Showing posts with label General Electric. Show all posts
Showing posts with label General Electric. Show all posts

07 April 2010

What Your TV is Telling You to Do

The Wall Street Journal

NBC Shows Send Eco-Friendly Cues

NBC Universal's Shows Are Sending Viewers Signals to Recycle, Exercise and Eat Right. Why?

In just one week on NBC, the detectives on "Law and Order" investigated a cash-for-clunkers scam, a nurse on "Mercy" organized a group bike ride, Al Gore made a guest appearance on "30 Rock," and "The Office" turned Dwight Schrute into a cape-wearing superhero obsessed with recycling.

Coincidence? Hardly. NBC Universal planted these eco-friendly elements into scripted television shows to influence viewers and help sell ads.

The tactic—General Electric Co.'s NBC Universal calls it "behavior placement"—is designed to sway viewers to adopt actions they see modeled in their favorite shows. And it helps sell ads to marketers who want to associate their brands with a feel-good, socially aware show.



Unlike with product placement, which can seem jarring to savvy viewers, the goal is that viewers won't really notice that Tina Fey is tossing a plastic bottle into the recycle bin, or that a minor character on "Law and Order: SVU" has switched to energy-saving light bulbs. "People don't want to be hit over the head with it," says NBC Universal Chief Executive Jeff Zucker. "Putting it in programing is what makes it resonate with viewers."

TV has always had the ability to get millions of people to mimic a beloved character. Ever since Carrie Bradshaw on "Sex and the City" stopped in at the Magnolia Bakery, fans of the show wait in long lines for the once-quiet shop's $2.75 cupcakes. When Jennifer Aniston as Rachel on "Friends" cut her hair, salons across the country reported requests for the shaggy, highlighted, layered look known as "the Rachel."

This is the power of persuasion that NBCU hopes to tap. "Subtle messaging woven into shows mainstreams it, and mainstreaming is an effective way to get a message across," says Lauren Zalaznick, president of NBCU Women & Lifestyle Entertainment Networks, which oversees the effort.

Since fall 2007, network executives have been asking producers of almost every prime-time and daytime show to incorporate a green storyline at least once a year. The effort now takes place for a week in April and November. Starting April 19 this year, 40 NBC Universal outlets will feature some 100 hours of green-themed programming, including an episode of the Bravo reality series "Millionaire Matchmaker" in which a 39-year-old tycoon with an eco-friendly clothing line goes into a rage after his blind date orders red meat.

In June, NBCU plans a week in which programming will emphasize healthy eating and exercise: The idea is that viewers will watch the shows and then spring into action. "It's about incorporating a marketer's message into a thematic environment," says Mike Pilot, president of sales and marketing at NBC Universal.

While the network says it tries to incorporate green programming throughout the year, the special emphasis twice a year creates an "event" that provides opportunities to advertisers, an NBC spokeswoman says. For instance, a Wal-Mart ad focusing on locally grown produce ran this past November after an episode of the medical drama "Trauma" in which emergency medic Rabbit rescues a window washer dangling precariously from a building; medics are alerted to the situation by a man sitting in his hybrid vehicle.

Behavior placement gives marketers extra incentive to advertise at a time when digital video recorders equip viewers with an unprecedented ability to skip commercials, says Jason Kanefsky, a media buyer at Havas's MPG. "You're not forcing your way into a program in any shape or form," he says. "You're just nodding your head at a program." ABC, CBS and FOX have plenty of product placement but haven't taken the step into behavior placement, network spokesmen say.

TV writers and producers are less enamored with behavior placement. Already on the hook to create holiday-themed episodes and accommodate marketers in other ways, some producers and writers grumble about additional demands. Requests for green-themed storylines come at the start of the year when programming executives sit down with producers and lay out which company-wide themes and holidays they will be working into shows.



Producers do have some leeway. "The Office," for example, embraces Valentine's Day, Halloween and Christmas but refuses to incorporate Easter since it isn't part of office culture.

Angela Bromstad, president of primetime entertainment at NBC, says her only specific request is that writers incorporate something related to the environment into a storyline and not make it a throwaway line of dialogue. "We haven't had any pushback," she says.

Paul Lieberstein, an executive producer on "The Office" who also plays the character Toby Flenderson, says he was thinking about making Dwight a superhero called "Recyclops" before network executives ordered up an environmental storyline.

"In this case it fell right into the realm of what we do," Mr. Lieberstein says. "We'd have to say no if it hurt the integrity of the show."

