Comcast is a pretty big company above and beyond the obvious of providing cable services to the masses, and now it’s in the process of acquiring NBC.
Last year, when the economy was in the tank and “Joe the Plumber” was scared for his job and cutting back on his spending, Comcast had set itself up to survive the economic instability. In 2008, Comcast made .91 cents a share in earnings, which equates to revenues of $34.3 billion. They made a gross profit of just over $20 billion and their reported net income was that of $2.5 billion.
With Comcast buying into NBC Universal for a majority ownership, that leaves parent company, GE (General Electric), with 49% ownership stake. Comcast is paying out to GE around $6.5 billion in cash and $7.25 billion in programming for that 51% stake. GE remains in control of the rest of the company, valued at $30 billion in the complicated deal.
Key Elements Of The Transaction are as follows:
• 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.
The move is seen as a protective measure against the possible dwindling number of cable TV subscribers as more and more people flock to the internet for their entertainment. Or, Comcast simply wants to own more movies and TV shows.
As it stands, these two companies individually both bring an impressive portfolio into an even more impressive, collective portfolio.
The different parts of NBC include
- Hulu (Joint venture with Fox Entertainment Group, and ABC)
- MSNBC cable TV,
- NBC News,
- NBC Universal Television Group,
- Telemundo Television Studios,
- The Weather Channel,
- Universal Orlando Resort in Orlando, Florida
- Universal Studios Florida
- Universal Studios Hollywood in Universal City, California
- Universal Studios Japan in Osaka
- Universal’s Islands of Adventure
- USA Network,
- Wet ‘n Wild – Orlando
NBC Universal Global Networks include:
- 13th STREET,
- Studio Universal,
- Universal Channel,
- the international (non-U.S.) Hallmark Channels,
- Movies 24,
- Diva TV,
- KidsCo (joint venture).
Nabbing up NBC is also going to give Comcast the rights to some premiere sporting events like the 2012 Olympics.
Comcast comes to the table with their own portfolio which includes:
- 25 million television subscribers in 39 of the 50 U.S. States
- 15 million Internet service customers
- 6.4 million telephone service accounts. (It’s the 3rd largest phone provider in the U.S..)
Additionally, Comcast owns or partially owns the following networks:
- Comcast SportsNet,
- SportsNet New York,
- MLB Network Comcast Sports Southeast/Charter Sports Southeast,
- E! Entertainment,
- Style Network,
- The Golf Channel,
- AZN Television, and
- FEARnet. <- One of my personal favorites!
Comcast Is A Focused Business
Comcast is focused on making money. With all of these entities being pulled under the same roof, will we still have variability of choices or do you think they might do what many large corporations do when they absorb other companies? That would be trimming the fat and “reorganizing” the infrastructure.
This had me wondering if we will be seeing some changes at Hulu, as the question about Hulu charging for content had come up in the past. But Comcast addressed the issue pretty quickly by saying that Hulu will be business as usual. In fact, they said that some new content will appear on the popular internet streaming site and other shows will appear on the Hulu competitor called TV Everywhere. TV Everywhere is something that Comcast, Time Warner and a few other cable companies rolled out last summer.
When all is said and done, I do see Comcast doing some double dipping. Entertainment and sporting programming needs sponsors and advertisers to pay for production. All the while, Comcast can charge their 25 million customers the usual fees for that same programming. Sweet for them.
Will The Customer Reap Any Benefits From NBComcast-Uni?
It’s no mystery that producing entertainment is an expensive endeavor. I have to wonder why GE was selling NBC. Was NBC-Uni falling short financially somewhere? Was the sale necessary for a needed influx of funds to keep going? I’ve seen that a number of times in motorsports when a team sells a stake of their team for just that reason. Sell or go under. If that’s the case, don’t be surprised that when Comcast moves in, some trimming or reorganizing really does take place.
We can’t say for sure without knowing the details of NBC Universal’s true financial plight.
What possible advantages could the consumer see with this joint venture? Movies that come from Universal Studios could become available more readily through video on demand (VOD) services.
Optimally, being a wishful thinker, this could mean that we have movies on VOD at the same time some of these projects come to DVD or even when a project opens in theaters. That should sooth some of our pirate-like readers over on our conversation about Movie Piracy!
Of course with access to recent movies and Comcast providing internet access, I can only guess that we could see content become available on the Internet just like cable’s On Demand. It could be called Net Demand, or On Demand Net! (There, I just coined some phrases before they did. Now they have to pay me if they use my idea!)
I’m personally worried for one of my favored networks, the Syfy Channel. I believe they’re doing alright but I’d hate to see this situation change their scenario in some way. True, it’s not an optimal network but it is my go-to channel in off-hours. But that’s just one tiny aspect in this entire deal.
For now, despite the deal being put together, there is still just one tiny hurdle to defeat for Comcast, and that’s the FCC approval for this entire deal.
There are many critics to this deal and many wonder if the FCC will actually let this deal finalize. That, is something we will find out in time. I’m on the bubble as to whether this deal should go through. It could do the consumer good, or we could lose big time to the momentum of making money in the business of entertainment.
I’d love to hear what Screen Rant readers feel about this deal.