09.30.09

Will Stars Align for Comcast and NBC?

Although Comcast is denying it has a deal to purchase NBC Universal, some in Hollywood are convinced it’s in the works—and that the cable giant will be better for NBC than its current owner, GE.

“I hope it’s true.”

So said one prominent Hollywood veteran on hearing about the report on The Wrap Web site that Comcast will buy NBC Universal from parent company General Electric for $35 billion. Comcast promptly denied it, saying in a statement: “While we do not normally comment on M&A rumors, the report that Comcast has a deal to purchase NBC Universal is inaccurate.”

The story caught even the most senior executives at NBC Universal off-guard. One NBC Universal insider said a deal may not be done yet—the report may have been premature or wrong. But many in Hollywood are convinced that some deal is in the works. Signals from the company have seemed to suggest that GE was not permitting any big moves—no major firings or new hires—and that in turn has fired up rumors that a sale might be imminent. Until Comcast’s name emerged, there was widespread speculation that Time Warner would be the buyer.

“Comcast will be a better owner than GE,” a former Universal insider said. “You want the parent company to want to invest money in the entertainment business.”

To some in Hollywood, Comcast seems like a better bet for the industry than either the status quo or a Time Warner acquisition. “Comcast will be a better owner than GE,” a former Universal insider said. “You want the parent company to want to invest money in the entertainment business.” And if Time Warner were to buy NBC Universal, it was widely assumed that Universal would be folded. Time Warner hardly needs another movie studio. But Comcast is likely to keep Universal going, using it and its massive library to supply on-demand movies to its customers. Consumers can look forward to seeing new movies on demand far closer to their theatrical release dates if this deal goes through.

The jewels of the deal for Comcast would be NBC Universal’s profitable cable channels, including the No. 1 USA, Bravo, and SyFy. But there might be a chance that Comcast will see the value in keeping NBC around as a broadcast network for the time being (rather than converting it to a cable channel, which is where it seemed to be headed). Comcast’s well-regarded COO is Stephen Burke, who has a long history in the network business and was formerly president of ABC Broadcasting. He understands that business well—and many fall shows are off to a surprisingly strong start. Not on NBC, of course, but the point is that broadcast networks can still claim to be the biggest aggregator of eyeballs for advertisers.

The networks also are still strong launching pads for shows that drive profit on cable. “Look at USA or TNT,” argues an NBC executive. “Original programs get buzz, but what gets ratings are shows like Law & Order and House.”

Not everyone is convinced that Comcast would be a good thing for NBC Universal. “I hear these guys [at Comcast] make GE look like spendthrifts,” fretted an NBC Universal insider. “I can’t imagine anything worse than GE, but maybe there is.” On the other hand, he said, “At least these guys understand the media business.”

And haven’t both Universal and NBC suffered enough? Universal has been on a losing streak with films like Land of the Lost and Brüno, and its executives have lived for months with rumors that some or all of them will be fired.

Meanwhile, NBC is in the midst of its Jay Leno experiment, with The Hollywood Reporter’s James Hibberd just reporting that the network has already seen its ratings drop in three time periods—and this is with Leno doing better than expected. Ratings among adults are down 43 percent at 10 p.m. Newscasts on NBC’s affiliates have dropped 16 percent and The Tonight Show is off 23 percent. (It’s unclear whether the math still works for NBC—remember the Leno show is cheaper than scripted programming and in the early going does appear to be relatively DVR-resistant, which appeals to advertisers.)

Comcast has had an appetite for making an acquisition for some time. It took a last-minute look at Universal before GE acquired the studio in 2003. Apparently at that time, price was an issue. A year later, Comcast took a big swing, offering to acquire Disney for $53 billion.

This time the stars may be in alignment.

Kim Masters covers the entertainment business for The Daily Beast. She is also the host of The Business, public radio's weekly program about the business of show business. She is also the author of The Keys to the Kingdom: The Rise of Michael Eisner and the Fall of Everybody Else.