American telecommunications giant Comcast has announced it will buy a majority stake in entertainment network NBC Universal, which will give the nation’s biggest telco control of several cable channels and a major film studio.
The complex deal is worth over $US30 billion, and will see Comcast pay GE over $US6.5 billion for a 51% stake in the entertainment giant.
Analyst have suggested the purchase will see Comcast place a bigger emphasis on digital distribution, with films and television shows likely to reach pay TV networks and other devices quicker than their current timelines.
Comcast, which has 24 million subscribers, said it plans to purchase 51% of NBC Universal from General Electric, which has held its stake in the company since 1986. The deal will see NBC borrow $US9.1 billion from third-party lenders, and value the entertainment giant at $US30 billion.
GE will purchase French media company Vivendi’s 20% stake in NBC for $US5.8 billion, while Comcast announced a 40% increase in dividends and plans to complete a $US3.6 billion buy-back plan over three years.
Comcast chief executive Brian Roberts and GE chief executive Jeff Immelt have reportedly been discussing the deal over the past year. GE purchased NBC in 1985 for $US6.3 billion as a hedge, but the deal turned out better-than-expected when the network had a string of television hits in the 1990s including Seinfeld, Cheers, ER and Friends.
But NBC reported an 11% drop in revenue to $US11.2 billion and a 27% decline in profit for the first nine months of this year, with its television ratings among the lowest in the US.
However, Comcast said its pay TV services are a major drawing card, with the telco attempting to expand its services into television for some time.
Additionally, NBC’s investment in digital media site hulu.com, which provides free television content online, is recording strong viewership and advertising growth.
“This deal is a perfect fit for Comcast,” 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.”
Additionally, the deal will see NBC expand its online presence and allow users to access more content digitally, as its traditional television ratings lose ground to the internet.
While both companies’ boards have approved the deal, there is a plethora of regulatory hurdles to cross before the joint venture is completed by the third quarter of 2010. Congress officials have already said it will investigate whether Comcast will gain “undue advantages” from the deal.
“This acquisition will create waves throughout the media and entertainment marketplace and we don’t know where the ripples will end,” said senator Herb Kohl in a statement. “Antitrust regulators must ensure that all content providers are treated fairly on the Comcast platform.”
Some analysts have suggested the deal will trigger a wave of acquisitions from larger media companies, as they attempt to stay competitive with Comcast-NBC.
Patrick Stafford is a freelance journalist and a former deputy editor of SmartCompany.