"Heroes" creator Tim Kring says behavior placement is easier than incorporating a specific brand, which is what the science-fiction series about ordinary people with superhuman abilities, recently did for sponsor Sprint Nextel Corp. This past fall, members of a carnival loaded a pickup truck with recyclables as Masi Oka, in the role of Hiro Nakamura, talks about giving back to the Earth. "Someone has to pay for our big, expensive television shows," Mr. Kring says.

Armed with its own data showing consumers are wiling to spend more if a brand seems eco-friendly, NBC in 2007 launched "Green Week," the programming component of a larger "Green is Universal" corporate campaign. That effort brought in an estimated $20 million in advertising revenue from 20 sponsors, according to industry estimates. Many new clients, including the nutrition bar Soy Joy, came on board, NBC says. In April 2008, the network added another week of green-themed programming, when network logos go green and on-air promos tout NBC's support for the environment. But there are no obvious cues to alert viewers to the green emphasis in programming.

To court advertisers targeting specific demographics, NBC researchers conduct regular focus groups. Viewers are broken into categories based on their favorite shows and their level of concern about the environment. "Alpha ecos" are mostly women who drive hybrids, eat organic and watch the Bravo channel. "Eco-logicals" are older viewers who have "traditional Midwestern values," drink Diet Coke, drive domestic cars and love basic-cable channel USA. When PepsiCo Inc.'s Sun Chips brand launched a compostable chip bag, executives wanted to reach young, edgy consumers who watch "30 Rock." Pepsi purchased a skit starring Kenneth, the show's lovable page. It will run during a commercial break of an eco-friendly episode this fall. "This audience has a tendency to be a little more cynical about blatant product placement," says Gannon Jones, vice president of marketing for PepsiCo's Frito-Lay unit.

Product placement on TV dates back to early soap operas sponsored by Procter & Gamble Co. Programming has been trying to get across messages, like Don't Smoke or Say No to Drugs, for almost as long. In the 1970s, libraries nationwide saw a spike in interest after the "Happy Days" character Fonzie got a library card. Last year, a character in the top-rated telenovela on NBC Universal's Telemundo, "Mas Sabe el Diablo" ("The Devil Knows Best"), had a job recruiting Latinos in New York City to participate in the 2010 Census. (Telemundo voluntarily took on the message for a group that is historically undercounted. It ran its efforts by Census authorities to make sure it had the details right.)

The messages NBC gravitates toward tend to be fairly innocuous. For instance, climate change may be controversial, but people can agree that taking care of the environment is a good thing. Same with diet and exercise: It may be controversial to ask people to quit smoking but people don't argue with taking better care of your body.

Still, do viewers really want their TV sets reminding them to recycle and go to the gym? Executives say the more seamlessly integrated the behavior is, the less it feels like the show is trying to manipulate. "The last thing you want to do is not reach the audience in the right way and make them mad at you," says NBCU's Ms. Zalaznick. Viewers don't mind if "you do a little good in the world, and you're still making your show."

For its first televised ad campaign, Vermont-based cleaning product manufacturer Seventh Generation Inc. paid NBCU to use Tori Spelling and Dean McDermott, stars of Oxygen's reality series "Tori and Dean: Home Sweet Hollywood," in a vignette about organic gardening that will run later this month during a commercial break. The corresponding episode will feature the couple gardening and composting. Dave Kimbell, Seventh Generation's chief marketing officer, says the company doesn't use product placement but sees behavior placement as a more effective way to express the brand's values and "create a dialogue" with consumers.

The trick is to not turn off viewers by being lectury or too obvious, producers say. "Late Night with Jimmy Fallon" had a segment that urged viewers to turn off their lights for five seconds to conserve energy. But each time the lights went out in the studio, a Latina janitor screamed "Ay dios mio!" and a gunshot went off killing a member of the Fallon cast. "At that hour people just want to laugh and have fun. They don't want to be preached at," the host says. 


03 December 2009

Comcast, General Electric Make It Official

Multichannel News

The $30 billion deal that switches control of NBC Universal from General Electric to Comcast brings value to allow everyone involved to focus more sharply on their core businesses, leaders of the two companies said Thursday.

"Either you're moving forward or you're moving backwards," GE CEO Jeff Immelt said in an interview on CNBC. "Being able to partner in cable and digital makes NBC Universal more valuable for investors, for Comcast investors and for the NBCU team."

General Electric and Comcast earlier announced the agreement that stands as one of the biggest deals in media history.

