National Broadcasting Company, Inc. History

Company History:

A broadcasting giant, National Broadcasting Company, Inc., through the NBC Television Network, serves more than 200 affiliate stations in the United States. During the late 1990s, NBC ranked as the number one network in the country, attracting more viewers than rivals ABC, CBS, and Fox. In the early 1990s, NBC ranked as the third network, but the popularity of such shows as "Seinfeld," "Friends," "Frasier," "ER," and "Dateline NBC," fueled the company's rise to preeminence over its competitors. The decade also saw the company diversify into cable, new media, and global television broadcasting. NBC's 24-hour cable channel, CNBC, was used as a springboard to launch cable television business news channels in Europe and Asia, and its 1996 joint venture with Microsoft led to the launch of MSNBC, a 24-hour cable news network and Internet site. In addition to part ownership in cable channels such as A&E, NBC also owns 19 percent of Internet service provider Snap!. NBC's annual revenue of more than $5 billion accounted for roughly five percent of GE's annual sales volume.

NBC's Origins in Radio

The original owner of NBC was the Radio Corporation of America (RCA). RCA was formed after World War I by several large U.S. companies in order to keep "wireless" (radio) technology in American hands. At the time, it was the leading manufacturer of radio receivers in the world.

RCA's goal in forming NBC was to be able to provide a large number of quality radio programs so that, as one of its newspaper ads said, "every event of national importance may be broadcast widely throughout the United States." General Electric Company (GE) and Westinghouse also had ownership interests in NBC, but RCA bought them out in January 1930 and remained the sole owner until 1986, when General Electric acquired RCA for $6.3 billion.

NBC's first radio broadcast, on November 15, 1926, was a four-and-a-half-hour presentation of the leading musical and comedy talent of the day. It was broadcast from New York over a network of 25 stations, as far west as Kansas City. Close to half of the country's five million radio homes tuned in. The first coast-to-coast broadcast soon followed, on New Year's Day in 1927, when NBC covered the annual Rose Bowl football game in California.

The demand for a network service among local stations was mounting so rapidly that less than two months after its first national broadcast, NBC split its programming into two separate networks, called the "red" and the "blue" networks, to give listeners a choice of different program formats. By 1941 these two networks blanketed the country; there were 103 blue subscribing stations, 76 red, and 64 supplementary stations using NBC programs. The blue network provided mostly cultural offerings: music, drama, and commentary. The red featured comedy and similar types of entertainment. There were regular radio programs for children, as well as soap operas and religious programs. When the Federal Communications Commission (FCC) declared in 1941 that no organization could own more than one network, NBC sold the blue complex, which became the American Broadcasting Company (ABC).

Early radio provided a forum for the popular vaudeville entertainers of the day: NBC hired many of them--Rudy Vallee, Fred Allen, Jack Benny, Ed Wynn, Eddie Cantor, Al Johnson, Groucho Marx, Bob Hope, Jimmy Durante, Bing Crosby, Red Skelton, Edgar Bergen, and Charlie McCarthy, and George Burns and Gracie Allen, to name a few. These performers had their own shows and appeared on each others' as well.

From the first coast-to-coast broadcast of the Rose Bowl in 1927, sporting events were a radio mainstay. That same year, the red and blue networks tied in with a number of independent stations to broadcast the second Gene Tunney-Jack Dempsey heavyweight fight from Soldier Field in Chicago. Two years later NBC broadcast the Kentucky Derby. During the 1920s and 1930s, the network featured the World Series many times, as well as major football games, golf tournaments, and the Olympics in Los Angeles in 1932.

NBC's first special events broadcast was Charles A. Lindbergh's arrival in Washington on June 11, 1927, after his historic transatlantic flight. In 1928 the network began coverage of national political events, covering the Republican and Democratic national conventions; the inaugurations of presidents Herbert Hoover in 1929 and Franklin D. Roosevelt in 1933; the opening of the 73rd Congress on March 9, 1933; and Roosevelt's first "Fireside Chat" on March 12th of that year. "NBC News" was officially created in 1933. The first international NBC broadcast also occurred in 1928, when the network carried a pick-up of President Calvin Coolidge opening a Pan-American conference in Havana.

