An antitrust review of an NBC Universal deal gives competitors a chance to rip away at its advantages
Comcast (CMCSA), already the largest U.S. cable operator, is on the verge of getting a lot bigger. First it has to make nice with the competitors, programmers, minority groups, and other special interests that fear an even more powerful Comcast after its $28 billion acquisition of General Electric's (GE) NBC Universal unit. The Federal Communications Commission and the Justice Dept.'s Antitrust Div. are reviewing the purchase, and thousands of public comments have been filed at the FCC.
The company is trying to neutralize opposition to the merger and ease antitrust concerns with a simple strategy: Make deals to get the deal. As in past media mergers, rivals and special interests have drawn up lists of demands that are the price of their support, and Comcast is whittling them down one by one. The latest: Comcast and NBCU agreed on July 12 to hold regular meetings where independent producers—who initially opposed the acquisition—could pitch their ideas for shows.
Founded in 1963 with the purchase of a Tupelo (Miss.) cable system with 1,200 customers, Comcast has expanded to 23.5 million cable subscribers. With the NBCU acquisition, the company would control a movie studio, 10 NBC stations, sports and Olympics programming, and cable networks such as Bravo, CNBC, MSNBC, and USA Network.
The Comcast-NBC combo would have a broadcast station and sports network in Boston, Chicago, New York, Philadelphia, San Francisco, and Washington—six of the biggest U.S. TV markets. Tom Eagan, an analyst at Collins Stewart in New York, says Comcast's major worry will be the lengths it will have to go to avoid court battles. "The big question is the degree of concessions they would have to agree to," he says, to win over the FCC and Justice, both of which declined to comment.
Skeptical NBC affiliates, whose views are considered by the FCC in its effort to preserve local broadcasting, were won over when Comcast last month promised not to move the Olympics and major sporting events like Sunday Night Football games from broadcast to cable. Comcast also pledged that it would engage in good-faith negotiations with ABC (DIS), CBS (CBS), and Fox (NWS) affiliates on carrying their signals. In a bid for minority support, the company said it will name a Latino to its board and add eight independent channels owned by blacks or Hispanics. "Comcast and NBCU have made an unprecedented set of voluntary commitments," Comcast spokeswoman Sena Fitzmaurice said in an e-mail.
Other rivals want even more concessions. Bloomberg, parent of Bloomberg News and Bloomberg Businessweek, has told the FCC it wants to ensure its channel will be located near other business shows. Satellite companies Dish Network (DISH) and DirecTV (DTV) are pushing to get the right to arbitration so Comcast can't use its post-merger clout to inflate prices for NBC's programs. Some analysts say the company may have to give up NBC stations in certain major markets to avoid antitrust restrictions. In its home base of Philadelphia, Comcast telecasts games of the city's sports franchises and owns two of them—the 76ers basketball and Flyers hockey teams—as well as Wachovia Center, where both play. For years, Dish and DirecTV have complained that Comcast denied them Philadelphia sports programming. The NBC deal "would enhance Comcast's stranglehold over Philadelphia by adding to its arsenal NBC's owned-and-operated station in that market," Dish told the FCC in a filing.
Comcast should remain flexible about what might be asked of it, says Roger Noll, a senior fellow at the American Antitrust Institute in Washington. The Justice Dept. "is not likely to challenge the deal unless Comcast refuses to make some concessions," he says.
The bottom line: As federal review of the Comcast-NBC Universal merger goes into high gear, rivals know this is "ask-for" season and seek concessions.