Network
His fears havent come to fruition yet. But the growing popularity of watching shows, movies and other content streamed over the Internet or over cell phone networks make the cable pipe less important for video than it ever has been in the history of the business.
Now Comcast is in talks with General Electric Co. to take a 51 percent stake in NBC Universal. The nations largest cable operator is expected to pay $4 billion to $6 billion in cash, merge its cable networks into a spun-off NBC Universal and help shoulder $10 billion to $12 billion of debt at the new company.
By owning the content itself – NBC Universals assets include the NBC network, movie studios and several cable channels – Comcast stands to make money no matter where a show is viewed.
Such leverage is welcome at a time when cable is losing basic cable subscribers to competitors and growth is slowing at its Internet and phone businesses. Meanwhile, fees it pays to programmers such as NBC Universal continue to climb.
“This is about the future of content distribution,” said James McQuivey, media analyst at Forrester Research. “Its going to be different. Its going to be multiplatform.”
On Friday, Comcasts hand in the deal strengthened when Time Warner Inc.s CEO, Jeff Bewkes, said at a conference in Washington, D.C., that hes not interested in NBC Universal.
Time Warner is already whittling the slate of films it puts out each year. Time Warner, which owns HBO, CNN and other cable networks, could have a better fit with NBC Universals cable networks, but Time Warner says its not interested in those assets either.
Speaking to reporters in India on Friday, GE chief executive Jeffrey Immelt said that “discussions are ongoing” over GEs plans for NBC. Immelt said those discussions include an initial public offering or “other partnerships,” but he did not specifically mention reports of the Comcast talks.
With control of NBC Universal, Comcast will have a big say in the future of online video. Hulu.com, a popular free video streaming site, is jointly owned by NBC Universal. Comcast is in trials to bring cable TV shows to the Internet free to subscribers.
With NBC Universal, Comcast would make money from programming fees it would charge cable and satellite TV operators and phone companies that offer video. It could shorten the time it takes for a movie to land in video on demand. Moreover, Comcast would not have to pay NBC for content.
“It gives them an opportunity to shape the digital future,” said Chris Marangi, an analyst at Gabelli & Co., a Comcast shareholder.
But investors have mixed feelings about the deal.
Barclays Capital analyst Vijay Jayant doesnt see the deal as a good use of capital. He said investors viewed Comcasts bid as “empire building,” and they dont see any synergies with this purchase, such as improved efficiencies or cost savings.
Shares of Philadelphia-based Comcast fell 43 cents, or 2.7 percent, to end Friday at $15.24. The stock fell over 7 percent on Thursday.
But others see an opportunity by Comcast to grab valuable NBC programming at a price thats manageable for the cable operator.
Wells Fargo analyst Marci Ryvicker upgraded Comcast to “outperform” from “marketperform.” Her reasoning: Comcast isnt issuing stock to buy NBC Universal, thereby not diluting the holdings of existing shareholders. The entertainment company also gives Comcast another avenue of growth, she said.
To be sure, Comcast is adding content to its cable TV business soon after Time Warner Inc. found it more feasible to separate from its cable operations, Time Warner Cable Inc.