Washington Post Staff Writer
A merger between Comcast and NBC Universal, expected to be announced by Thursday, would probably come with concessions aimed at forestalling a drawn-out federal review of the deal, sources close to the negotiations said.
In previous major media mergers, companies have agreed to preserve local news coverage and grant competitors access to content, for example. Sources familiar with the Comcast-NBC Universal talks said such promises would probably be announced with the merger.
The $30 billion transaction would significantly reshape the media landscape by giving the nation's largest cable and broadband Internet provider control over content that makes up one out of five TV viewing hours, according to some analysts. NBC owns Universal Studios, theme parks, shows such as "The Biggest Loser" and "Heroes," and cable channels such as USA Network, Bravo and CNBC.
The deal, which has been in the works for months, was jump-started Monday when General Electric agreed to acquire the portion of NBC Universal it doesn't own from French conglomerate Vivendi for $5.8 billion, according to sources. That agreement was the remaining hurdle for Philadelphia-based Comcast to consummate its purchase of NBC Universal.
Under the terms of the merger, Comcast is expected to pay about $6 billion in cash for a 51 percent stake in NBC Universal. GE would retain a 49 percent stake, and Comcast would contribute its cable assets to the joint venture. Comcast would control the venture's day-to-day operations and have the right to buy the rest of NBC Universal within seven years, according to the sources, who spoke on condition of anonymity because the deal has not been formally announced.
Big hurdles
If completed, the deal would extend Comcast's vision to bring more content to its subscribers in as many forms as possible -- TV, computers and mobile devices.
But the proposed merger faces significant hurdles, including a close review from federal regulators that some analysts said could last a year. Either the Federal Trade Commission or Justice Department will review whether the deal is anti-competitive, and the Federal Communications Commission will examine how the deal affects consumers.
The deal also has major implications for the Washington region.
NBC Universal owns 34 TV stations, including District-based WRC (Channel 4), and Comcast dominates cable service, owning most of the major systems in the area. The only major jurisdiction Comcast does not serve in Washington's immediate suburbs is Fairfax County.
Although no regulation prevents ownership of a broadcast station and cable assets in the same market, such combinations would probably raise concerns. Regulators conceivably could force Comcast to sell its broadcast or cable stations in the same region as a condition of approval. Washington is one of several markets where Comcast and NBC have such properties.
Sources familiar with the deal said the joint venture has no plans to divest its local TV stations or the NBC network.
Online video scrutiny
Another area expected to draw regulatory scrutiny is online video distribution. Comcast hopes to expand its offerings by acquiring NBC's content.
The cable operator's video-on-demand service, which is separate from its online aspirations, was started six years ago with a few hundred titles and has a library of 17,000 shows and draws 350 million views a month.
Public interest groups have said Comcast could have too much control over content amid a shifting media landscape that is moving increasingly to the Web.
The FCC has a history of nurturing nascent video distributors to promote competition. A source at the Justice Department said the antitrust division is considering questions about how the merger would affect online distribution models such as Hulu -- a joint venture owned by programmers, including NBC -- and a cable industry plan, TV Everywhere, that will bring more shows online, but only to cable subscribers.
"They will face a year-long gauntlet of regulatory and political hearings and conditions that threaten to derail not just the synergy value that might otherwise be achieved in a combination, but in a worst case scenario, that might threaten the structural attractiveness of the core businesses of both Comcast and NBCU," Craig Moffett, an analyst at Bernstein Research, wrote in a note Tuesday.
Comcast and GE declined to comment. A Comcast spokeswoman, however, has said the company's online video strategy allows programmers to negotiate deals with other cable, satellite and online distributors of content.
The deal follows similar media mergers.
In 2003, News Corp. bought Direct TV, and in 2001 Time Warner merged with AOL in a $100 billion deal. Those mergers failed, with News Corp. divesting its shares in Direct TV.
Time Warner spun off AOL this year, separating its cable and Time Warner content business. Comcast also made a failed bid for Walt Disney in 2004.
Washington Post Staff writers Paul Farhi in Washington and Tomoeh Murakami Tse in New York contributed to this report.
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