JIM LEHRER: Next: a media merger of two giants.
Jeffrey Brown reports.
JEFFREY BROWN: The historic peacock network, NBC Television, is getting a new home in a deal that reshapes the entertainment landscape.
General Electric announced today it’s selling a majority stake in the network’s parent company, NBC Universal, to Comcast, the nation’s largest cable TV operator. The price tag, nearly $14 billion.
The deal was made possible when GE persuaded French media conglomerate Vivendi to sell back its minority stake in NBC Universal. The resulting announcement means Comcast will gain control of profitable cable networks, including USA, Syfy, Spanish-language network Telemundo, and the Weather Channel, the Universal Pictures movie studio, and NBC itself.
GE has owned NBC, the home of such TV icons as “The Today Show” and “Saturday Night Live,” since 1986. The flagship network was once hugely profitable, most recently in the era of “Friends,” “Seinfeld,” and other hits, but has struggled in recent years, and is now mired in fourth place in the ratings.
For its part, Comcast, a family-owned business headquartered in Philadelphia, now reaches 96 million homes, a quarter of all households subscribing to cable TV.
With the new deal, the company would also own one out of every seven TV channels. That raised immediate concerns from some consumer groups. The deal, which is subject to approval by shareholders, will also have to pass regulatory muster with the Federal Communications Commission and other federal agencies.
And we turn now to Roben Farzad of “BusinessWeek” magazine, and Andrew Leckey, president of the Reynolds National Center for Business Journalism at Arizona State University. He’s a former correspondent for CNBC.
Well, Roben, let me start with you.
Help us with the big picture here first. What does the marriage of a huge cable company and an entertainment giant tell us about the changing world of media? What’s going on?
ROBEN FARZAD, “BusinessWeek”: Well, it’s kind of like deja vu all over again, to the extent that we’re almost 10 years removed from the announcement of that AOL-Time Warner merger, which like Comcast-NBC, aims to bring you that Holy Grail of content married with distribution.
So, you hear all these whimsical things about being in your living room and being able to pull up old episodes of “Miami Vice” and — and various different sports programming, and having all that brought under one umbrella. Much easier said than done, however.
JEFFREY BROWN: Andrew Leckey, what would you add to that? What do you see going on, big picture first?
ANDREW LECKEY, president, Reynolds National Center for Business Journalism: Well, the big picture is thank heavens it’s not another Time Warner-AOL deal, which everyone worries about.
All the media deals today, the fear is, it will be something terrible again. We know that the marriage between GE and NBC was a very difficult marriage. Amazing it got all the way here from 1986.
I think there are going to be changes. Any time there’s a change, everybody looks at what they own, where they’re going, where they’re headed. And it gives everybody a little nervousness about how things might turn out. But it’s a deal that does make sense on many levels.
JEFFREY BROWN: And what — Andrew, what does Comcast want? What does it think that it can get from this that it could offer consumers?
ANDREW LECKEY: Well, it can offer more cable channels, that’s for sure, more cable stations.
There’s also the possibility of content. But it’s a much more pragmatic time in discussing content these days. Back when Disney was getting involved with ABC, it looked as though it was one big assembly line that would present product and put it out.
And it’s much more complicated than that, which is why the government regulators are going to have to look at a lot of things and think really big picture. But it does gain quite a bit. It gains bulk as well. It also gains a lot of validity.
In the past, they were considered dogs and cats. Broadcast and cable were not the same thing. But we have seen in the last several years the growth of profits in cable. And cable rules the media world right now.
JEFFREY BROWN: Well, that — Roben, I mean, I said in our setup that this reshapes the media landscape. One of the things that’s so interesting is what Andrew just said, that the prime targets seem to be these cable networks, as opposed to this very historic network, broadcast network, of NBC.
ROBEN FARZAD: Well, the prime targets here are — are manifold.
Not only do you have Comcast trying to get in its hands a very important negotiating chip. For example, if Comcast, the cable company, wants to go back to Disney, which owns ESPN and, say, look, now we have a quarter of all households and we have these bargaining chips. If you want to get CNBC from us, if — you have to treat us fairly with respect to ESPN, which has been arguably gouging the cable companies.
They get that. They are able to say that, we are a more diversified business now. We’re not just the dumb pipe. That’s really the fear here for Comcast, which has largely been a distribution-only company. It does have a couple of content assets, E!, The Golf Channel, but rather penny-ante.
