Comcast, the country’s largest cable operator, already boasts a pretty fair stable of cable networks, with ownership of or stakes in E! Entertainment Television, Style, The Golf Channel, Versus, AZN Television, PBS KIDS Sprout, TV One, G4, and regional sports networks Comcast SportsNet Philadelphia, CSN Mid-Atlantic, CSN Chicago, CSNWest, and SportsNet New York.
But what if Comcast’s media properties were combined with ownership or stakes in NBC Universal’s CNBC, MSNBC, Bravo, mun2, Syfy, USA Network, Sleuth, and Oxygen, not to mention broadcast networks NBC and Telemundo and several of their affiliates?
As widely reported, talks have been going on to do just that, as NBCU parent General Electric and Comcast are discussing a transaction under which NBCU would be spun off into a separate company and combined with Comcast’s cable-network assets, and the cable operator would pay $7 billion in cash for a 51% stake in the new entity, leaving GE with 49%.
Needless to say, a deal (or potential deal) of such magnitude received quite a bit of coverage in the press, with different views on the proposed mega-transaction. Some of the highlights follow:
Sam Schechner of The Wall Street Journal: Comcast may feel it has good reason to buy a stake in more cable networks, which have been a bright spot in the media business. The company’s core cable-TV distribution business is being eroded by competition from telephone and satellite companies. And, in recent years, Comcast’s growth has come largely from new services, such as Internet access and digital phone service. But growth in those services is slowing.
Comcast would face huge challenges at NBC Universal. The NBC broadcast network is lagging in the ratings. After years of losing primetime viewers, NBC had a difficult start to the new TV season. Its new medical dramas, Mercy and Trauma, had weak debuts. And its comic-book-inspired Heroes has bled a significant number of viewers from last season.
Control of NBC Universal would put Comcast in a tough position: As a cable distributor, it would likely fight paying more for programs. But as NBC’s owner, it would have a different agenda.
Peter Grant and Nat Worden of WSJ, on the Internet surpassing cable TV and if this prompted Comcast chairman and CEO Brian Roberts to consider the deal: Owning the programs and the channels is one way to block this from happening. Either the content can be kept off the Internet, forcing people to buy it if they want to see it, or it can go behind a subscription wall on the web. Cable companies, including Comcast, are experimenting with a plan to put cable programming on the Web but require viewers to prove that they subscribe to a pay-TV service through an online authentication process before they can access it.
From Sanford C. Bernstein & Co. analyst Craig Moffett, via The New York Times: If Comcast had control over the NBC portfolio, they would be calling the shots for a significant portion of American viewing hours.
It’s less expensive (than a purchase), and at first blush, it looks like it is predicated on a very attractive valuation of Comcast’s own content assets that they would be contributing to the venture. It still leaves open plenty of questions about why Comcast wants to do this at all.
From Mike Farrell of Multichannel News: Any transaction is predicated on Vivendi, which owns a 20% stake in NBCU, selling its interest back to NBC parent General Electric. Vivendi has the right every November to put back its interest in NBCU to the company, sell it to a third party or force an initial public offering of the 20% stake.
From John Eggerton of Multichannel News: There are no Federal Communications Commission regulatory roadblocks to such a deal—the FCC repealed its rules preventing co-ownership of cable systems and TV stations back in the late 1990s. But there could be hurdles to the combination of a studio and top cable operator from a Democratic administration that has vowed more merger scrutiny.
A number of industry veterans said the FCC would likely put some conditions on the merger of a studio and MSO—as there were when News Corp. bought DirecTV—to make sure independent programmers were not disadvantaged by the vertical integration of studio and distributor.
Stations in markets where Comcast has cable systems and TV stations might ask for conditions barring discrimination in carriage terms in retransmission-consent negotiations, said one veteran communications attorney.
From Stifel Nicolaus telecom and media analysts David Kaut and Rebecca Arbogast, via John Eggerton of Multichannel News: The Department of Justice would be “more open to theories of vertical integration harm” than under the former administration, but “it will continue to be difficult to establish that vertical deals are sufficiently anticompetitive to support blocking a merger.”
Kaut and Arbogast said the approval would likely come with conditions addressing increased concentration in video programming and cable distribution. They pointed to the DirecTV/News Corp. deal and its conditions of baseball-style arbitration for disputes over regional sport networks, collective bargaining for small cable operators and program-access guarantees as likely precedent for those conditions.
“However, in the end, we believe the deal is likely to be approved,” they said.
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