NY Times
General Electric has reached a tentative agreement with the French media conglomerate Vivendi that clears the way for the sale of NBC Universal, including the flagship NBC network, to Comcast, the nation’s largest cable operator, people briefed on the deal said Monday.
Under terms of the deal, G.E. will buy Vivendi’s 20 percent stake in NBC Universal for about $5.8 billion. It removes one of the few remaining hurdles in its plan to sell control of the television and movie company to Comcast in a $30 billion agreement that reflects the changing landscape of broadcast television.
While a deal between G.E. and Comcast still could hit a snag over the final price, it is considered highly likely: G.E. wants to sell NBC because of rising losses, and Comcast wants to buy it to control more of the television programs and movies that flow through its cable systems.
The final threads may take days to sew up and there is a tentative plan to announce a final deal on Thursday, according to these people, who spoke on condition of anonymity because the negotiations are not complete.
While the agreement still could fall apart, G.E.’s decision to sell NBC Universal reflects the shifts in fortune that are battering the media business, especially network television.
G.E. executives had insisted until very recently that they had no interest in selling NBC Universal, even as they tried to interest suitors, like Time Warner and Comcast, through back-channel flirtations.
Their attempts grew more urgent after internal forecasts showed the once very profitable broadcast division of NBC Universal could lose big, a remarkable downturn for a network that had earned roughly $400 million in past years, according to an executive briefed on the matter. NBC has had an especially difficult few years in prime time, where the network, once home to “Seinfeld,” “Friends” and “E.R.,” is mired in last place.
Although the News Corporation, the conglomerate controlled by Rupert Murdoch, considered making an offer, Comcast was the lone serious suitor, a testament to the uncertain future of mainstream media, as the Internet has fractured audiences and few viable business models have emerged for the distribution of content online.
In 2003, when Vivendi held an auction for its Universal properties, many big media companies took part, including Comcast, Viacom, Cablevision, Liberty Media and MGM.
This time, there was only Comcast, which under its chief executive, Brian L. Roberts, has long harbored big ambitions of becoming a major producer of television and movies. In 2004, Comcast failed in a hostile takeover bid for the Walt Disney Company.
In the proposed deal, Comcast will contribute its own cable channels, which include Versus, the Golf Channel and the E Entertainment channel, and a modest amount of cash, about $5 billion, to a joint venture in which it will own 51 percent. G.E. will retain a 49 percent stake, and would likely reduce its ownership over several years.
In its size and melding of distribution of content and distribution, the proposed deal resembles the takeover of Time Warner by AOL. If Steve Case, the former head of AOL, was the public face of that failed merger, the public face of the proposed NBC-Comcast deal could well be Jay Leno.
Mr. Leno had long ruled late-night television as host of “The Tonight Show,” one of the network’s strongholds, along with its morning show and news division. In a risky move, Jeffrey Zucker, the head of NBC Universal, moved Mr. Leno into the 10 p.m. slot, clearing the way for Conan O’Brien at 11:30 and radically remaking prime time.
But so far the move has only produced lackluster ratings and a poor lead-in to local news, further exacerbating NBC’s problems in prime time. The move has also become emblematic of network television’s struggle to re-imagine itself at a time of declining ad revenues and online competition.
John C. Malone, the chairman of Liberty Media and a longtime media investor, sees this as a victory for Comcast.
“It does not represent a huge risk Comcast is making with its core business,” he said. “There is the opportunity to see if they can achieve synergies without betting the farm.”
Many others, however, said the deal is less about synergy than other media mergers. At least in theory, Comcast-NBC Universal will be a company separate from Comcast’s cable assets.
“This deal is not about that,” said Leo J. Hindery Jr., the former chief executive of TCI, once the nation’s largest cable company, referring to synergies. “That Chinese wall is going to be built pretty thick.”
Instead, the deal is a bet by Comcast on how it can grow its business. It could use its power in film, with Universal Studios, to expand video-on-demand offerings by altering movie release windows to make movies available on demand the same day they are released on DVD, noted Craig Moffett, an analyst at Sanford C. Bernstein.
