General Electric Co. (GE) offered the first glimpse this earnings season of the state of broadcast networks in the second quarter, and it disappointed.

The company's media unit, NBC Universal, said its operating profits dropped 41% in the quarter while revenue fell 8%, which roughly mirrored its results in the first quarter of this year.

The troubles came from NBCU's broadcast network and its local TV stations, where it sees little sign of relief as auto dealers and other major advertisers have cut spending dramatically.

Weakness also came from its film studio business, and attendance at its theme parks were down double-digits again, suggesting that consumers are still hurting from the recession and raising concerns about Walt Disney Co. (DIS), with its heavy exposure to theme parks.

The results were also in line with those revealed earlier this week by Gannett Co. (GCI), which owns 23 local broadcast TV stations in the U.S. Its broadcast division posted a 20% decline in TV revenue, and the company said it expects another slide in the mid-twenties percentage range in the third quarter because of the absence of political and Olympics-related ad spending.

Representatives for network owners Walt Disney Co., CBS Corp. (CBS) and News Corp. (NWSA, NWS), which owns this newswire, declined to comment ahead of their own quarterly reports due out over the next several weeks.

For its part, GE said it expects comparisons for NBCU to improve in the back-half of the year due to cost-cutting measures and the absence of production costs for the Beijing Olympics that it recorded in last year's third quarter. The company's chief executive, Jeff Immelt, said he expects the divisions results to be "significantly better" for the rest of the year.

The second half of last year got a boost from a heated news season resulting from the Olympics and the presidential election, but otherwise, it was a disastrous period for the media industry between Wall Street's financial meltdown and a worsening recession. As a result, third and fourth quarter comparisons are generally expected to ease for the sector.

GE Chief Financial Officer Keith Sherin said on a conference call following the company's earnings release that the so-called upfront ad selling season at NBC has been "slow," and the company plans to hold onto more inventory than usual heading into the new TV season.

Broadcast networks usually lock in large deals with advertisers over the summer in advance of the fall TV season. That process has been disrupted in recent years as networks suffer from audience declines and rising competition from cable networks and digital media outlets.

This year, the upfront selling season has been particularly difficult as ad markets suffer amid the global financial crisis and recession. Advertisers are being tight-fisted with their budgets as they wait to see where economic conditions are headed, and networks are trying to hold prices steady. A broadcasting industry source said upfront prices have been rolled back by 1% so far.

As a result, dealmaking has been slow, and networks like NBC are holding inventory for the so-called scatter market, where advertisers buy spots during the TV season, in a wager that the economy will improve and ad demand will be higher later this year.

GE could use a recovery at NBC, because it's also grappling with slumps at its financial and industrial lines of business. Speculation surrounding its relationship with Vivendi, which owns a 20% stake in NBCU, is particularly heated this year as the Paris-based entertainment conglomerate approaches its annual contractual option to unload the stake in November.

If Vivendi signals that it will exercise the option this year, GE would have nine months to pony up an estimated $4 billion to $5 billion to exercise its option to buy Vivendi's stake at a time when it's already struggling to shore up its financial position. Otherwise, Vivendi's minority stake in NBCU could be put in play, raising a host of potential complications for GE's ownership of the media company.

Vivendi CEO Jean-Bernard Levy has long said he will eventually sell the NBCU stake, because it's a "non-core asset" for the company. This year could be an inopportune time to sell, with media valuations depressed, but some investors view the business as beset by permanent declines.

Flavie Lemarchand Wood, a spokeswoman for Vivendi, declined to comment on whether the company is considering exercising its option this year. She did say speculation the company is interested in leveraging its option to buy all of NBCU is inaccurate.

Gary Scheffer, a spokesman for GE, declined to comment except to say Vivendi is "a great partner."

-By Nat Worden, Dow Jones Newswires; (212) 416-2472; nat.worden@dowjones.com