Comcast-NBCU Deal Finally Completed

But What's Next for the New $43.5 Billion Media Giant?

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LOS ANGELES (AdAge.com) -- Comcast Corp. has officially taken a 51% stake in NBC Universal, an acquisition that will create a mega-media company valued at a combined $43.5 billion, according to Ad Age estimates of the companies' 2008 revenue.

Brian Roberts
Brian Roberts
General Electric, now a 49% owner of NBC Universal, will acquire the 20% interest in NBC previously held by Vivendi for $5.8 billion, while Comcast will make a tentative payment of $6.5 billion in cash to GE to secure the transaction.

As Comcast CEO Brian Roberts and Chief Operating Officer Steve Burke joined NBC Universal President-CEO Jeff Zucker for a conference call this morning, the question on everyone's minds was this: What is Comcast going to do with all those assets?

NBC Universal has two broadcast networks (NBC and Telemundo), over a dozen cable networks (USA, Syfy, Bravo, Oxygen, CNBC among them) and a 33% stake in Hulu, one of the web's top video destinations. Comcast, the country's largest cable company, owns a handful of cable networks itself (including E!, Style, Versus, Golf Channel and G4) -- not to mention its relationship with 24 million cable subscribers, many of whom are also paying internet customers who will be among the first to test TV Everywhere, the TV industry's paid-content initiative for online video.

So it's understandable that Comcast's Mr. Roberts was a bit cagey when it came to questions about his short-term plans to change the fundamental business model of the broadcast piece of NBCU's portfolio, the NBC network. One New York Times report today even speculated Comcast would eventually drop the NBC name in favor of Comcast Entertainment.

Re-transmission fees?
Previous reports have suggested that a merged Comcast-NBC Universal would pursue a cable-network revenue model for NBC, in which the company would make cable and satellite distributors pay per-subscriber fees to carry the network, in order to supplant the current ad-supported-only model.

"The broadcast business has been talking about re-transmission consent fees, and the value has been getting interesting for awhile," Mr. Roberts said. "NBC is very much included in that, and it continues to evolve and we'll be part of the business as it goes forward. I think we have an opportunity by being in both businesses to find constructive solutions to allow the broadcast business to thrive. We're still a cable operator who is trying to manage its costs. I think the two are going to work well together as they always have. We're confident the broadcast business will be pretty vibrant going forward."

Mr. Zucker added, with regards to NBC and Spanish-language broadcaster Telemundo, "We believe we should be paid for that content."

Additionally, the subject of a subscription-based model for Hulu, a free, ad-supported site co-owned by NBC, News Corp. and Disney Corp., has been a frequent topic of discussion in regards to Comcast's prominent role in the TV Everywhere initiative.

Comcast's Mr. Burke clarified a recent statement he made in regards to a pay-model for Hulu "not being in the cards," saying it is a decision that ultimately won't be made by Comcast because of its neutral ownership of the property.

"We think the way NBCU is distributing its video content online is very consistent with us. We're very careful about the content that goes out on the internet. We look at things like TV Everywhere ... and once the deal is approved, we're going to want NBCU to continue to do what they're doing," Mr. Burke said. "I actually think Hulu and TV Everywhere are very complementary. There's a place for both, I would anticipate for the foreseeable future."

Mr. Burke was also bullish on the merger's immediate impact for advertisers, which will likely be working with a sales team to be headed by Comcast Entertainment's ad sales chief, Dave Cassaro, Broadcasting & Cable reported. Because Comcast counts 24 million subscribers, and the cable industry will finish 2010 with about 10 million set-top boxes that will enable interactive and addressable advertising, the market for advanced advertising could accelerate much more rapidly than it has in the past.

"We have more channels, more content that have all these great niche segments that are so well-covered by this joint venture that could be great for advertisers," Mr. Burke said. "Something like 23% of the revenue of the combined company comes from ad sales, so we're heavily incented to make sure that offering to advertisers is attractive and takes advantage of the technology for us in the future."

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