In 1923 David Sarnoff, the founder of NBC, wrote a memorandum to the board of directors of RCA about something he called "television," or "the art of distant seeing." "Television," he said, "will make it possible for those at home to see as well as hear what is going on at the broadcast station." The groundwork for his vision had been laid by the invention of the cathode-ray tube in 1906--the forerunner of the modern television picture tube.

RCA engineers began actively conducting television experiments in 1925, but it was not until 1939 that NBC began what is considered the first regular television service, with a telecast of President Roosevelt opening the New York World's Fair. The first television network broadcast occurred on January 11, 1940, when programming was transmitted from RCA's WNBT-TV New York City to General Electric's WRGT-TV, Schenectady, New York, via automatic radio relays.

In 1941, NBC obtained a commercial television station license from the Federal Communications Commission for WNBT-TV and officially became the world's first commercial television station.

Television programming was limited by World War II to four hours a day. In 1942 NBC Radio began featuring "The Army Hour," an official weekly broadcast that provided on-the-scene reports from military bases and battle zones. On D-Day, June 6, 1944, the network canceled all commercial broadcasts to provide continuous news coverage of the invasion of Normandy. Although World War II slowed the growth of television, NBC continued to experiment with new broadcasting concepts, including color television. During the mid-1940s NBC began to build a television empire the same way it had built its radio network. Its first television network consisted of four stations that covered New York City, Philadelphia, Schenectady, and Washington, D.C.

Post-World War II Growth of Television and NBC

After the war, television began to expand news coverage, create new weekly variety and drama programs, and adapt popular radio shows to the screen. "Meet the Press," a program featuring a panel of journalists interviewing important public figures of the day, debuted on NBC Radio in 1945. It switched to NBC-TV in 1947, destined to become the longest-running show on television.

By this time, two more stations had joined the NBC-TV network. In 1947 there were only 14,000 television homes: at the start of 1948 this number had swelled to 175,000, and by the end of the year, nearly a million sets had been sold. During this time the number of operating television stations had mushroomed from 19 to 47.

By 1951 NBC had installed regular coast-to-coast network television service. Its first venture was covering the signing of the Japanese peace treaty in San Francisco on September 4, 1951. Popular early coast-to-coast programs included the "All Star Revue" with Jack Carson and "The Colgate Comedy Hour" with Eddie Cantor.

As the 1950s progressed, NBC Radio focused on news, sports, and public affairs programming while NBC-TV implemented new programming formats, expanding its schedule from the late afternoon and evening formats prevalent at the time to include a new kind of show, the early morning weekly series. "The Today Show," which began in 1952, was the pioneer among such programming, offering news, features, interviews, and entertainment in a two-hour, magazine-type format.

In 1953 NBC presented the first coast-to-coast transmission of a color broadcast. Later that year, the FCC approved the RCA-backed National Television System Committee's standards for color compatibility, which removed CBS's rival color system from competition. This new technology made it possible for viewers who did not own a color television set to receive all network programs on their old black-and-white sets, even if the programs were broadcast in color.

Television programming continued to expand. As equipment was improved and miniaturized, it became easier for television teams to cover fast-action news in the field. In 1956 NBC aired the first videotape, and in 1962 the launching of the "Telstar" communications satellite made it possible to relay live video sequences from continent to continent almost instantaneously.

By the 1960s television was big business, and NBC continued to expand its programming with such popular programs as "The Virginian," Rowan and Martin's "Laugh-In," "The Man from U.N.C.L.E.," and "Star Trek." The network also initiated and presented the 1960 presidential debates between John Kennedy and Richard Nixon. In 1964 it presented the first made-for-TV movie, establishing a new television format.

During the 1970s, though television programming was swelling to an all-time peak, radio was sagging. NBC tried, unsuccessfully, to buoy radio sales by introducing several new programs. In 1975 NBC Radio introduced an ambitious 24-hour radio news network, the National News and Information Service (NNIS), but it was discontinued two years later for lack of audience and station clearance.

