NBC Jeff Zucker Dishes on Strike, Hulu, iTunes, Kitchen Sink


NBC Universal President and CEO Jeff Zucker spoke at Harvard Business School’s Entertainment and Media Conference in Cambridge today. He rebutted claims of network irrelevancy, network neutrality, and Steve Jobs. It was clear that there was a lot of mutual respect and love between the MBA students and Zucker.

Here’s a video clip where Zucker talks about how he doesn’t know what the future of content consumption will be:

I was at the event but could find nary a Wi-Fi or even a cell signal in the basement auditorium. So since this wasn’t even live-ish blogging, I cleaned up my notes:

On the role of broadcast news:

“We live in a blogosphere world, and we live in the world where news and the definition of news is very different than it was 5 years ago, let alone 10 or 15 years ago. I don’t imagine there’s many people in this room who watch the 6:30 news….The definition of NBC news is really changing and becoming MSNBC and MSN.com.”

On the writers’ strike:

“The writers’ strike was unfortunate, it lasted too long for everyone I think. I don’t think there’s any winners when something like that happens. At the same time I think it gave many of us an opportunity to reflect on how we run our business and to question whether there were changes that were long overdue. Hollywood is a town that’s built on inertia and there were a lot of mansions built on that system.

“Some of the changes we are instituting is that there’s going to be less overall deals with writers, we’re not going to put all that money upfront onto holding onto those writers, we’re going to let the market determine it.

“We spend $10 million on a pilot, and then we end up spending $1.5 on the rest of the series. Let’s just spend $1.5 million dollars and make that pilot and see what it’s going to be. Interestingly a number of competitors have now stepped up and say that they’re going to do the same thing. I just think it’s the right way to run the business in this new era.”

On Warner Bros. TV President Bruce Rosenblum’s comments about studios evading networks to go straight to viewers online:

“I don’t think that that’s gonna happen any time soon. There’s still nothing that aggregates an audience like network television, broadcast television, if you’re an advertiser, and you want to reach a large number of people….If Warner Bros. wants to bypass the networks, they’re never going to be able to produce a program of the quality of ER or Friends. Digital distribution is opening up tremendous new avenues for everyone, but I don’t think it replaces the broadcast networks, the cable networks.

More on challenge of digital:

“What we know historically is every time there’s a new avenue of distribution, that’s good for the consumer. I think it’s additive to this whole process, I don’t think that cannibalizes what we have.

“If anyone comes in here and tells you exactly what’s going to happen in the digital frontier and tells you what’s happening, they’re lying.
What we have to do is make sure we’re playing in both worlds, the old digital world, and the analog world. The economics around these digital properties are not yet fully formed — they will be, but that’s five years at least. We can’t trade analog dollars for digital pennies [his standard line].”

On net neutrality:

“I think piracy of intellectual property is a huge concern. If you come up with an idea and it gets passed around without you getting paid for it or credit for it or whatever you’re interested in, then you’re the loser. I do think that’s it incumbent upon the leaders in this country in this area to stand up and protect intellectual property.”

On international expansion:

“Media is growing faster outside the United States than it is inside the United States, so if you want to grow, you’ve got to go. We’re going to continue to look to expand internationally.”

On Universal Studios:

“What we’re trying to do is manage for margin, and that resulted in our best year ever last year. It’s really not about box office share, it’s about margin.”

On Apple iTunes:

“I got into a pretty public fight with Steve Jobs about our TV. We were the market share leader at iTunes, we had 35 percent of the market share at the iTunes store. What we said to Steve and his team was that we wanted there to be some variable pricing. There’s no example in the world of where the retailer sets the price — there’s no example, except at Apple. We’re very conscious of what happened in the music industry.”

“We offered do a test with one show, you pick the show, I don’t care, and charge $2.99 for that and everything else at $1.99, and in fact we’ll give you the whole library at $0.99, and they didn’t want to do it. Granted none of is it as mobile and successful as iTunes.

“We agreed to put up our film stuff on Apple just a few weeks ago and the reason we did that is variable pricing.”

