For more than a decade, Brian Roberts, the scion running the country’s largest cable television system, has envisioned transforming his company into more than just a collection of — as Wall Street calls cable — “dumb pipes.”
So Roberts’ Comcast Corp. has been steadily bulking up. First it became the conduit of television, then an Internet service provider and a telephone company. Along the way it has been building regional sports networks, launching entertainment Web sites and snapping up such cable channels as E, Style, G-4 and the Golf Channel.
But despite Roberts’ muscle and ambition, Comcast lacks the big prizes in media: a Hollywood movie studio and broadcast network. Gaining control of NBC Universal would change that.
“Comcast wants to become a major global communications player on the same scale as a Disney, Viacom, Time Warner or Fox,” said Marc Nathanson, a cable television pioneer who founded Falcon Cable TV. “Brian Roberts and his management team see this move as one of survival.”
Thrusting Comcast into the upper echelons of the entertainment firmament would cast the Philadelphia-based cable operator beyond its traditional role of distributing programs made by others, a lucrative business but one that appears to have peaked. Comcast would become one of the world’s largest owners of programming, from blockbusters such as “The Bourne Identity” franchise to prime-time hits such as “The Office.”
At the same time it would not only assure Comcast a powerful voice in determining how and when consumers watch movies and TV shows, but also provide a hedge against one of its fastest-rising costs: the content that flows through those “pipes.”
Holding up the deal, at least for now, is a decision by French telecommunications company Vivendi to exercise its option to sell its 20 percent stake in NBC Universal to General Electric Co., which owns 80 percent of NBC Universal. Comcast will not move forward with the deal until Vivendi agrees to exit.
The merger, of course, would have to pass muster with the Obama administration, a regulatory review that could take more than a year. Industry insiders, however, believe it would ultimately win approval.
“I think the mood between (the economic) stimulus and other signs the administration has made is that they want to have a constructive environment,” Roberts told analysts this month on an earnings call, explaining his rationale for optimism.
Owning NBC Universal is about more than fortifying the Robertses’ family empire, which began 46 years ago in Tupelo, Miss., when Roberts’ father, Ralph, who had made a living selling belts and suspenders, bought a company that installed wires to homes so that customers, for $5 a month, could receive clearer TV signals. Comcast would eventually grow into a $34-billion-a-year business, with 24 million subscribers, reaching nearly 25 percent of TV homes in the country.
But competition has grown fierce. Satellite television providers, including DirecTV, and telephone companies AT&T and Verizon now offer similar TV channel packages — often at lower prices. Comcast, like many cable operators, has been losing hundreds of thousands of subscribers each year to competitors.
At the same time, program suppliers, including NBC Universal and Walt Disney, have been charging cable companies higher fees to carry their channels. Broadcast networks, including Fox and CBS, have said that they intend to charge cable operators for their over-the-air channels that they once retransmitted free of charge.
“Comcast’s fear is that it will become more difficult to pass those price hikes on to viewers because of the increased competition,” said Jason Bazinet, a media analyst with CitiGroup Global.
“If you are Brian Roberts, buying a content company is a hedge against these rising programming costs,” Bazinet said. Comcast then would help set prices. “For Comcast,” he noted, “you would be collecting as many checks as you are cutting them.”
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