Comcast [ CMCSA 15.975  +1.035 (+6.93%) ], the largest cable TV operator in the US, will end up controlling 51 percent of the newly-formed company while GE [ GE 16.25  +0.18 (+1.12%) ] will own 49 percent.

The transaction could take more than a year to close as the companies await approval from the Federal Communications Commission.

Comcast Chairman Brian Roberts told CNBC he believes the deal will be approved, as do most analysts.

"We think this is an approvable transaction," Roberts said during a joint interview with Immelt (see video below). "We think this is pro-consumer and brings real benefit at a time when distribution is going from physical to electronic in the digital age. This vertical integration tends not to present some of those challengs that a horizontal integration might."

Roberts added that he sees few major changes occurring at least for employees as Comcast realizes the value particularly of the cable channels, such as Bravo, Syfy and E!, in NBC's domain.

"This is a different time, a different deal, and we'll have to execute to show that. But in our assumptions we're not assuming any great layoffs or changes as a result of that," he said. "We think cable programming and the content business in general, structured properly, is a good business."

"This deal is highly structured, gives us real incentives to grow the business together," he added. "I think the two of us coming together are better than alone and the fact that we're a cable company is certainly not going to hurt this company. I think we're going to focus and we're pretty excited."

GE, parent of CNBC, currently owns 80 percent of NBCU, which the two companies have valued at about $30 billion. Before a final deal could be struck, Vivendi of France had to agree to sell its 20 percent stake in NBC Universal, which GE ultimately agreed to buy for $5.8 billion.

The mega deal includes the spinoff of NBC Universal and $9.1 billion in debt. It also includes the merger of Comcast's content assets valued at $7.25 billion and a $6.5 billion cash contribution.

"For Comcast, this transaction is strategically compelling and will generate attractive financial returns and build shareholder value," Comcast Chairman and Chief Executive Officer Brian Roberts said in a press statement.

"It is also expected to be immediately accretive and will also allow us to maintain our strong commitment to returning capital to shareholders- all while increasing the scale, capabilities and value of our cable distribution, content and digital assets," Roberts added.

At the same time, Comcast announced it increased the company's planned annual dividend by 40 percent to $0.378 per share.

Disney Rival

When completed, the deal would make Comcast one of the nation's largest entertainment companies rivalling the heft of its former takeover target, Walt Disney [ DIS 30.59  -0.20 (-0.65%) ].

The transaction will generate about $8 billion in cash at closing, with an expected small after-tax gain, GE chairman and CEO Jeff Immelt said in the statement.

"I believe that the new NBCU will deliver value for both Comcast and GE in the future. We will give consumers and advertisers more choice and our cable and digital assets will be second to none," Immelt said.

Comcast wants NBC Universal largely for its lucrative cable channels, such as Bravo and CNBC. NBC Universal also spans the NBC and Telemundo broadcast networks, the Universal Pictures movie studio and Universal theme parks.

Comcast is eager to diversify its holdings amid an encroaching threat from online video and more aggressive competition from satellite and phone companies that offer subscription TV services.

Jeff Zucker, current president and CEO of NBCU, will be CEO of the new joint venture.

The deal bodes well for the two companies, Lawrence Haverty, Associate Portfolio Manager at Gabelli Global Multimedia Trust, told CNBC. Haverty owns shares in both companies.

The cable business is going to rebound with advertising revenues in general but "the future for the broadcast networks is very problematic," he said.

"The only reason to hold off on this is the regulatory delay issue which is frankly, in my opinion, just a mess… the time that it's going to take," Haverty added.

The two companies will look at all platforms to see where they can find value, Anthony Fry, senior managing director at Evercore Partners, told CNBC's "Strictly Money.""They will want to keep whatever they can actually find a way of creating monetary value across multiple platforms… The future is about what is the content that you own that you can find ways of distributing, of which customers will pay," Fry said.

Although the deal holds the promise that movies could reach cable TV more quickly after showing in theatres, and that TV shows could appear faster on cell phones, it has already raised concerns that Comcast would wield too much power over entertainment.

Exit provisions are critical in joint ventures because they deal with when and how a partner can get out. In the case of GE, many of its shareholders have urged the conglomerate to offload NBC Universal, whose broadcast and cable networks, movie studio and theme parks are considered misfits among GE's mostly industrial operations.

Vivendi will continue to receive quarterly dividends from NBC Universal until the deal is completed and if it does not complete, it would launch an accelerated IPO for the stake, the company said. 