Is the strike actually causing the Hollywood system to change?

“There are tremendous forces that try to ensure that it doesn’t. I think oftentimes there has to be an event that pushes you to finally make good on what you have down, and it think this work stoppage might have been out of this event, and the economics of that talent had just gotten out of control. There needed to be some spark, and perhaps that was it.”

Will digital film distribution catch up with digital TV distribution?

“I think eventually that’ll happen, but I don’t think it’s imminent. I think the relationship with the exhibition houses remains incredibly strong, and I don’t think that’s going to change for some time, but maybe it will.”

New revenue models?

“Are y’all trying to give me a headache? [Praises the quality and difficulty of the questions]. Embedded ads, product integration, live, sports, all of those are critical.”

On Hulu advertising and interest in its archive shows:

“The advertisers’ response to it has been phenomenal, far greater than we would have expected. We’ve put [the library of old shows] online, we’ve been surprised at how much interest there is in it. Frankly there’s one person interested it — there’s streaming costs, you have to cover it — but that’s more than we would have had before that.”


Jackson West

I’m not sure that AlexC is correct in playing my piracy against LIz’s Net Neutrality. There’s no reason a creator can’t honestly represent themselves on an open network, but there’s all sorts of reasons a distributor/agent can’t represent themselves on a closed pipe.

Oh my science, I thank web links for freeing me from the research to make sure credits are one hundred percent proper.


What Liz calls Zucker’s “net neutrality” comments, Jackson calls his “piracy” comments. If there was a question that spurred this comment, was it in the context of NN or Piracy?

Rep. Mary Bono Mack, U2’s manager, and RIAA’s Cary Sherman all intertwined NN and Piracy in recent comments. Yesterday, I posted a video of Bono Mack’s statement here:


There is so much to pick out of Jeff Zucker’s comments at HBS Conf, I’m going to have a stab at a bunch of them.

Firstly, in the video he states he is not an expert in all this new world. Well, as the CEO of NBC Universal, I think he really needs to grasp te fundamental economic concepts. Don’t you?

On piracy – “…If you come up with an idea and it gets passed around without you getting paid for it or credit for it or whatever you’re interested in, then you’re the loser. “

People are predominantly pirating because of huge nuisance costs. (sorry to link to my own stuff but here is a previous post on Dan Fawcett at Fox talking about piracy). In summary, people pirate because; they don’t know if they will like something, advertising sucks, distribution windows suck, pirated stuff is easier to move across devices.

On the internet as a distribution platform – “What we know historically is every time there’s a new avenue of distribution, that’s good for the consumer. I think it’s additive to this whole process, I don’t think that cannibalizes what we have.

He’s right, it probably doesn’t today, but the internet is not a distribution platform. If he thinks it is (he talks about ubiquitous content in the video), he will end up spending money like Rosenblum at Warner on marketing. The cost of production is falling. The cost of distribution is zero. There is so much competition, the signal wont be heard through the noise. On the internet the experience demands to be different.

On revenue models – “Embedded ads, product integration, “

Is that the best you can do? You are talking about the most interactive video experience platform ever created and you are going to do what you did in oldteevee?

On cost of streaming – “Frankly there’s one person interested it — there’s streaming costs, you have to cover it — but that’s more than we would have had before that.”

[Mostly] it’s not streaming, it’s progressively downloading [that’s me being picky]. The economics quoted aren’t really important. The marginal cost of adding one download is $0.0025 = free. Again, I think as the CEO he should really understand the fundamental economics of this new world he talks of.

Jackson West

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I take issue with Zucker’s assertion that no retailers set price. While studios and labels have been able to enforce minimum advertised pricing for years with retail outlets, ultimately Wal-Mart determines what they’re willing to pay wholesale and charge retail.

And few disagree that there should be some intellectual property protection, but the current system (with employees writing off IP rights to employers, no opt-in registration system, no rights to repurpose orphaned works and a 95-year ownership window) is clearly broken. As are business models built on exclusivity and DRM.


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