commitments that will expand its base from today's 28 million homes to 55 million by 2000. Murdoch may be making headlines, but Wright has made his fledgling network the clear No. 2 after CNN.

Of all the aggressive managers Wright installed, Ohlmeyer produced the most dramatic results. When he took over entertainment in 1993, Ohlmeyer tore down internal barriers in the division, organizing a daily 2:30 p.m. "war room" meeting of his department heads where they develop strategy, identify problems, and brainstorm. The goal is to promote teamwork, eliminate second-guessing, and bring the best brains to bear on issues--part of a concept GE has enshrined as "boundarylessness."

So far the results have been impressive. The network's promotion machine is awesome; just look at how NBC's "Must See TV," an oxymoron if ever there was one, has become part of the lexicon. Under Ohlmeyer, NBC was the first network to eliminate commercial breaks between programs, leading viewers seamlessly from one show to the next. The Tonight Show with Jay Leno, overcoming a rocky start, has won the late-night battle with CBS's David Letterman, Welch's old nemesis. In daytime, a perennial weak spot, NBC still trails its broadcast rivals, but the Peacock Network has made impressive gains in ratings and profits since Ohlmeyer took command.

NBC insiders argue that Ohlmeyer's success is no accident--they say he has the most strategic, focused, and aggressive programming operation in Hollywood. NBC, for example, plans far ahead so it doesn't rush programs onto the air before they're ready. Veteran Littlefield says, "Trust me when I tell you--we had no strategic plan in the Eighties. It did not exist."Adds Ohlmeyer: "People try to mythologize this business. They talk about 'the men with the golden guts.' But it's no different than any other business. You pay attention to detail. You have good taste. You know what you're doing. You get in business with the right people. You support them with the right assets. And you succeed." Echoes of Jack Welch?

Rivals concede that NBC has thrived under Ohlmeyer, but they scoff at the claim that he brought any new strategy or system to bear on what are, ultimately, guesses about viewer taste. Says Ted Harbert, outgoing chairman of ABC Entertainment: "They are starting to believe their own press. Once that happens in this town, you're usually dead within three years."

In a sense, both camps are right. GE management helped discipline the bureaucracy at NBC. But gut instincts still count for plenty. Even Wright enjoys the game; he saw a pilot of the sitcom Third Rock from the Sun, which had been commissioned by ABC, and encouraged his people to go after it. It became an instant hit.

What's indisputable is that Ohlmeyer has delivered three years of steady ratings growth to NBC, along with the youthful demographics sponsors love. With nine of the top 20 shows on TV so far this season, NBC is a lock to win prime time comfortably again in 1996-97. Even so, NBC 's lineup has lost 4% of its core viewers, and the network hasn't come up with a bona fide hit since the launch of Third Rock a year ago. In historical terms, the numbers look even scarier. NBC's 10.5 rating so far this season is 41% below the 17.8 rating the network enjoyed when it was No. 1 a decade ago. Luckily for all the networks, demand for advertising remains so strong that buyers are spending more than ever to reach smaller audiences.

Still, Wright's taking nothing for granted. Much as he pushed into cable a decade ago, he's now making risky, long-term investments in Europe and Asia, where NBC lags behind Murdoch and CNN and ESPN. With a little help from friends at GE--the same executives in charge of selling jet engines and medical equipment abroad are now trying to peddle some TV ad time--NBC is distributing four networks: CNBC Asia, CNBC Europe, NBC Europe, and NBC Asia. All are losing money, but the idea is to get a foothold in markets that could soon explode. That's also the thinking behind a host of NBC investments in new media like NBC Desktop, an online financial service. Here, once again, no one can accuse Wright of complacency.

The more common charge against NBC is that it is arrogant. NBC executives, particularly those on the west coast, have a nasty habit of ripping the competition. Says a CBS executive: "It shows their immaturity and the thinness of their belief that they are really winners. Theirs is a diseased, overly competitive culture." Perhaps so. NBC's cockiness could lead to its downfall. Top Hollywood producers, who decide where their best new TV shows will be shown, dislike nothing more than network executives who claim to be smarter than they are. More likely, NBC could fall victim to the programming cycles that have always been part of television. The cycles come into play for a variety of reasons, mostly because troubled networks launch more new shows and, as a result, have a better shot at creating tomorrow's hits.

Formidable as these problems seem, it would be folly to underestimate Welch and Wright. "Success is addictive," Wright says. "We don't want to lose it. We feel we worked hard to get here and, dammit, we want to stay." At GE managers have to be No. 1 or No. 2 in their markets, or the business gets closed or sold. That's something Wright, with his fighting Irish spirit, is not likely to let happen.