. . . but Leaves NBC More Fragile : Departure of Programming Whiz Seen as a Sign That Network May Face New Trouble Keeping Lead

NBC, already struggling this season to maintain its ratings lead, received a further setback Tuesday with word that longtime programming chief Brandon Tartikoff had accepted an offer to become chairman of Paramount Pictures.

Despite six years of supremacy in prime time and billions in profits for its corporate parent, General Electric Co., industry analysts say NBC is showing ominous signs of a network whose best days may be behind it.

Without Tartikoff, the sole remaining link to the old NBC management that lifted the network out of the ratings cellar in the early to mid-1980s, many industry executives question how long GE may continue to own the network before selling it--according to the most persistent rumor--to a major studio such as Paramount Communications Inc.

“Let’s face it, your best man just walked out the door,” said Nicholas Heymann, an analyst for County Natwest Securities in New York and a former GE executive. “It’s hard to understand why this would enhance GE’s long-term desire to be in this business.”

NBC President Robert C. Wright rejected suggestions that Tartikoff’s exit means that GE will sell the network. “Brandon’s departure does not diminish GE’s support for this business. We talked about this issue for some time. We recognized Brandon had (other) ambitions,” Wright said.

Nonetheless, Tartikoff’s departure could not have come at a worse time for NBC, and many view his exit as exacerbating an already fragile situation.

Ratings for the recently concluded prime-time TV season were down 13% for NBC, after it had suffered a 9% drop the year before. More significantly, NBC lost out to ABC for the first time since 1984 among the important 18- to 49-year-old viewers whom advertisers pay a premium to reach.

Lower ratings are not the only problem facing the network. Beset by an industrywide advertising recession and spiraling news costs from covering the Persian Gulf War, NBC’s operating profit is expected to decline this year to $400 million or less from a peak of $605 million in 1989.

To some degree, NBC’s problems are tied to the declining fortunes of the network TV business, which is fast seeing its once lucrative franchise of free, over-the-air broadcasting erode in the face of competition from cable, home video and Fox’s growing fourth network.

At the same time, NBC must also compete against the increasingly successful programming strategies of ABC and CBS, which are nearly neck-and-neck with NBC.

Tartikoff “took a network that was in third place, built it up overnight to first place and kept it there for six years,” said Betsy Frank, senior vice president at Saatchi & Saatchi Advertising in New York.

But in the past two years, Frank added, NBC “has slipped pretty badly. Even though they finished first, they still suffered a pretty significant audience decline. Each year this happens, there are more holes to plug. But they haven’t found them.”

In the convoluted logic of network television, success frequently leads to failure. Success in NBC’s case, industry analysts say, forced the network to continue renewing popular but aging shows instead of replenishing the prime-time schedule with new shows that would attract younger viewers.

“When we put together our schedules for next season, NBC’s foundation is going to contain a significant number of critical shows that are currently trending downwards,” said David Poltrack, vice president of marketing for CBS. “In the past, NBC’s foundation of returning shows has been superior to ABC’s or CBS’, but this is not the case this year.”

Tartikoff, 42, had one of the best track records in the volatile business of television programming. His success is matched only by Fred Silverman, the former programming whiz at all three networks who first hired Tartikoff at NBC. But Silverman’s winning streak at CBS and ABC ended in 1981 after he failed to lift NBC out of third place. Under his successor, Grant Tinker, NBC began its climb to first place in 1985-86.

When General Electric bought NBC parent RCA in 1986 for $6.4 billion, few at the network had a clue of what lay ahead. Driven by the bottom-line discipline of GE management, NBC executives--many long accustomed to lax financial controls--suddenly faced smaller budgets, shrinking staffs and pressure to find cheaper ways to produce programs.

Not surprisingly, it has never been a comfortable marriage between the buttoned-down GE corporate culture and the more freewheeling NBC. Many longtime NBC executives, including the core group responsible for raising the network to first place, have been eased out or taken early retirement.

By last summer, however, Tartikoff had been growing restless at NBC. The network had finished its fifth consecutive prime-time season win, and there was little left to do, even for a man who is frequently described as compulsively competitive.

“He had been considering moving for a while,” relates James Burrows, one of the executive producers of “Cheers,” the hit Paramount comedy series that NBC paid a record $65 million to renew for a 10th season earlier this year. “I would say it’s true he was tired, plus the (programming) market has become so diverse now, that there is less chance for inspiration.”

Furthermore, Tartikoff and most other network executives were betting that the Federal Communications Commission would abolish the “financial interest and syndication rules” that prevent the networks from owning most of the shows they air.

Contrary to expectations, the FCC last month granted the networks only limited entry to the lucrative syndication business. Wall Street, which had supported repeal of the rules because it would fuel a round of network-studio mergers, was stunned.

Also disappointed was Tartikoff, who had anticipated that a change in the rules would open the way for GE to acquire a major Hollywood studio. “The fin/syn rules didn’t go his way,” Burrows said. Instead, the FCC’s decision has had the opposite effect by essentially foreclosing any chance that GE would acquire a studio to pair with NBC.

Wright said that when NBC announced last summer that it was elevating Tartikoff to the new position of NBC Entertainment chairman, “it was with the hope that Brandon would stay with NBC for some time to come and he would find a number of opportunities to assume beyond his traditional role of programming.”

Those “opportunities,” acknowledged Wright, included GE possibly buying one of the major Hollywood studios. “I think if that had happened, Brandon would have assumed some significant role in the theatrical business.” But, Wright said, “we elected not to pursue that option at this time” because “there really isn’t any studio to acquire.”

In addition, Wright said, “the making of movies isn’t our business. And the new fin/syn rules limit our opportunity to own a studio. The guts of a studio are its TV syndication business. It’s very difficult for us to pay for a syndication library and not be able to syndicate it. It’s not our time.”

Wright, however, was taken by surprise when Tartikoff told him two weeks ago that he was in serious talks with Paramount. Even as the rumors were spreading through Hollywood, Wright discounted them.

Now Wright views Tartikoff’s departure as part of the inevitable upward spiral of successful Hollywood executives. “Brandon had done the job for 10 years. He was getting restless. He felt the allure of Hollywood.”

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AS NBC’S RATINGS FALL For the first time in five years, NBC last season lost out to ABC in attractingthe important 18 to 49-year-old audience. Source: Capital Cities / ABC . . .SO DO ITS PROFITS Declining ratings have translated into declining profits at the network. Source: General Electric annual report and County Natwest Securities