Comcast and General Electric Co. formally announced what may arguably have been the media industry's worst kept secret over the past few months, that they have agreed to form a joint venture with GE's NBC Universal media properties valued at about $30 billion.


The announcement, which had been expected ever since early October when it first surfaced that the two business giants were in talks, contained few surprises. According to the deal GE will contribute NBCU's businesses valued at $30 billion, including its cable networks, filmed entertainment, televised entertainment, theme parks, and unconsolidated investments, subject to $9.1 billion in debt to third party lenders. Comcast will contribute its cable networks including E!, Versus and the Golf Channel, its ten regional sports networks, and certain digital media properties, collectively valued at $7.25 billion, and make a payment to GE of approximately $6.5 billion of cash subject to certain adjustments based on various events between signing and closing.

A conference call with the financial community is scheduled fortoday at  8:30 p.m. (ET),  while a media call is slated for two hours later. Check multichahnnel.com for updates and more details on this transformative agreement.

The deal will create the Comcast Entertainment Group (CEG), which will house Comcast's interest in the joint venture and will stand alongside Comcast Cable, which operates the company's traditional cable business. Headquarters for the business will remain in New York. The joint venture board will have three directors nominated by Comcast and two nominated by GE.

"This deal is a perfect fit for Comcast and will allow us to become a leader in the development and distribution of multiplatform ‘anytime, anywhere' media that American consumers are demanding," Comcast chairman and CEO Brian Roberts said in a statement. "In particular, NBCU's fast-growing, highly profitable cable networks are a great complement to our industry-leading distribution business. Today's announced transaction will increase our capabilities in content and cable networks. At the same time, it will enhance consumer choice and accelerate the development of new digital products and services."

The deal marks the beginning of an exit from the media space for GE, which bought the NBC broadcast network in 1986 and steadily increased its cable holdings over the years. In 2004 the company significantly boosted its cable presence with the purchase of 80% of Vivendi Universal and under chairman Jeff Zucker has added to its cable portfolio with the purchase of networks like Oxygen and The Weather Channel. Zucker will become CEO of the joint venture, reporting to Comcast chief operating officer Steve Burke.

"The combination of Comcast's cable and regional sports networks and digital media properties and NBCU will deliver strong returns for GE shareholders and business partners," GE chairman and CEO Jeff Immelt said in a statement. "NBCU has been a great business for GE over the past two decades. We have generated an average annual return of 11 percent, while expanding into cable, movies, parks and international media. We are reducing our ownership stake from 80 percent to 49 percent of a more valuable entity. By doing so, GE gets a good value for NBCU. This transaction will generate approximately $8 billion of cash at closing with an expected small after-tax gain."

While some critics have pointed to the failure of past attempts to meld distribution with content - Time Warner, which split off its cable distribution unit in March is held up as a prome example, Burke said in a statement that the situation will be different with Comcast NBCU.

"Both Comcast and NBCU have excellent track records of integrating and growing multi-billion dollar businesses, including significant content acquisitions," Burke said in a statement. "In addition, we have both developed some of the country's most popular programming and built many of the most watched and valued networks in the industry. We are confident that we'll be even stronger together, and look forward to working with Jeff Zucker and the NBCU team to deliver the best consumer experience."

Zucker also seemed promed for the challenge.

"Combining the assets of NBCU, ranging from our suite of cable properties and two broadcast networks to a legendary film studio and global theme park business, with the content assets and resources of Comcast, will enable us to continue to thrive in an ever-changing media landscape," Zucker said in a statement. "Consumers of all of our products - on screens large and small - will have the benefit of enhanced content and experiences, delivered to them in new and better ways as a result of this transaction. This marks the start of a new era for NBCU, and I'm genuinely excited that I will be leading this wonderful organization, along with the Comcast team, at this important time in our history."

Below are some of the key deal points:

• NBCU will borrow approximately $9.1 billion from third-party lenders and distribute the cash to GE.

• NBCU, valued at $30 billion, will be contributed to the newly formed joint venture. Comcast will contribute its programming businesses and certain other properties valued at $7.25 billion.

• GE will acquire Vivendi's 20% interest in NBCU for $5.8 billion. GE will purchase approximately 38% of Vivendi's interest (or approximately 7.66% of all outstanding NBCU shares) from Vivendi for $2 billion in September 2010, if the Comcast transaction is not closed by then. GE will acquire the remaining 62% of Vivendi's interest (or approximately 12.34% of all outstanding NBCU shares) for $3.8 billion when the transaction closes.

