Comcast to Take Control of NBC Universal
The deal, announced early Thursday morning, values NBC Universal (NBCU) at $30 billion and will establish a joint venture to be 51 percent owned by Comcast and 49 percent owned by General Electric.
Jeff Zucker, the current president and CEO of NBCU, is set to be the CEO of the new joint venture, reporting to Comcast Corp. COO and cable division president Steve Burke. A new unit called Comcast Entertainment Group (CEG) will house Comcast's interest in the venture.
Under other financial components of the deal, NBCU will borrow about $9.1 billion from third-party lenders and distribute the cash to GE, which is set to acquire Vivendi 's 20 percent stake in NBCU for $5.8 billion.
The deal is expected to generate about $8 billion in cash at closing, though it could take almost a year to complete. The GE and Comcast boards have already stamped the deal.
Rumors of a the deal first surfaced two months ago, with the original report indicating that Comcast might pay as much as $35 billion to obtain control of NBCU. (See Does Comcast Have Eyes for NBCU? )
Kings of content?
On the programming side, Comcast will throw in its programming businesses (valued at $7.25 billion), which include properties such as E! (entertainment, gossip channel), Versus (sports channel), G4 (gaming channel), and the Golf Channel (golf channel), as well as 10 regional sports networks.
NBCU will contribute its core NBC broadcasting asset, its news division, Universal Pictures, and a stable of cable networks comprising USA, Bravo, Syfy, CNBC, and MSNBC, among others. NBC is also throwing in its interest in the Hulu LLC broadband video hub.
The deal is expected to establish the Versus sports channel as a stronger competitor to ESPN, but Comcast chairman and CEO Brian Roberts talked up the "TV Everywhere" implications, claiming it will allow the MSO "to become a leader in the development and distribution of multiplatform 'anytime, anywhere' media that American consumers are demanding… and accelerate the development of new digital products and services."
Sanford C. Bernstein & Co. Inc. analyst Craig Moffett has already suggested that the purchase will give Comcast control of a content factory that accounts for roughly 20 percent of U.S. viewing hours, giving it better distribution leverage for its core cable business as well as its budding TV Everywhere strategy. (See Comcast Web TV Trial: 10,000 Being Served .)
At the same time, Moffett warned that the deal could be potentially damaging to Comcast and could weigh down the whole cable sector, noting that "the very attempt to acquire content assets will inevitably reignite the questions about whether [Comcast] CEO Brian Roberts has faith in the attractiveness of his core business."
On deck: regulatory scrutiny
With a deal agreed upon, now comes the hard part: getting it approved in the midst of catcalls that the acquisition would give Comcast too much power, because the company would not only own the pipe but also have control of a major source of programming that travels over it.
Although it's expected that the Comcast-NBCU marriage will be saddled with significant concessions to eliminate antitrust concerns, the fear going in is that Comcast might hit DirecTV Group Inc. (NYSE: DTV) and other video service competitors with high fees to carry its content.
On cue, Free Press and the Consumer Federation of America (CFA) quickly came out against the deal, arguing that it could trigger further media consolidation and hurt competition in "traditional video markets" as well as the emerging broadband video market. On the latter, they claim a Comcast-NBCU combo "would have a powerful motive to starve competing online video sources by denying them access to vital content."
Also up for debate is which agency will join the Federal Communications Commission (FCC) in reviewing the deal. The Los Angeles Times reports that news of the coming deal has already set up a tug-of-war between the Federal Trade Commission and the Justice Department over which agency would run it through the wringer.
— Jeff Baumgartner, Site Editor, Cable Digital News