The big business news last night and this morning is the report that Comcast Corp. is attempting to buy a 51% share of NBC Universal which also owns a host of other subsidiaries which include Universal Studios – both the movie studio and the theme parks. The purchase would give Comcast a broadcasting presence to add to its 1/4 share of the cable television market. While the business world is a buzz over the proposed deal, the White House is reportedly less than enthusiastic about the prospects of the sale stating its concerns for “the consumer.” The fear is that the deal would form a conglomerate that could control access, cost, and content – all things that this administration wants to be unilaterally in charge of. I think you can see the problem here.
A federal court ruled in 2o02 that the FCC cannot prohibit a broadcasting company from merging or purchasing a cable corporation, so the legal side of the matter at least rests with relatively stable precedent. That being said, the merger between AOL and Time Warner, which most describe as a total failure, may be a sign that even if this merger is “legal” it may not produce a viable product.
So what does the administration have to gain from keeping this deal from happening? Well the short of it is this. President Obama has repeatedly taken the position that he opposes any and all media consolidation. To be fair, this usually is a reference to radio outlets because he and his brethren on the Left are baffled by why they can’t crack the conservative stronghold on the talk radio medium. Allowing this deal to go through without at least token opposition would do a great deal to undercut that position especially considering the size and magnitude of this deal when viewed in comparison to lowly talk radio. We can even ignore the fact that the purchase is from GE which obviously raises a few ears around Capitol Hill as they have a quaint little relationship with that “conglomerate” and its lobbyists as well. Allowing a substantial part of that entity to go back into control of the private sector must have some of them losing sleep at night. Where will they turn to now for favorable news coverage if NBC and MSNBC are going to be back on the hook of actually having to produce programs that people watch without the security of a bailout?
NBC’s network includes Spanish-language Telemundo and channels such as CNBC, The Weather Channel and Bravo. The move gives Comcast – the largest US cable service provider – control of films and programmes it can deliver to audiences via TV, web or mobile devices.
But the acquisition has its critics, with some calling it the most foolhardy media deal since AOL’s ill-fated marriage to Time Warner in 2001. There are suggestions there is too little overlap between the businesses to result in significant savings, while competition regulators are likely to impose restrictions. But Comcast, owner of E! Entertainment, says there will be benefits for consumers. For example, Universal movies could reach cable television sooner after their cinema releases and television shows could be quicker to appear on mobile phones and other devices.
PHILADELPHIA — In agreeing to buy 51 percent of NBC Universal from General Electric Co., which has controlled NBC since 1986, Comcast hopes to succeed in marrying distribution and content in a way Time Warner Inc. could not. AOL and Time Warner are undoing their ill-fated marriage Dec. 9. Time Warner has already shed its cable TV operations.
Meanwhile, GE needs cash to support its financing unit, GE Capital, which was devastated in last year’s financial meltdown.
Under the deal, expected to close in a year if regulators and shareholders of both companies approve, GE would buy Vivendi SA’s 20 percent stake in NBC Universal for $5.8 billion. Of that, $2 billion is payable in September 2010 if the deal hasn’t closed by then, and the remaining $3.8 billion would be due at closing. NBC Universal is to be separated into a new joint venture.
Comcast would buy a 51 percent stake of the new company by paying $6.5 billion in cash and contributing $7.25 billion worth of cable channels it owns, including E!, Style and Golf Channel. Moody’s analyst Neil Begley noted that Comcast is jumping in as media company values are relatively low and stands to benefit as business conditions improve.
GE would retain a 49 percent stake, with the option of unloading half its stake in 3 1/2 years and all of it in seven years. The new company or Comcast could buy out GE. The new NBC Universal would borrow $9.1 billion that would partially go toward covering the money GE owes Vivendi.
Comcast would get to name three people to the board and GE two, and Comcast would manage the joint venture. Jeff Zucker would remain NBC Universal’s CEO and report to Comcast Chief Operating Officer Steve Burke. NBC Universal’s headquarters are expected to stay in New York.
The Comcast-NBC deal is widely seen as a test of the Obama administration’s resolve to fight media consolidation, but consumer groups aren’t confident regulators will find a legal means to block the transaction.
Comcast would likely have to agree to some restrictions, such as treating rival cable, satellite TV and phone companies equally in programming talks instead of favoring its own cable operations.
Shareholders haven’t been happy, either, at what they see as a renewed attempt at empire building after Comcast’s failed $54 billion hostile bid for Disney in 2004.
Many investors sold off the stock at the first whiff of a possible deal with GE, afraid that Comcast would make an acquisition it couldn’t handle and tie up money for dividends and stock buybacks that could boost Comcast’s shares. Shares in Comcast have fallen 11 percent, vaporizing about $5 billion in market value, since word of the deal leaked Sept. 30.
The biggest problem for Comcast has nothing to do with the purchase itself as it does with them leaving Jeff Zucker as the president of the company. He has done everything he could to take the network for the days of “Seinfeld” and “Friends” to making it the last place network. When you think about it the deal makes sense because Zucker has already started to turn NBC into a cable channel with the addition of Leno in the 10 o’clock hour. Do we see an Olberman cameo on “The Office” in the future?
Ha. No doubt. I bet Olberman is scared right now that he wont have a job after the new year. All of MSNBC will be heading out the door if ratings are the only motivation. NBC = Nothing but Crap!
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