A Touchdown for Comcast?

It's become an almost Pavlovian response among Wall Street analysts and money managers: holding their noses when an executive proposes bringing content (movies and TV shows) and distribution (cable, satellite, and Internet) under one roof.

And so when investors learned on Sept. 30 that Comcast (CMCSA) CEO Brian L. Roberts was considering a deal to take majority control of General Electric's (GE) NBC Universal (NBCU), the cable giant laid an egg on Wall Street. Its share price fell 7% the next day, to 15.67. The Street's worry was clear: Roberts' yen for NBCU's movies and TV shows would divert his executive team from the core business of providing cable TV, broadband, and phone service to Comcast's nearly 25 million subscribers.

Roberts has had a bad rap on Wall Street ever since 2004, when the cable company bid $54 billion for Walt Disney (DIS) and then walked away once the Mouse House played hard to get. Roberts is mindful of that and of the Street's obsession with quarterly numbers. But he also needs to manage for the long haul. That means finding a way to offset slowing growth at Comcast, which is losing subscribers to phone and satellite companies and could suffer as more viewers move to the Web to watch movies and TV shows. (Roberts declined to comment.)

The NBCU deal could give a slowing Comcast a significant lift. People with knowledge of Roberts' thinking single out NBC's sports assets. The Peacock Network controls the rights through 2012 for the Olympics and through 2013 for Sunday night National Football League games. With NBC's high-end sports, Roberts could build Comcast's smallish Versus sports channel into a bigger player. And with the NFL as a partner, Roberts could be in a position to pressure the league to cut him in on an even more robust deal to carry more football games.

HAVING A SAY IN HULUWith NBC, Roberts will "have effectively created a potent competitor to ESPN," says Neal Pilson, a former CBS sports executive who now consults. Pilson figures Comcast will use NBC Sports' national platform to complement its 11 regional sports networks, which include major markets such as New York, Chicago, Philadelphia, and San Francisco. Throw in Comcast's Golf Channel and Versus, which has college football and pro hockey games, and the new entity clearly would give agita to executives at ESPN headquarters in Bristol, Conn.

With access to NBC content, Roberts could enhance his current cable offerings by providing more shows to subscribers over the Net—and eventually via their smartphones. Comcast already has Fancast, a free video site that doesn't have much traction. By controlling NBC, he'd have a say in the future of the much more popular Hulu online video service, which NBC co-owns with Fox (NWSA) and Disney. Roberts might want to charge everyone access to Hulu, which currently is free, and take a cut of the proceeds.

Assuming Roberts wins control of NBC, the network likely wouldn't look the same for long. Federal regulators almost certainly would force Comcast to sell off TV stations in markets in which it also owns cable systems. The next logical step? Converting NBC into a cable channel. That would allow Comcast to charge cable and satellite operators hefty fees for the privilege of carrying NBC shows, giving Comcast a way to offset falling advertising revenue.

For Brian Roberts, there is no shortage of potential. First, of course, he has to get his hands on NBC Universal. And then he has to change the minds of shareholders who have long worried that the Comcast CEO covets Hollywood flash over cable's fundamentals. But even those opinions may be changing. "It's a very good deal for Comcast," says media investing heavyweight Mario Gabelli, whose fund owns some 22 million Comcast shares. "It's a win-win for Brian."

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