“Project Crimson” has from the start been the code name for the biggest media merger in recent memory, and all 290 pages outlining the financials involving General Electric’s purchase of 20 percent of NBC Universal, giving it ownership of NBC, had been worked out weeks ago. Then the complicated structural issues — tax and indemnity stuff — were figured out.
Comcast, to which GE is, in turn, selling a 51 percent stake in NBC, even got GE to agree there wouldn’t be conversations with anybody else about NBC Universal.
Obviously, Brian Roberts took more seriously than I did those reports that Rupert Murdoch’s News Corp. was circling and might become a bidder. But there was a last-minute holdup from Vivendi regarding the sale of its 20 percent NBC Universal stake, serious enough for GE chairman Jeff Immelt to fly to Paris to beg the one-time French water company to come to reasonable terms.
Then again, the French love money even more than screwing allies, and Vivendi knew it had GE by the balls. What I could never understand is why GE left itself so vulnerable by placing Vivendi in the catbird seat. Immelt is no Jack Welch, the legendary GE chief who was never anybody’s fool.
In the end, GE paid Vivendi $5.8 billion, an embarrassing overpayment since the overall Comcast 51 percent/GE 49 percent deal for NBCU is $30 billion.
This all puts the largest cable company and the nation’s No. 1 residential Internet-service provider in charge of a content, distribution and Internet empire consisting of the NBC network, Universal Studios, MSNBC, CNBC, USA Network, Telemundo, the Weather Channel, Hulu.com, 27 television stations and other goodies.
Vivendi can now become an even greater telco powerhouse, and GE can start investing in more industrial companies. And Comcast can realize its dream of becoming a media behemoth.
All while you, and I, and every other consumer gets screwed.
Expectations are that the handoff could take place by 2011, but only if regulatory approval takes the expected 14 months.
But will it? Already, consumer and watchdog groups like Free Press are warning that the proposed merger would allow an unprecedented era of media consolidation across cable, the Internet and broadcast television.
First, let’s look at what this deal means to showbiz. Comcast remains cagey about what it plans for NBC Universal boss Jeff Zucker, Universal Studios president/COO Ron Meyer and the rest of the NBCU bigwigs who’ve led the company through its disastrous 2009. I’ve heard that Comcast No. 2 Steve Burke, who’ll be overseeing NBCU, was saying he’d move Zucker out in a few months.
Other media outlets have reported that Zucker will be retained. But, an insider says of Zucker’s fate, “The last thing Comcast wants to do is indicate anything one way or another. There are still 14 months to go.”
Actually, I think the truth is more that Comcast doesn’t want anybody to express opinions about the NBCU folks right now, possibly poisoning the long pretakeover process.
But I understand that Comcast is less likely to jettison Universal Studios than NBC’s troubled broadcast network. “The studio is of more interest to them than the network is,” an insider explains. “Everyone would get rid of the network because, basically, this is a deal to buy a bunch of cable channels. The problem is that nobody thinks the network is salable. It loses a huge amount of money right now.”
Let’s go over the financial terms: Vivendi is selling its 20 percent NBCU stake to GE. NBCU becomes a new joint entity controlled 51 percent by Comcast and 49 percent by GE. Comcast contributes all its cable channels, like Golf , Versus, E! and Style, plus $6B to $7B in cash. In turn, GE puts in its 80 percent ownership of NBCU, plus Vivendi’s 20 percent, as well as $8B to $10B in debt.
So what happened to other potential suitors for NBC Universal? All gone. Murdoch was too concerned about the regulatory risks for his News Corp. Talks with Comcast bitter rival John Malone ended with the realization that there’s not enough value to do a deal. And Time Warner’s Jeff Bewkes was scared off, saying at a New York conference, “Somebody has finally noticed that these things don’t work out so well. We love to see our competitors taking risks.”
As Comcast CEO Brian Roberts’ longtime No. 2, Burke is the former ABC broadcasting president and architect of Comcast’s 2004 attempted hostile takeover of Disney (his loathing of FrankenEisner was an open secret). He is also the son of the former president of Capital Cities/ABC before it was bought by Disney, so he’s true broadcast royalty by blood. I’m sure his intent is to return NBC and Universal to their former glory. Finally.
The Free Press complains that Comcast, as the largest U.S. cable provider, would have unprecedented control over what and how consumers watch. This deal could suffocate online TV like Netflix and iTunes.
Comcast already raises its rates every year, and with less competition, they’ll jack up those numbers. It could cost more to get NBC shows on your cable or satellite system, and Comcast will have an incentive to promote NBC shows over local or independent programming, making it harder to find alternative voices on cable.
The merger also would eliminate the hard bargaining between distributors and content producers. The Comcast-NBC behemoth will also have motivation and the market power to enforce anticompetitive “bundling,” as well as price-gouge other cable companies.
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Comcast will be motivated to move NBC’s video content behind a pay wall and stunt the growth of the Internet. Also, it will trigger a “merger wave,” as distribution companies and content companies muscle up to match the new threat posed by the vertically integrated Comcast.
Josh Silver, executive director of Free Press, the national nonpartisan organization founded in 2002 to lobby for more democratic and diverse media policy, is pushing the FCC — now Democrat-controlled — to block the Comcast/GE-NBCU merger for these reasons and more. Under the Republicans, the FCC rarely met a media merger it didn’t like.
Silver writes that the Comcast deal “would further starve Americans of the diversity already missing from our media marketplace. It raises the most basic antitrust issues for an administration that has declared both the importance of media diversity and an intention to be far more vigilant against anticompetitive conduct and abuses of market power.
“President Obama, Congress and federal agencies must acknowledge the serious threat this merger poses and take the necessary measures to prevent harm to competition and consumers. That means putting the American people first and corporate greed second,” Silver adds.