After returning from the crazy EA Europe trip I flew to Hollywood for a session with an attorney group at NBCUniversal. That’s right even attorneys need to learn finance. I did this session right on the studio lot. The training facility was unavailable so I did my session right in a studio room with overhead lights and all. It was pretty cool.
I had about 40 NBCUniversal legal leaders in the class. The session moved along pretty well. The big issue with this group was understanding how NBCUniversal fit in financially with their parent Comcast. It’s interesting to note that NBCUniversal makes significantly lower profit margins than Comcast. So the question came up ‘why would Comcast buy a business with a lower margin than theirs?’.
If you go back a few years NBCUniversal was sold by GE for precisely that reason. GE was looking to focus on higher margin businesses. Often conventional thinking on Wall Street is the higher the operating margin percentage (that’s operating income divided by revenue) the higher the stock price will be. So back to the question why did Comcast make this acquisition? The answer lies in the fact that Comcast is a cable based company and with the changing environment in cable with the new online competitors Comcast decided they needed to control content. Even though NBCUniversal has a lower margin than the rest of Comcast, NBCUniversal provides content and the video entertainment market is getting more competitive.
Another great piece of the NBCUniversal business is its cash rich park business which is growing rapidly and generating strong cash flows for the Comcast parent. The parks have been a great strength to NBCUniversal for the last 5 years. That turns out to be good news for me on two fronts. First, profitable successful businesses tend to keep training. Second, I have significant ownership in a business called Setpoint Systems which provides amusement park rides.
One trip highlight was a visit to my favorite little sushi place called Kiru Kiru. Great rolls and sashimi. The best rolls are named after many of the Hollywood studios. If you are in the area I recommend it. This is also a great place for a morning run. Lower altitude than Utah and nice scenery. I got a nice run in while on this short trip which is never a bad thing. I was a bit tired for this one after Europe and the 4th of July celebration but still a great day for finance.