In a momentous shift in the balance of power of the entertainment industry, cable television giant Comcast Corp. on Thursday made it official by announcing that it was buying control of NBC Universal from General Electric Co.
The proposed $30-billion transaction is the culmination of the longtime ambition by Comcast's chief executive, Brian Roberts, to transform his family-controlled Philadelphia company from a passel of distribution pipes into a leading producer of movies and TV shows and owner of prominent cable channels.
The deal underscores how the high profit-margin business of cable TV -- not a broadcast network or a Hollywood movie studio -- has become the financial backbone of media conglomerates.
"Cable channels are the best part of the media business today; they are really the crown jewels of any entertainment company," Comcast Chief Operating Officer Steve Burke told analysts in a conference call.
Unlike over-the-air broadcast networks, cable channels have two streams of revenue: subscriber fees and advertising. Roberts said that 82% of the operating income of the new entity would come from cable channels. Five of NBC Universal's cable networks -- USA, Syfy, Bravo, CNBC and MSNBC -- generate $200 million a year or more each in operating income.
"We are creating a new company with an absolutely first-class set of cable channels," Roberts said. "This is the logical evolution of our programming strategy."
If federal regulators approve, a new joint venture would be created by pooling businesses from both companies. Comcast would provide nearly $14 billion in assets, including $6.5 billion in cash, for 51% ownership of the new entity. Comcast said its cable channels -- including E, Versus, the Golf Channel and nine regional sports networks -- were worth $7.25 billion. Comcast's subscription cable TV systems would not be part of the new entity.
As part of the deal, GE would reduce its ownership in NBC Universal to 49% in exchange for $9.1 billion, which the new entity would assume as debt.
The Comcast deal marks the end of an era for NBC, which has been one of the brightest bulbs within GE for nearly a quarter-century. Under GE, NBC became a profit- and hit-making machine, inventing the slogan "must-see TV" and fielding such memorable programs as "Cheers," "Seinfeld," "Friends," "Frasier" and "Law & Order."