The broad parameters of the deal between G.E. and Comcast had been in place for weeks, but the deal could not be completed until a separate negotiation between G.E. and Vivendi was completed. Vivendi, the French conglomerate, owned 20 percent of NBC Universal as a remnant of a 2003 deal in which it sold Universal Studios and the cable networks USA and Syfy to G.E.
The groundwork for the tentative deal between G.E. and Vivendi was laid out last week, when G.E.’s chief executive, Jeffrey R. Immelt, met in person with his counterpart at Vivendi, Jean-Bernard Lévy, in Paris, these people said. News of the tentative agreement with Vivendi was first reported in The Wall Street Journal.
If it holds, the pact would conclude weeks of hardball negotiations between G.E. and Vivendi over control of NBC Universal, a battle centered largely on the value of the French company’s 20 percent stake. But Vivendi took a tough stance, relying on its option of holding an initial public offering for its stake rather than selling it back to G.E.
G.E. first plunged into the media business in 1985, not because of any expertise in television programming but as a financial hedge. John F. Welch Jr. , then G.E.’s chief executive, feared the threat to the company’s industrial businesses from the rising challenge of efficient Japanese manufacturers. “I was looking for a business that would give us a place to hide,” Mr. Welch, also known as Jack, wrote in his autobiography, “Straight From the Gut.”
The appeal of RCA, he explained, was NBC with its “strong cash flow.”
Today, things look very different.
“The media business has gotten beyond G.E.’s comfort zone in terms of managing it and finding a path to creating value in the content business in the future,” said Nicholas Heymann, an analyst at Sterne, Agee & Leach, who is a former G.E. manager. “The skill set to figure all that out is not going to be found within G.E.”
The Comcast deal, analysts note, would help G.E. reduce its debt as it tries to shore up its big finance arm, which got hit by the credit crisis. Over the years, they say, G.E. has revamped its portfolio of businesses at times, and Mr. Immelt is doing that again.
“The pendulum is swinging back to the core industrial businesses,” said Noel M. Tichy, a professor at the University of Michigan business school, and a former head of G.E.’s management school in Crotonville, N.Y.
Under terms of the deal, G.E. will buy Vivendi’s 20 percent stake in NBC Universal for about $5.8 billion. It removes one of the few remaining hurdles in its plan to sell control of the television and movie company to Comcast in a $30 billion agreement that reflects the changing landscape of broadcast television.
While a deal between G.E. and Comcast still could hit a snag over the final price, it is considered highly likely: G.E. wants to sell NBC because of rising losses, and Comcast wants to buy it to control more of the television programs and movies that flow through its cable systems.
The final threads may take days to sew up and there is a tentative plan to announce a final deal on Thursday, according to these people, who spoke on condition of anonymity because the negotiations are not complete.
While the agreement still could fall apart, G.E.’s decision to sell NBC Universal reflects the shifts in fortune that are battering the media business, especially network television.
G.E. executives had insisted until very recently that they had no interest in selling NBC Universal, even as they tried to interest suitors, like Time Warner and Comcast, through back-channel flirtations.
Their attempts grew more urgent after internal forecasts showed the once very profitable broadcast division of NBC Universal could lose big, a remarkable downturn for a network that had earned roughly $400 million in past years, according to an executive briefed on the matter. NBC has had an especially difficult few years in prime time, where the network, once home to “Seinfeld,” “Friends” and “E.R.,” is mired in last place.
Although the News Corporation, the conglomerate controlled by Rupert Murdoch, considered making an offer, Comcast was the lone serious suitor, a testament to the uncertain future of mainstream media, as the Internet has fractured audiences and few viable business models have emerged for the distribution of content online.
In 2003, when Vivendi held an auction for its Universal properties, many big media companies took part, including Comcast, Viacom, Cablevision, Liberty Media and MGM.
This time, there was only Comcast, which under its chief executive, Brian L. Roberts, has long harbored big ambitions of becoming a major producer of television and movies. In 2004, Comcast failed in a hostile takeover bid for the Walt Disney Company.