NBC was so disheartened by its lack of success in the radio arena that in the early 1970s it developed a plan to sell all of its radio stations and exit the business. It never followed through, though, and by December 1983 the network had completed the conversion of its radio transmissions from landlines to satellite. In 1985 NBC established a radio-programming distribution arm called NBC Radio Entertainment, allowing it to get involved with a variety of musical programs such as country and jazz. With these changes, NBC's radio business became profitable again, but in 1988 NBC did finally decide to leave the business, and that year sold seven of its eight radio stations.

The early 1980s was a hard time for NBC Television. In 1983 none of NBC's nine new shows was renewed, and the network received low consumer ratings for the third year in a row. Some sources attributed this decline to poor management and a mishandled budget. The network quickly replaced low-rated programming and managed to bring its ratings up to second place by the 1984-85 season, and to number one by 1985.

In 1986 NBC facilitated the exchange of news between NBC-TV affiliates by launching the "Skycom" domestic and international satellite system. It became the only network to use satellites as its sole method of distribution. In the same year, General Electric Company acquired RCA for $6.3 billion and became NBC's parent company.

GE's early management of NBC coincided with the departure of chairman Grant Tinker, a well-respected executive who, along with programming chief Brandon Tartikoff, was generally given credit for the network's rise to first place during the 1980s with such hits as "Cheers," "The Cosby Show," "St. Elsewhere," and "Hill Street Blues." The naming of Tinker's successor, former president of GE financial services Robert C. Wright, was viewed as the inauguration of a new era at NBC, one in which the network's corporate culture was radically altered to reflect a primary concern with shareholder's profits. Tartikoff's 1991 move to head Paramount was a further signal that a new guard was in place.

NBC Under Wright: The 1990s

Wright's institution of budget and staff reductions helped NBC to realize an initial increase in revenues, but beginning in 1989 these figures began to decline along with operating profits. According to GE's 1991 annual report, the broadcasting subsidiary weathered "the worst network advertising market in 20 years." With a four percent decrease in revenues that year, NBC suffered an operating profit decrease of 56 percent. NBC still won the 1990-91 ratings wars, though "by its narrowest margin in six years," and was the recipient of 22 Emmy Awards.

The company entered 1992 having divested itself of RCA Columbia Home Video and acquired the Financial News Network, which it merged with its Consumer News and Business Channel. April saw the last episode of "The Cosby Show," a virtual goldmine with its continuing syndication; in May the company ballyhooed the long and colorful history of "The Tonight Show," starring Johnny Carson, with a final airing that was a resounding success.

After winning the May sweeps, the most important of three ratings months, NBC poised itself for coverage of the Barcelona Summer Olympics. Although Steve McClellan and Rich Brown reported that losses for the network and for its Triplecast venture with Cablevision (an expensive service providing subscribers with continued coverage of the games from beginning to end on three separate cable channels) "will total between $50 million and $100 million," Wright and others viewed NBC's coverage as profitable in other ways, not least of which was the showcasing of NBC talent. Despite Wright's prediction a year earlier that the outcome of 1992 would be "extremely questionable," NBC nonetheless appeared motivated to get the most for its programming dollar and intended to move in the direction of attracting younger viewers, a demographic group that in turn attracted the highest commercial fees.

As NBC sought to win over the coveted 18- to 49-year-old viewing audience, however, the broadcaster faltered. In selecting senior executives for several positions, Wright had erred, hiring individuals ill-equipped to manage the company's news and entertainment programming. The network slipped to the number three position in 1993, falling behind rivals ABC and CBS and barely managing to beat back the upstart FOX network. Wright bore the brunt of the criticism, as those inside and outside the industry belittled the ability of a GE-trained lawyer to steward the fortunes of an entertainment company. Wright could not be dissuaded from altering his strategy, however, an approach articulated by his boss, GE's chief executive officer, John (Jack) F. Welch. Said Welch, according to a February 1997 Fortune profile: "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." With the support of Welch, Wright intended to manage NBC the GE way, despite mounting opposition to operating the network in the traditional corporate manner.

