The next big media deal
Comcast-NBC deal can reshape the American media industry
The New York Times, the Financial Times and The Wall Street Journal all reported today on the billion-dollar agreement. After nearly nine months of talks, Comcast – the biggest cable operator in the US – announced a deal to buy 51 percent of NBC Universal from GE.
The merger is expected to reshape the American entertainment industry, giving a cable provider with 25 million television subscribers and 15 million Internet customers a vast portfolio of profitable content.
The New York Times states that the agreement – which could take up to 18 months to be finalized – raises certain anxieties about the future of the industry.
NBC has been mired in fourth place among the major broadcast networks, and the economics of the broadcast television business has deteriorated in recent years amid declining overall ratings and a decline in advertising. By contrast, cable channels have continued to thrive because they rely on a steady stream of subscriber fees from cable companies like Comcast.
The Financial Times makes an interesting point, asserting that the deal goes against current trends in the media industry.
The deal runs against recent media industry trends in splitting apart content creation and distribution that has inspired decades of deal-making, but failed to generate more value combined than apart.
Free Press, the advocacy group in Washington, reaffirmed today that will ask regulators to block the deal because it would give Comcast too much power over what viewers see.
“The pundits who are predicting this merger will be a cakewalk haven’t done a careful analysis of the damage it will do to the competitive fabric of the video marketplace,” said Mark Cooper, research director for the Consumer Federation of America. “This merger’s potential to foreclose competition and stifle innovation is significant and real.”
According to the group, the merger could hurt competition in traditional video markets as well as in emerging markets. Moreover, the Comcast-NBC agreement would trigger more media consolidation, as remaining companies – both in distribution and content – will seek to fortify to match competition.
The deal also sparked fears of job losses. Both companies employ together roughly 130,000. But according to Mr Burke, the Comcast executive who will oversee the joint venture, almost all employees should feel safe as the businesses do not overlap.