And it fears as being looked at as a commodity, as just this dumb pipe coming into the household, at a time of unbelievable competition, even in distribution. You have — you have Verizon with FiOS. You have the telecom companies. You have satellite nipping at its heels. You have the prospect of ubiquitous, cheaper free Wi-Fi, and consumers going straight to content providers on the Web for this.
So, Comcast, at the end of the day, has to justify being able to charge you well north of $100, $110, $120 for that monthly cable bill.
JEFFREY BROWN: Andrew Leckey, turn your attention to NBC. What — what happened, in short, to be blunt about it? I mean, we’re talking — this — this happens at a time when ratings are very low, when most of the attention is focused on this experiment of putting Jay Leno in prime time.
An historic network, where is it left now?
ANDREW LECKEY: Well, this, historically, is the time when a company moves on somebody or attempts to purchase it, although Comcast is paying quite a bit for it.
Well, right now, they have come right out and said, we intend to keep NBC News, NBC channel as — as it is. We’re not going to try to morph it into some sort of a cable operation. We’re going to stick with it.
So, right there, it jumps a huge hurdle in the public’s eye and perhaps in the FCC as well. Also, there are some top people that are involved there. In the news organization, which I know all of us are concerned about, you have got Steve Capus. You’ve got Mark Hoffman at CNBC. You have got a number of key people that they don’t want to lose.
It may not be the number-one moneymaker for the network, but it certainly is a huge positive step for it, an image in which it proves it cares about news, it’s got tough news people, and what’s happening is going to be told best on NBC.
JEFFREY BROWN: Roben, where do you see NBC, in terms of what happened to it and its place now, after this merger?
ROBEN FARZAD: I also see this, Jeffrey, through the lens of GE having waited way too long to sell this asset.
You did say in your segment that maybe NBC was at its chief value in that late ’90s era of must-see TV Thursday night, “Seinfeld” and “Friends.” And it’s fair to — it’s safe to say that NBC, like — you know, GE, like some of the other conglomerates that had media subsidiaries, really was blindsided by the severity of the disruption that would be brought on by the Internet, by the extent to which it diminished that asset.
It forced NBC’s hand, for example, to have to cede the 10:00 hour and bring in Jay Leno, because people were TiVoing and DVRing things. And it was much harder to charge advertisers what you used to be able to charge them in the heyday.
Now, GE owned this asset for 23 years before it was — its acquisition of RCA, which then became NBC and the 30 Rock assets. And GE has had a financial crisis of it own. It’s been at subprime central. It has GE Capital to worry about. And it’s in the odd position of having to raise cash, and having to raise cash at a time of depressed media values.
So, if you turn that around, Comcast and Brian Roberts, this conservative family-run business out of Philadelphia, is taking a bet on the direction of media, a very disrupted industry, at a very dark and depressed time.
So, you’re really curious to look at this and study it five or 10 years down the line, assuming it is approved.
JEFFREY BROWN: Yes, that’s where I wanted to end.
Andrew Leckey, in the short time we have left, the — there are these concerns about where this leaves us, sort of anti-competitive concerns. Will one company be so powerful that it could — it could hike prices on consumers, that sort of thing?
What do you — what do you see going forward in terms of the regulatory process here and those concerns?
ANDREW LECKEY: Well, the FCC right now, it wants to prove that it’s not a rubber stamp. This is the Obama administration. It wants to prove it’s not a rubber stamp, but also that it has some vision for the future.
Historically, attempts to regulate media have done a poor job, the failed Newspaper Act, which wound up with a bunch of umbilical papers that lost money anyway. Now we’re going to have a good look from the FCC at approving the transfer of the controlling interest in the TV stations, availability of content to competitors.
The Justice Department is going to get involved, in terms of advertising rates and retransmission consent. It’s going to be a crystal ball-type of a discussion, because you have to see, where are things headed?
And now you have got a whole group of control panels that you’re dealing with. And you have to decide which is going to lead the way. Even three or four years ago, when, previously, Comcast made a move at Disney, it was a different media world. And it’s going to keep changing in waves year after year. So, they have to be as farsighted as possible.
Now, the European Union can take years working through something like this. I don’t think it will take that long. But I think everything will be gone over very carefully by a new group of people at the FCC, facing their first big precedent-setting test.
JEFFREY BROWN: All right, we will leave it there.
Andrew Leckey and Roben Farzad, thank you both very much.
ROBEN FARZAD: Thank you, Jeffrey.
ANDREW LECKEY: Thank you.