from The Economist
IT SEEMED for a while as though the media business had dispensed with swagger. As the markets push their companies around, moguls such as Rupert Murdoch of News Corporation have taken to complaining about the power of Google. A new book, “The Curse of the Mogul”, tries to bury such figures once and for all. But executives at Comcast, a big American cable operator, seem not to have read it. Reports this week suggested that the company was close to a deal to acquire a majority stake in NBC Universal, a television and film outfit. The combination would rival Disney as the world’s biggest media firm.
Ownership of NBC Universal is split between GE (which holds 80%) and Vivendi, a French conglomerate. Comcast would commit cash and merge its modest collection of cable channels, which include E! and the Golf Channel, with NBC Universal’s much more impressive roster. It would end up with 51% of the resulting entity. GE would end up with 49% and would probably exit gradually over the next few years. The deal depends in part on Vivendi agreeing to sell its stake.
Comcast has coveted content for a while—it made an offer for Disney in 2004. The company has reportedly agreed to value NBC Universal at about $30 billion, which seems generous. News Corporation and Time Warner, which boast almost double the revenues of NBC Universal, as well as reputations for better management, are worth about $35 billion each. Comcast presumably believes that cables and content to push through them are worth more together than separately. In that it may be mistaken.
The cable business is labour-intensive—Comcast employs about 100,000 people—and demands huge investment. When Time Warner ran a cable operation (it spun it off in March), investors doubted it could focus properly on either content or distribution. They seem not to like Comcast’s ambitions either. Its shares dropped sharply as rumours of the NBC Universal deal spread, and have not yet recovered. Almost all big media mergers provoke scepticism, given their troubled history.
Although it is hard to imagine regulators blocking the deal, they may attach conditions to it. America has already evolved rules greatly restricting the ability of combined content-and-distribution businesses to bully rivals. Comcast may have to agree to refer disputes over the price it pays to carry rivals’ content, which are expected to become more common in the next few years, to binding arbitration.
There is, however, one extremely good reason for Comcast to do a deal. The big strategic problem facing media companies these days is how to move their products online while preserving margins—without swapping analogue dollars for digital pennies, as Jeff Zucker, NBC Universal’s boss, once put it. As one of the architects of Hulu, an online video service, NBC Universal has been deeply involved in these experiments. For their part, cable companies fear that people will become so accustomed to getting television and films online that they will drop their video subscriptions. A combined Comcast-NBC Universal would be able to exert a good deal of control over old media’s internet dreams, to say the least.
Ownership of NBC Universal is split between GE (which holds 80%) and Vivendi, a French conglomerate. Comcast would commit cash and merge its modest collection of cable channels, which include E! and the Golf Channel, with NBC Universal’s much more impressive roster. It would end up with 51% of the resulting entity. GE would end up with 49% and would probably exit gradually over the next few years. The deal depends in part on Vivendi agreeing to sell its stake.
Comcast has coveted content for a while—it made an offer for Disney in 2004. The company has reportedly agreed to value NBC Universal at about $30 billion, which seems generous. News Corporation and Time Warner, which boast almost double the revenues of NBC Universal, as well as reputations for better management, are worth about $35 billion each. Comcast presumably believes that cables and content to push through them are worth more together than separately. In that it may be mistaken.
The cable business is labour-intensive—Comcast employs about 100,000 people—and demands huge investment. When Time Warner ran a cable operation (it spun it off in March), investors doubted it could focus properly on either content or distribution. They seem not to like Comcast’s ambitions either. Its shares dropped sharply as rumours of the NBC Universal deal spread, and have not yet recovered. Almost all big media mergers provoke scepticism, given their troubled history.
Although it is hard to imagine regulators blocking the deal, they may attach conditions to it. America has already evolved rules greatly restricting the ability of combined content-and-distribution businesses to bully rivals. Comcast may have to agree to refer disputes over the price it pays to carry rivals’ content, which are expected to become more common in the next few years, to binding arbitration.
There is, however, one extremely good reason for Comcast to do a deal. The big strategic problem facing media companies these days is how to move their products online while preserving margins—without swapping analogue dollars for digital pennies, as Jeff Zucker, NBC Universal’s boss, once put it. As one of the architects of Hulu, an online video service, NBC Universal has been deeply involved in these experiments. For their part, cable companies fear that people will become so accustomed to getting television and films online that they will drop their video subscriptions. A combined Comcast-NBC Universal would be able to exert a good deal of control over old media’s internet dreams, to say the least.
No comments:
Post a Comment