In the proposed deal, Comcast will contribute its own cable channels, which include Versus, the Golf Channel and the E Entertainment channel, and a modest amount of cash, about $5 billion, to a joint venture in which it will own 51 percent. G.E. will retain a 49 percent stake, and would likely reduce its ownership over several years.
In its size and melding of distribution of content and distribution, the proposed deal resembles the takeover of Time Warner by AOL. If Steve Case, the former head of AOL, was the public face of that failed merger, the public face of the proposed NBC-Comcast deal could well be Jay Leno.
Mr. Leno had long ruled late-night television as host of “The Tonight Show,” one of the network’s strongholds, along with its morning show and news division. In a risky move, Jeffrey Zucker, the head of NBC Universal, moved Mr. Leno into the 10 p.m. slot, clearing the way for Conan O’Brien at 11:30 and radically remaking prime time.
But so far the move has only produced lackluster ratings and a poor lead-in to local news, further exacerbating NBC’s problems in prime time. The move has also become emblematic of network television’s struggle to re-imagine itself at a time of declining ad revenues and online competition.
John C. Malone, the chairman of Liberty Media and a longtime media investor, sees this as a victory for Comcast.
“It does not represent a huge risk Comcast is making with its core business,” he said. “There is the opportunity to see if they can achieve synergies without betting the farm.”
Many others, however, said the deal is less about synergy than other media mergers. At least in theory, Comcast-NBC Universal will be a company separate from Comcast’s cable assets.
“This deal is not about that,” said Leo J. Hindery Jr., the former chief executive of TCI, once the nation’s largest cable company, referring to synergies. “That Chinese wall is going to be built pretty thick.”
Instead, the deal is a bet by Comcast on how it can grow its business. It could use its power in film, with Universal Studios, to expand video-on-demand offerings by altering movie release windows to make movies available on demand the same day they are released on DVD, noted Craig Moffett, an analyst at Sanford C. Bernstein.
The broad parameters of the deal between G.E. and Comcast had been in place for weeks, but the deal could not be completed until a separate negotiation between G.E. and Vivendi was completed. Vivendi, the French conglomerate, owned 20 percent of NBC Universal as a remnant of a 2003 deal in which it sold Universal Studios and the cable networks USA and Syfy to G.E.
The groundwork for the tentative deal between G.E. and Vivendi was laid out last week, when G.E.’s chief executive, Jeffrey R. Immelt, met in person with his counterpart at Vivendi, Jean-Bernard Lévy, in Paris, these people said. News of the tentative agreement with Vivendi was first reported in The Wall Street Journal.
If it holds, the pact would conclude weeks of hardball negotiations between G.E. and Vivendi over control of NBC Universal, a battle centered largely on the value of the French company’s 20 percent stake. But Vivendi took a tough stance, relying on its option of holding an initial public offering for its stake rather than selling it back to G.E.
G.E. first plunged into the media business in 1985, not because of any expertise in television programming but as a financial hedge. John F. Welch Jr. , then G.E.’s chief executive, feared the threat to the company’s industrial businesses from the rising challenge of efficient Japanese manufacturers. “I was looking for a business that would give us a place to hide,” Mr. Welch, also known as Jack, wrote in his autobiography, “Straight From the Gut.”
The appeal of RCA, he explained, was NBC with its “strong cash flow.”
Today, things look very different.
“The media business has gotten beyond G.E.’s comfort zone in terms of managing it and finding a path to creating value in the content business in the future,” said Nicholas Heymann, an analyst at Sterne, Agee & Leach, who is a former G.E. manager. “The skill set to figure all that out is not going to be found within G.E.”
The Comcast deal, analysts note, would help G.E. reduce its debt as it tries to shore up its big finance arm, which got hit by the credit crisis. Over the years, they say, G.E. has revamped its portfolio of businesses at times, and Mr. Immelt is doing that again.
“The pendulum is swinging back to the core industrial businesses,” said Noel M. Tichy, a professor at the University of Michigan business school, and a former head of G.E.’s management school in Crotonville, N.Y.
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