Comcast Makes Switch To Content Partner From Rival With NBC

Comcast Corp.'s (CMCSK, CMCSA) agreement to acquire a majority stake in NBC Universal fundamentally changes how the cable giant works with the rival telecommunications and satellite TV providers.

Beyond a competitor for a spot in the consumer home, Comcast will become a major content provider that companies such as Verizon Communications Inc. (VZ) or DirecTV Group Inc. (DTV) will rely upon for NBC programming, core cable channels, television shows and movies. It's a mounting concern for the telcos and satellite providers that the already rising programming fees may get more aggressive under Comcast.

General Electric Co. (GE) and Comcast agreed on Thursday to create a joint venture for NBC Universal, with Comcast owning a majority stake. Under the deal, GE would get a $6.5 billion cash payment from Comcast. Vivendi S.A. (VIV.FR) will get $5.8 billion for its 20% stake in the entertainment business.

For Comcast, it's an unusual transition. Before the deal, the cable company had been aligned with all of the content distributors in pushing for better programming fees. But now it's on the other side of the bargaining table, where those fees would directly contribute to its revenue.

It's unclear exactly how the dynamic will change. Comcast already provides several niche cable channels, including E! and the Golf Channel, and follows existing program-sharing rules. Any such deal would receive heavy regulatory scrutiny. But there has been some tension over how much influence Comcast will have over its rivals, particularly with cable companies already givingtheir rivalsa hard time over sports programming.

Dish Network Corp. (DISH) Chief Executive Charles Ergen said during the company's quarterly call last month that he was concerned about the deal, given already rising programming costs.

"We purchased programming content from Comcast for a long time," Ergen said. "And we're not treated fairly when it comes to the sports teams in Philadelphia. So, that has always smelled a little bit."

Dish couldn't immediately be reached for comment.

Liberty Media Corp. (LCAPA, LINTA, LMDIA) Chairman John Malone told Dow Jones Newswires last month that DirecTV would potentially look at "horizontal or vertical acquisitions" such as programming to counter anything Comcast might do.

"If regulators don't control costs and the market power of a content owner, then basically the other players in the industry have to play the same game," he said.

Liberty shareholders last month approved spinning out the company's entertainment businesses and merging them with DirecTV.

DirecTV couldn't immediately be reached for comment.

AT&T Inc. (T) and Verizon have been largely mum on the deal. Verizon had previously said that its distribution relationship with Comcast has been fairly cordial.

The animosity is clearer on the service side, where there is no shortage of friction between cable providers and their telco and satellite competitors. The cable and phone companies have been particularly vehement because they compete directly against each other in phone, Internet and video services. Other cable companies have thrown roadblocks at the phone companies.

AT&T and Verizon, for example, have complained to the FCC that Cablevision Systems Corp. (CVC) is wrongfully withholding high-definition sports programming from the telcos, although they can access the standard-definition version.

"Certainly, it's a concern" when one company owns as much content as Comcast will, said Verizon spokesman Eric Rabe, adding that Verizon's relationship with Comcast has been relatively favorable.

AT&T has a similar complaint regarding Cox Communications' exclusive rights to broadcast San Diego Padres games. The FCC has yet to make a formal ruling on either of the complaints, although its media bureau panel has advised dismissing AT&T's complaint.

AT&T Chief Executive Randall Stephenson, however, told Dow Jones Newswires last month that he wasn't nervous about the deal, and expects to get the same access to programming that it gets now for its U-Verse Internet TV service.

An AT&T spokesman declined to comment on Thursday.

Even with the existing arguments, Comcast isn't likely to dramatically change any of the programming deals, analysts say.

Other content providers have been positive on the deal.

Liberty Chief Executive Greg Maffei and News Corp. (NWS) Chief Operating Officer Chase Carey both praised the deal, with Maffei noting that it would act as a hedge against rising programming costs.

News Corp. own Dow Jones, the publisher of this newswire and The Wall Street Journal.

-By Roger Cheng, Dow Jones Newswires; 212-416-2153; roger.cheng@dowjones.com

(Nat Worden contributed to this report.)

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