Cable Operators

Executive Of The Year: A Big Deal Year

12/21/2009 4:00 PM Eastern

Complete coverage of Brian Roberts as MCN's executive of the year can be read in the Dec. 21, 2009 issue, or by clicking on the stories listed below.

The Life of Brian

Roberts on '09 -- And Beyond

Speeding Innovation On Several Fronts


It’s been a good year to be Brian Roberts. So far in 2009, the Comcast chairman and CEO has seen his company begin rolling out super high-speed Internet service via DOCSIS 3.0 in earnest, watched Online On Demand (Comcast’s version of TV Everywhere) take root and has made strides in the development of cable’s interactive advertising efforts through the Canoe consortium. And then there is The Deal.

Comcast’s announcement that it will form a new joint venture with General Electric Co.’s NBC Universal is the culmination of a five-year quest to merge the Philadelphia-based MSO’s vast distribution assets with strong, high-quality content.

It is also a marriage that promises to change the face of the media landscape. And, for all these reasons, Roberts has been named Multichannel News’ Executive of the Year.

GE's Jeffrey Immelt and Comcast's Brian RobertsThe NBCU deal, which still has to pass what is expected to be intense regulatory scrutiny, will combine NBCU’s cable channels (including Bravo, USA Network, Syfy, CNBC and MSNBC), the NBC Television Network, Telemundo, 26 owned-and-operated TV stations and the Universal Pictures movie studio with Comcast’s own cable channels (E! Entertainment, Versus, Golf Channel, 10 regional sports networks, Style and others). Comcast will own 51% of NBCU (which it will house in a separate entity called Comcast Entertainment Group) and General Electric Co. will control the rest. The deal values the NBCU properties at about $30 billion and the Comcast assets at about $7.25 billion.

Current NBCU CEO Jeff Zucker will become CEO of the new venture, reporting to Comcast chief operating officer Steve Burke.

On a conference call with analysts on Dec. 3, Roberts summed up his feelings on the deal succinctly.

“With this transaction, I believe our company is strategically complete,” Roberts said on the call.

The NBCU deal has the potential not only to make Comcast stronger — the JV should generate about $18.2 billion in annual revenue, $3 billion in cash flow and $1.4 billion in free cash flow in 2010 — but it also could transform the cable and broadcasting landscape. Depending on what Comcast ultimately does with the assets — the deal is expected to take at least one year to pass regulatory muster — the joint venture could impact the further growth and acceptance of video on demand, could solidify online-authentication efforts and could even expand sports offerings by creating a more-competitive rival to ESPN.

Detractors point to the possibility of heavy regulatory conditions heaped on the deal (including network neutrality and program-access conditions) and the spotty record the industry has had in the realm of vertical integration.

Roberts has stressed that there is no comparison between NBCU and other vertical integration attempts like Time Warner Inc. — which split off its Time Warner Cable and AOL units this year.

“We have a cable-programming business that was subscale,” Roberts said. “By combining it with NBC Universal, we achieve scale.”

And Comcast acquires a strong growth engine.

While cable distribution will still drive the business — even after the deal is closed, cable systems will still generate 80% of Comcast’s operating cash flow — the NBCU partnership will drive growth.

According to Comcast, its own cable networks have been growing operating cash flow by 10.6% annually since 2004. At NBCU, the growth rate is even better — 16.2% annually since 2004.

On the Dec. 3 conference call, Burke said that while those growth rates aren’t expected to be maintained forever, they are expected to continue to be healthy.

“Will the growth of these assets be the 15 or 16% that they’ve been over the last six years in the next five or six? Maybe not,” Burke said. “We’re certainly not modeling 16% forever. Trees don’t grow to the sky. But will these have very predictable, very stable, very nice growth rates? Our bet is they will.”

With access to NBCU content, video-on-demand windows could shrink, Comcast’s VOD offerings could swell (Universal Pictures has 4,000 titles in its library) and new cable channels could be created. Comcast’s own interactive advertising initiatives — through its participation in the Canoe consortium — could also spread across NBCU properties.

“This company’s ability to reach target markets like women, or people interested in entertainment or news, is really unparalleled,” Burke said.

And while analysts and investors struggle for the hidden significance in the deal, Leichtman Research Group president Bruce Leichtman said that may all be moot. According to Leichtman, a former cable executive, the biggest overall impact of the deal will be a stronger Comcast.

“The healthier Comcast is, the healthier the industry is,” Leichtman said. “They are the majority for investors and they are the bellwether for investments.”

Comcast has been relatively quiet regarding its plans for the future, primarily because it has to keeps its hands off of the actual management of NBCU until the deal closes. But at the UBS Global Media and Communications conference in New York Dec. 7, Roberts tried to squash any speculation that the distribution giant was displeased with the broadcast business. Some analysts have speculated that Comcast could sell off the television stations in the near-term or transform NBC into a cable network. That, Roberts said at the conference, will not happen.

“We believe NBC should have an affiliate station group we don’t own in addition to the owned-and-operated businesses, and we should have a free broadcast signal in the air. We are not looking to change that part of the equation,” Roberts said.

On the surface, the transaction appears to be another in a long line of great deals for Comcast — for about $13.75 billion ($6.5 billion in cash and $7.25 billion for its cable networks), it gets control of the fourth-largest broadcast network, a dozen highly rated cable channels (including perennial primetime ratings winner USA Network), theme parks and TV stations. For GE, it gets a quick cash infusion and an exit strategy from a business that it no longer considers a core asset. GE can begin selling its stake back to Comcast after three and a half years — at a 20% premium to its market value at the time — and can fully exit after seven years.

Comcast initially began conversations with GE about NBCU in July, but talks heated up in October after Vivendi S.A., the French conglomerate that owns a 20% interest in NBCU, stated publicly that it may be looking to exit. After some initial posturing, Vivendi agreed in early December to sell its interest to GE for $5.8 billion.

The deal ends what has been a longtime quest for content for Roberts, who first attempted to boost Comcast’s programming presence with a failed $66 billion unsolicited bid for The Walt Disney Co. in 2004. Although Disney shareholders ultimately rejected that deal (they thought the price was too low), Roberts has secretly lusted after content assets ever since. According to some published reports after the deal was announced, Roberts entertained buying Viacom and even social networking phenomenon Facebook before setting his sights on NBCU in July.

But for the time being at least, Roberts’ and Comcast’s content needs are fulfilled. And for the chairman, he has another year to bask in the glow of finally landing the deal he has always wanted.

September