• Comcast will make a payment to GE of approximately $6.5 billion in cash subject to certain adjustments based on various events between signing and closing.

• The new venture will be 51% owned by Comcast and 49% owned by GE.

• GE expects to realize $9.8 billion pre-tax in cash before debt reduction and transaction fees and after buyout of the Vivendi stake. GE expects to realize approximately $8 billion in cash after paying down the existing NBCU debt and transaction fees.

• GE will be entitled to elect to cause the joint venture to redeem one-half of its interest at year 3 ½ and its remaining interest at year 7. The joint venture's obligations to complete those purchases will be subject to the venture's leverage ratio not exceeding 2.75X EBITDA and the venture continuing to hold investment-grade ratings. Comcast also has certain rights to purchase GE's interest in the venture at specified times. All such transactions would be done at a 20% premium to public market value with 50% sharing of upside above the closing valuation.

• To the extent the joint venture is not required to meet GE's redemption requests, Comcast will provide a backstop up to a maximum of $2.875 billion for the first redemption and a total backstop of $5.750 billion.

01 December 2009

GE Makes Ready For Sale Of NBC

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.

01 November 2009

Comcast, GE Try To Find A Price

Wall Street Journal


Comcast Corp. and General Electric Co. are wrestling over the value of NBC Universal in negotiations that would give Comcast control of GE's television and movie company, and an agreement could come within the next three weeks, people familiar with the talks said.

GE and Comcast executives held a series of sessions in New York last week, including presentations from NBC Universal executives on their units, people who attended the meetings said.

Those meetings completed much of the due diligence for a Comcast deal, some of those people said. The Comcast-GE talks could still fall apart.

Meantime, GE is exploring other options for NBC Universal, according to people familiar with the matter. GE and media company News Corp. are in preliminary conversations about an alternative NBC Universal deal, said a spokeswoman for News Corp., which also owns The Wall Street Journal. "It's a great set of businesses, and we're taking a look at it," she said.


One of the biggest outstanding issues for Comcast and GE remains the value of NBC Universal. It is central to a set of transactions that would merge Comcast's television networks with NBC Universal, creating a television and movie behemoth controlled by the nation's largest cable company.

In the transaction Comcast and GE are considering, Comcast would contribute cash and cable networks in return for an initial 51% of the expanded entity. GE, which now owns 80% of NBC Universal, would retain 49%. French telecom and media company Vivendi SA, which owns 20%, would be bought out.

Comcast has tried to pull NBC Universal's value down, minimizing the cash it would need to contribute to a deal, people familiar with the matter said. GE, citing rising media stock prices since summer, has pushed for an increase, they said.

Any Comcast deal could take a year or longer to clear regulators, people familiar with the talks said. Public interest groups and competitors of NBC Universal and Comcast also could urge lawmakers or regulators to put conditions on any deal.

A News Corp. deal would be tricky, too. Regulatory rules would prohibit News Corp., which owns the Fox broadcast network, from owning the NBC network. A person familiar with the matter said that any News Corp. deal would exclude NBC, local TV stations owned by NBC Universal and cable-news channel MSNBC. Dividing NBC Universal could make a potential deal more difficult, another person familiar with the matter said.

One person familiar with the talks said Comcast wasn't worried about talks with News Corp., calling them a GE negotiating tactic.

Any other potential deals could also face an uphill battle, given the momentum of the Comcast talks. GE and Comcast have been discussing the outlines of a deal since early spring, according to people with knowledge of the talks.

Brian Roberts, Comcast's chief executive, played a central role in pitching a potential deal to Jeffrey Immelt, GE's chief executive, a person familiar with the matter said. Another person described the role of Messrs. Roberts and Immelt in talks as "huge."

07 October 2009

What Comcast Would Bring To NBC Universal




From Fortune

They aren't there yet. A proposed deal that would join together General Electric's NBC Universal with Comcast Corp.'s entertainment assets faces a long haul to the finish line. But even with an outcome uncertain, it's clear that the pact would make Comcast even more of a force with which marketers would have to reckon.

Any deal involving NBC Universal is predicated on the notion that Vivendi will exercise its exit rights in relation to its 20% stake in the venture, which it can do each year between approximately Nov. 15 and Dec. 10, according to Bernstein Research. That said, a Vivendi decision to get out of the company would leave General Electric trying to determine whether to sell the stake, hold an IPO for it, or bring in a partner, according to people familiar with the situation. And even if it does decide to go the partnership route, who's to say it isn't holding discussions with parties other than Comcast?

