Comcast Corp. (CMCSA) has made good on its intent to buy a majority stake in General Electric’s NBC-Universal; if the deal receives antitrust blessings, the way media and communications interact – not just over the airwaves, but over the Web as well – promises to change.
On Dec. 3, the nation’s largest cable operator said it will merge $7.25 billion worth of its channels with NBC Universal assets valued at $30 billion. Comcast is sweetening the terms by paying $6.5 billion in cash so it will own, for now, 51 percent of the new entity.
Investors, pleased by the news, pushed Comcast’s stock up almost 6 percent by noon Eastern. However, ratings service Standard & Poor’s revised its outlook on Comcast from positive to stable, citing the company’s financial leverage in the transaction. Still, S&P liked the diversification the deal adds for Comcast and the expectation that the operator will, over the next few years, eventually control the media conglomerate in full.
The joint venture will be comprised of NBC Universal businesses and Comcast’s cable, regional sports and other networks. Comcast Entertainment Group, a unit the operator just formed, will manage the programming.
GE, meanwhile, will pitch in its cable networks, films, theme parks and other investments worth $30 billion, all subject to $9.1 billion in debt. It also will buy out the stake of French media giant Vivendi and cover transaction fees and other costs, after which it expects to realize about $8 billion in cash.
Content, Cost Concerns
The deal is huge for Comcast. In addition to overseeing one of the world’s largest media and entertainment libraries, buying the majority stake in NBC-U also gives Comcast entrée into online video-on-demand, an advantage the company wants and needs. NBC runs Hulu, the go-to site for programming from popular first-run shows such as “The Office” to feature-length films. Such a move would put Comcast in front of its rivals in the race to monetize online video – even the gurus at Google Inc. (GOOG) have yet to make YouTube profitable.
And Comcast well could charge for online VoD access. That’s because, in the second quarter of 2009 alone, Comcast lost 77 percent of its Internet subscribers. Even though the company reported higher profits than expected, the boost came from increased rates. Meanwhile, Comcast competitors, particularly telcos and satellite providers, are attracting consumers to their lower-priced, often more generous packages. Comcast needs an edge. But there’s no guarantee consumers will be willing to pay for TV content online they can get for free through their TVs.
Charging for online content is just part of what some organizations fear. Free Press and the Consumer Federation of America on Thursday warned of Comcast’s power to charge rivals exorbitant prices for access to programming, or even deny them access to content altogether, if the merger goes through. The public interest groups also said Comcast will have “motive to starve competing online video sources by denying them access to vital content.”
