What's the Deal With NBC Universal?

With so Much Chatter Around Comcast's Pursuit, Here's What to Keep in Mind

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NEW YORK (AdAge.com) -- The potential combination of Comcast and NBC Universal has launched what seems like a thousand stories over the last several weeks -- and this even though the deal has yet to be consummated and could be derailed by any number of factors. That won't stop us from spilling more ink over this fascinating subject, simply because the ramifications for consumers and advertisers are too great to ignore.

What's Important

A new media behemoth: According to Bernstein Research, Comcast would control approximately 20% of the viewing hours in the U.S., and would potentially be able to pump NBCU content through its cable pipes to accelerate consumer use of video-on-demand, which some TV executives suggest could well supplant the digital video recorder as a consumer means of navigating across hours and hours of possible entertainment options.

Jeff Zucker
Jeff Zucker
Nullifying a possible new threat: With CBS successfully negotiating retransmission fees from Cablevision and Time Warner Cable in past months, there is growing concern among cable operators that they'll no longer be able to transmit broadcast-network fare on the cheap, particularly when large portion of the hours viewed come from people watching ABC, Fox and the like. One school of thought believes broadcast networks might seize upon the high demand for their shows among viewers over time to make a play for some portion of the fees cable companies derive from putting DVRs in homes. And, of course, programming fees for the rest of the pack -- ESPN, TNT, MTV, Discovery -- keep going up, too. So Comcast's purchase could act as a hedge of sorts against having to pay at least one of the broadcast networks additional fees as well as letting the Philadelphia company take more money due to its ownership of USA, CNBC, SyFy and the rest of NBCU's cable fare.

Whither NBC? Just because Comcast snaps up NBCU doesn't mean issues surrounding NBC go away. The once-vaunted Peacock network is still in some hot water. Once again, its new programs haven't launched well, and these days it seems to step in one controversy after another (canceling "Southland"). All this plus the overwhelming scrutiny of the new "Jay Leno Show" and concern that one day its prime-time ratings may match those of top-rated cable fare. Does Comcast have a plan?

What's Less So

Rival bidders: Yes, it's entirely possible that anyone from Liberty Media's John Malone to News Corp.'s Rupert Murdoch might want to sniff around NBCU, or at least get a look at its books. But regulatory scrutiny on any sort of merger involving one of the nation's broadcast networks will winnow down the number of potential candidates for this type of deal. Already, Time Warner's Jeff Bewkes has taken his company out of the running and it's hard to imagine the owners of Fox, ABC or CBS being able to make a bid stick. More likely -- if anything really comes to pass -- is a third party, such as Mr. Malone, offering to help fund a pact by taking a stake in the venture. But if Comcast is going to shell out anywhere from $6 billion to $8 billion plus contribute its cable networks for a controlling stake in the new NBCU entity, why would it want someone else involved? After all, it's Vivendi's 20% stake in the current NBCU -- and what it might do with it -- that is causing so much uncertainty at present.

The Zucker Factor: Would NBCU CEO Jeff Zucker stick around to run NBC after a Comcast play? Some reports suggest the answer is yes. But as Los Angeles Times' Company Town blogger Joe Flint recently suggested, unless the sources are "GE Chief Executive Jeffrey Immelt and Comcast toppers Brian Roberts and Steve Burke, I'm not so sure I'd be going out on a limb. God forbid we let a deal happen first before declaring what the management strategy will be." Fact: These days, technology and consumer habits are shaping many of a media company's decisions more strongly than whichever individual happens to be at the helm. Mr. Zucker has done a fantastic job of focusing attention on the many fissure points currently extant in the TV business, while distracting observers from NBC's broadcast-network issues. He's promoted innovation and new thinking about business models, and built a shiny cable empire. Which doesn't mean NBC's marketplace viability doesn't come into question now and again. He certainly has the corporate heft to stick around; whether Comcast sees a role for him or wants its own person in place remains the question.

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