Comcast snags NBC Universal to build $37 billion venture

The deal would make Comcast a major media player with several very profitable cable channels. But could it succumb to cable-bashing opponents?

It's official. Comcast, the nation's largest cable company, announced Thursday that it is buying a controlling stake in the TV network and movie studio NBC Universal.

The total value of the blockbuster media industry deal, which had been rumored since September, is estimated at around $37 billion. The new joint venture will merge Comcast's cable channels, which are worth about $7.25 billion, with NBC Universal assets that have been valued at around $30 billion, the companies said Thursday.

Comcast also plans to contribute about $6.5 billion in cash. The cable heavyweight will own 51 percent of the venture, and General Electric will own 49 percent. Jeffrey Zucker, who has been president and CEO of NBC Universal, will lead the joint venture.

GE, which owned 80 percent of NBC Universal before the deal, is getting about $8 billion in net cash for its contribution. The joint venture is taking on about $9.1 billion in debt, which reduces the amount of cash that Comcast has to put up for the deal. And it also provides the cash to pay GE.

The deal will make Comcast a major media player with several very profitable cable channels, including USA, CNBC, MSNBC, and Bravo. It will also have control over NBC's broadcast networks and TV stations, its film studio, and its amusement parks.

The New York Times reports that Comcast and GE had been working on the deal since March. Rumors of a pending joint venture surfaced in the press in September. But the final deal was delayed as GE negotiated a buyout with French media company Vivendi, which owned 20 percent of NBC Universal. Earlier this week, GE and Vivendi reached an agreement whereby Vivendi will get $5.8 billion for its 20 percent share. If the deal does not close by September, GE is still responsible for paying Vivendi about $2 billion, or about 38 percent of the agreed price.

Brian Roberts, chief executive of Comcast, said in a statement that NBC Universal is a perfect fit for Comcast, and it "will allow us to become a leader in the development and distribution of multiplatform 'anytime, anywhere' media that American consumers are demanding."

Roberts tried and failed to buy another major media company, Disney, in 2004.

Will cable-bashing undo the deal?
The deal is likely to be scrutinized by government regulators, namely the U.S. Department of Justice and the Federal Communications Commission.

Craig Moffett, an equities analyst with Bernstein Research, said in a research note in late October, when rumors of the deal were heating up, that regulators may find plenty of reasons to reject the acquisition.

The biggest problem for the deal could be the fact that GE and Comcast will try to close it during a midterm election year. Politicians taking sides on Net neutrality issues and the national broadband plan may find it easy to bash Comcast. And a marriage between the nation's largest cable and Internet service provider and one of the nation's three broadcast TV stations may ignite old fights over media ownership, a la carte billing, retransmission consent, and cable prices.

"Cable-bashing in an election year is a no-lose bipartisan proposition," Moffett writes in his note. "The headline risk is quite material. Approval of a deal, should one be reached, cannot be assured."

Comcast argues that the deal will be good for consumers by getting some movies on cable TV and on-demand services more quickly, since Comcast will control NBC Universal's movie catalog. Comcast may also be able to put content more quickly on cell phones.

Still, some consumer advocates, such as Free Press, oppose the deal. They say Comcast would have too much power in the entertainment industry.

One issue of concern is that Comcast could use NBC's programming to undermine rival TV services from phone companies, such as AT&T or Verizon Communications, or from cable operator Dish Network. Comcast could charge these competitors more for cable channels, while giving its own cable TV business a better deal. Comcast officials say this is unlikely. And the company has already proven that it offers fair pricing with its existing cable channels, such as E! Entertainment, G4, and the Golf Channel.

The deal may also have an effect on online video services, such as Hulu, which is owned by NBC, News Corp., and Walt Disney Company. That said, Comcast has been experimenting with its own online video service for some premium channels for Comcast customers. The company also already has a Web-based video aggregator called Fancast, which streams full TV shows and movies for all Web users.