NBC U deal makes Comcast CEO a player

Brian Roberts joins elite group of media honchos

Redstone, Rupert … Roberts.

Brian Roberts, 50, one of the savviest media dealmakers of the last two decades, has officially become Hollywood royalty. He’s even part of a dynasty: His father Ralph founded the family business, cable company Comcast, in 1963 and was still active in negotiating its biggest coup, the acquisition this week of NBC Universal from General Electric.

The deal has Comcast handing over $6.5 billion in cash and entertainment assets valued at $7.25 billion to create a new NBC U of which it will own a controlling 51% stake. That covers Universal Studios film and television ops, a stable of top-rated cable networks including USA, Syfy, Bravo, CNBC and MSNBC, the NBC Television Network and stations, Spanish-lingo broadcaster Tele­mundo, NBC Sports, NBC News, theme parks and a handful of digital properties.

Comcast brings 23.8 million cable customers, 15.7 high-speed Internet subscribers and 7.4 million telephone subscribers — the so-called triple play.

In merging the two companies, Brian Roberts is taking a leap of faith that the time has come at long last when a single owner can generate potent synergies by housing content and distribution under one roof. He’s making the move when media moguls before him, one by one, turned and fled the swamp of synergy.

Time Warner recently jettisoned its cable operation, saying both companies would be better off on their own. And of course the company’s merger with AOL was a historic fiasco; Sumner Redstone combined Viacom and CBS, only to break them apart again; Rupert Murdoch waged a heated battle to buy satellite broadcaster DirecTV, then called it nasty names and dumped it.

“This is a different time and a different deal,” said Roberts on a conference call with reporters Dec. 3. “I don’t look backward, I look forward.”

It’s clear now that consumers want electronic distribution. “Some they want for free, some (they want by) subscription, and some they want (through) pay-per-view,” he said. “We are in a unique position…to find solutions that benefit both content providers and distributors.”

DVD sales, which fueled Hollywood’s growth for years, have been in decline. But A giant cable company like Comcast, given access to huge film and television libraries and a major Hollywood studio, would have the freedom to play with windows, creating movie events on demand and on mobile platforms.

“We think there are dozens of ideas that come out of this combination,” said Steve Burke, chief operating officer of Comcast, who’ll be the exec overseeing the NBC U partnership for the cabler. Cross-promoting channels, launching new channels, creating VOD packages, movie windows. “Clearly not everything will work…but there’s the opportunity to innovate.”

Softer consumer demand for DVDs was exacerbated by the current economic downturn, which also squeezed advertising. Roberts feels that buying at a low point in the economic cycle, and in a period of upheaval in the media business, might be the ideal time to foster creative solutions to finding new rev streams.

“The industry is in transition after a period of extraordinary growth,” he said, speaking of the movie biz. “We think we can really claim a helpful role.”

Over the years, Roberts has been as well known for deals he didn’t do, as ones he did. In 1999, John Malone scrapped a deal to sell his TCI cable systems to Comcast after AT&T swooped in with a better offer. Comcast picked up a hefty $1.5 billion breakup fee. A few years later it launched, and won, a hostile bid for AT&T’s cable biz anyway.

In 2004, Roberts made an unsuccessful run at Walt Disney. He’d figured on more support from the board and from his own shareholders. Comcast backed off without a fight.

Comcast is considered the only investor in MGM that didn’t lose its shirt after the studio was acquired in late 2004 by a group of investors. It got hundreds of films to pump through its on-demand windows.

Its new role, straddling content and distribution, will require finesse.

Execs tread carefully when asked about the new trend of broadcast nets asking distributors to pay for the right to retransmitting local channels. CBS and Fox have been most aggressive in seeking cash payment in so-called retrans consent deals.

“I think, being on both sides, we can help the broadcast business evolve … and as a cable operator try to manage our costs,” Roberts said.

That would be a neat trick.

NBC U’s Jeff Zucker, who will be CEO of the new company, jumped in to note that retrans is “something we would expect to participate in. We look forward to those discussions in the future.”

Another challenge is getting Comcast’s “TV Everywhere” project to coexist peacefully with the video streaming site Hulu that is jointly owned by NBC, News Corp. and Disney. Burke called the two services “very complementary” with Hulu, serving up broadcast fare and premium cable programming reserved for TV Everywhere.

He said there are no plans to turn Hulu into a premium service as well, but that it would be up to Hulu shareholders to decide that.

In the end, if nothing else, Roberts and Burke said the NBC Universal deal is worth it for the cable networks alone, which have proven to be the sturdiest inhabitants of the media and entertainment cosmos. Cable channels, with their dual revenue streams, will throw off 82% of the cash flow of the new company.

“Wow. It’s really what brings us to this transaction,” Roberts said.

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