Wright turned his attention toward cutting costs and eliminating NBC's bureaucratic structure. The network's workforce was trimmed from 8,000 employees to fewer than 5,000, saving the company nearly $120 million in overhead. As Wright performed the tasks expected of a former financial services president, he also compensated for his initial hiring mistakes by recruiting creative executives with an entrepreneurial zeal, notably Don Ohlmeyer. Ohlmeyer, a sports and entertainment producer who ran his own production company, joined NBC in early 1993 to lead NBC Entertainment. The strategy developed in 1993 was to build a dominant Thursday night of programming. The popularity of shows such as "Seinfeld," "Friends," "Frasier," and the hour-long drama "ER" achieved this objective unequivocally, breathing new life in the network after the loss of "The Cosby Show" and "Cheers." Under Ohlmeyer, the broadcaster became an innovator, the first network to segue from one program to another without a commercial break (NBC's vaunted "seamless" programming) and the first to show previews of the upcoming program on half the screen while credits rolled on the other half. By 1995 NBC ranked as the number one network.

With the network again capturing the industry's highest ratings, Wright continued to broaden NBC's interests. Leading the pack, however, was not enough for Wright. "We have to be bigger than broadcasting," he told Fortune. "That worried me before I got here, that worried me the day I got here, and it's worried me every day since." Wright demanded NBC diversify into cable, new media, and global television, thereby providing opportunities for growth to compensate for the perennial decline in broadcast viewership. In 1996, the company teamed up with Microsoft to launch MSNBC, a 24-hour cable news network and Internet site, which was jointly owned by the two companies. That same year, Wright also began a push into overseas markets with the launch of CNBC Europe and NBC Asia.

By the beginning of 1997, Wright could point to strong evidence for managing NBC in the traditional GE manner. The network was still in the lead, and for the fourth consecutive year it had generated record revenues and earnings, recording more than $5 billion in revenue and an estimated $950 million in operating profit. As the network entered the late 1990s, it appeared to occupy solid ground, although it did not have NFL football on its schedule for the first time in more than 30 years. NBC did own the television rights, however, to the Olympics through 2008, having secured a $4 billion deal in 1995. In the future, NBC was expected to further its involvement in cable, new media, and international broadcasting, as it fought the capricious war to lead the nation in broadcast ratings.

Principal Subsidiaries: CNBC, Inc.; Living Music, Inc.; NBC

Entertainment Corp.; NBC News Bureaus, Inc.; NBC News Worldwide, Inc.; NBC International Limited; NBC Subsidiary KCNC-TV, Inc.; Spectacular Music, Inc.; NBC Digital Publishing; NBC Online Ventures.

Further Reading:

• Auletta, Ken, Three Blind Mice: How the TV Networks Lost Their Way, New York: Random House, 1991.
• Campbell, Robert, The Golden Years of Broadcasting: A Celebration of the First 50 Years of Radio and Television on NBC, New York: Charles Scribner's Sons, 1976.
• Carter, Bill, "All the Networks Exult As Sweep Month Ends," New York Times, May 21, 1992.
• Elliott, Stuart, "NBC Likes Young Viewers, Judging From Its Fall Plans," New York Times, May 13, 1992.
• Gorowitz, Bernard, ed., On the Shoulders of Giants: 1924 to 1946--The GE Story, Schenectady, N.Y,: Elfun Society, Territorial Council, 1979.
• Gunther, Marc, "How GE Made NBC No. 1," Fortune, February 3, 1997, pp. 92+.
• Huff, Richard, "Wright of Passage: NBC Prez Sees Rocky '92," Variety, August 12, 1991.
• McClellan, Steve, and Rich Brown, "NBC Claims Silver (Lining) in Summer Olympic Effort," Broadcasting, August 10, 1992.
• "Nets 'Yellow' with Envy," Advertising Age, November 9, 1998, p. 44.
• Schatz, Ronald W., The Electrical Workers: A History of Labor at General Electric and Westinghouse, 1923-60, Urbana: University of Illinois Press, 1983.
• Sharkey, Betsy, "Master of His Domain," ADWEEK Eastern Edition, June 1, 1998, p. S26.
• "When the TV Going Gets Tough," U.S. News & World Report, May 13, 1991.

Source: International Directory of Company Histories, Vol. 28. St. James Press, 1999.

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