After two decades as owner of one of America's storied broadcasters, and five years operating a fabled movie studio, General Electric Co. appears ready to take a smaller part in show business.
The industrial giant, maker of jet engines and wind turbines, is in talks to have cable TV leader Comcast Corp. assume management of NBC Universal, which includes NBC; more than 10 cable channels including Bravo, MSNBC and USA Network; the Universal Pictures movie studio; and the Universal Studios theme parks. Under terms of the deal, Comcast would pool cash and its cable channels into a new company that it would control with a 51% stake. GE would contribute NBC Universal and own 49%.
Comcast's cable TV systems, which serve nearly 1 of every 5 of the nation's TV households, would not be part of the entity.
Such a transaction would thrust Philadelphia-based Comcast into the same league as Time Warner Inc., Walt Disney Co. and News Corp. It also would continue consolidation in the entertainment business after Disney's deal this summer to buy Marvel Entertainment, the publisher of Spider-Man and Iron Man comic books, for $4 billion.
After years of telling investors it was happy in the entertainment business, GE's hand is being forced by the French telecommunications company Vivendi.
Vivendi owns 20% of NBC Universal and must decide in the next two months whether it wants to sell its stake for at least $4 billion, or hold on to its interest. If Vivendi decides it wants out, GE -- whose financial services businesses have been hit hard in the collapse of the capital and real estate markets -- would have to come up with a mountain of cash or find a new investor.
Enter Comcast. The family-run public company, which owns several cable networks including E! and the Golf Channel, has been eager to become a bigger player in the industry. Owning movies, television shows and networks would help Comcast fill its cable pipelines, video-on-demand services and emerging Internet video business.
Six years ago, Comcast considered making a bid for the Universal film studio, theme parks and cable channels that were then solely owned by Vivendi. But GE prevailed and combined its NBC properties with the Universal holdings. The following year, Comcast made a run at Walt Disney Co. before investors signaled their disapproval.
This time may be different. Unlike the $54 billion Comcast would have had to shell out to snare Disney, combining with NBC Universal would come comparatively cheap. The move could result in sweeping changes at NBC's television networks, film studio and theme parks in Los Angeles and Florida.
"We estimate that all of NBC Universal is worth $20 billion to $25 billion," Laura Martin, a media analyst with Soleil Securities, said in a report Thursday. "We don't expect Comcast to have much competition for the asset so the price might be inexpensive. Comcast should be able to negotiate a great price to offload NBC Universal from GE."
For much of its time under GE's stewardship, NBC was the No. 1 network with such powerhouse programs as "Today," "Meet the Press," "Law & Order," "Friends" and "The Tonight Show With Jay Leno." Universal was the top-ranked studio, churning out such blockbusters as "The Bourne Identity," "Wedding Crashers" and the "Fast and Furious" films. In recent years, however, both have slid precipitously in performance and profit, undermining the value of the entertainment company.
NBC Universal this year has been hit by numerous problems: a shortage of scripted shows for NBC's prime-time schedule and a risky decision to shift Leno's late-night talk show into prime time that is starting to look shaky; a string of box-office flops at the studio; and a lingering recession that has clobbered advertising revenue at NBC's once cash-gushing TV stations.
All of this is occurring against a backdrop of other woes within GE's financial services units, which are prominent in commercial lending -- areas that have been walloped by the recession. Last year, at the height of the financial crisis, legendary investor Warren E. Buffett stepped in and lent GE $3 billion.
"Some have opined that GE's financing subsidiary has been a major player in the commercial real estate market that continues to exhibit some weakness, and therefore that may require some additional capital," said Mario Gabelli, founder of Gabelli Asset Management, a large investor in media companies including Comcast and Vivendi.
"GE right now isn't flush with $4 billion or $5 billion of extra cash and they are trying to figure out how to solve this near-term," said Nicholas Heymann, an analyst at the brokerage firm Sterne, Agee & Leach.