So it seems as if Comcast and GE are sniffing each other intently, rather than getting the signing documents ready. Even so, talks between the two parties appear to be centering on the idea of a joint-venture property that would include Comcast's entertainment assets -- which include the E! Entertainment network, the Versus sports cable channel, regional sports networks and the male-oriented G4 outlet -- and all of NBC Universal's properties, including its Universal movie studio, NBC broadcast network, theme-park properties and burgeoning suite of cable assets. Comcast would likely contribute between $4 billion and $6 billion, according to a person familiar with the matter, with GE contributing approximately $12 billion raised through debt.

Comcast would have majority control, taking a 51% stake in the venture, compared to GE's 49%, according to a person familiar with the situation. The move would make Comcast, already the nation's largest cable-services provider, the overseer of a large portion of news, entertainment and information, and the backer of everything from "30 Rock" to CNBC to Chelsea Handler to Conan O'Brien to broadcasts of NHL games.

An NBC Universal spokeswoman was not able to be reached for immediate comment. A Comcast spokeswoman said Comcast executives were not available for comment.

Ready and willing

Comcast's interest is obvious, particularly after the once-sleepy concern made a bid in 2004 for Walt Disney Co. Gaining control over NBC would give Comcast scads of content to ship over its cable and broadband lines, and it would add a raft of cable networks that have two streams of revenue -- subscription fees and advertising.

In looking at big media companies, "the best businesses that all of us have in the entertainment business are the cable content channels, and those channels, with that dual revenue stream, are really good businesses," said Stephen Burke, chief operating officer of Comcast, at a recent investor conference. "And I think we wouldn't be doing our job if we didn't try to figure out a way to get bigger in those businesses."

Advertisers might be interested in services Comcast could bring to the table, including the capabilities of a cable set-top box. Marketers have long hungered for the second-by-second viewership data these devices record, as well as the interactive and addressable advertising they help enable. Comcast could also help spur more on-demand use of programming -- a viewing opportunity more advertisers would like to crack.

More important, perhaps, gaining those channels would also give Comcast protection in an era when consumers have more power to avoid commercials, potentially crimping the flow of ad revenue. TV networks are looking to raise the fees they get from cable systems for their programming a way to make up for ratings erosion and lower ad rates.

What's more, some Wall Streeters believe the broadcast networks could one day seek to take a piece of the fees cable providers charge subscribers for usage of digital video recorders -- particularly because the most heavily recorded programs are those that originate from the big broadcast networks. Bernstein Research analyst Michael Nathanson estimates U.S. consumers will pay around $3.3 billion in 2009 on DVR subscription fees to their video providers. Assuming a 50-50 split, he recently estimated, "one could surmise there is a potential $1.65 billion in fees that could be claimed as 'content payments.'"

No debt here

The joint venture would allow Comcast to take on content and hedge against such payments for what would seem to be a reasonable price. The company has spent considerable time deleveraging its balance sheet in the last several years and has little interest in building debt anew. In his remarks, Mr. Burke downplayed the notion that Comcast would seek "a big $50 billion acquisition," favoring instead "opportunities that are complimentary with our core business."

GE's interest in such an agreement comes after a year of lackluster performance by the NBC broadcast network. While NBC has embarked on a spate of cable acquisitions in recent years -- recently picking up Oxygen as well as a joint-venture with The Weather Channel -- the best-known piece of the operation, NBC, has proven less able to jockey with CBS, Fox and ABC in the prime-time programming wars, where shows fetch the highest advertising prices. Placing NBCU in a joint venture would allow GE to keep its beak dipped in a media cash flow while letting an outside party have the day-to-day worry of managing the glitzy operation.

Taking on NBCU would certainly pose other challenges. It's one thing to program G4 or E!; it's quite another to program USA and even NBC (and how facile would Comcast be at managing NBC News, MSNBC and CNBC, which can generate as much news as they break?). And the NBC broadcast network brings with it a unique set of hurdles, including the fact that it has lagged in the ratings for several years and has recently begun the deconstruction of its prime-time lineup with a cheaper-to-produce talk show featuring Jay Leno.

Comcast "would have a controlling stake in good-performing cable networks and could also utilize NBCU's content library," wrote Wells Fargo analyst Marci Ryvicker in a Friday-morning research note. "Clearly there is less of a need for the broadcast network/O&Os or theme parks, which could be further spun or eventually sold."

The road to the altar will be long and uncertain, and any marriage that results would be just the start, not the finish, of what is sure to be a long-running story.