Arranged Marriage Of Comcast And NBC Stumbles Over One Parent’s Dowry Demand

General Electric’s attempt to arrange a marriage for its 80-percent owned subsidiary NBC Universal is hitting a snag as NBC’s other parent, Vivendi, demands a greater dowry before it consents to Comcast’s proposal.

Even if the marriage of these media giants is arranged, consummation of the deal will still be dependent on review by federal agencies, which will confront such issues as combined control over media content and distribution, and “net neutrality,” the principle that Internet service providers should not block or prioritize traffic based on content.

G.E. has been negotiating for weeks with French media conglomerate Vivendi over buying its 20 percent share of NBC and then selling a majority interest in NBC to Comcast. G.E. and Comcast have reached an agreement in principle that would transfer 51 percent of NBC to Comcast.  Comcast is reported to be contributing its cable networks and between $4 billion and $6 billion in cash to the deal.

While G.E. and Comcast had hoped to announce the final deal as early as this week, it now appears that no deal is likely to be announced for at least a week.  Reports indicate that although G.E. and Comcast have agreed to value NBC at about $30 billion, Vivendi is balking and arguing that NBC is worth at least an additional $500 million.

NBC owns a variety of media outlets including the NBC television network, several affiliate stations, cable television networks, Universal Studios, and a stake in the Hulu.com website that is popular for viewing television programs and movies.  Comcast is the nation’s largest provider of cable television and Internet services and also owns several major cable networks.

Several public interest groups have already spoken out against the proposed deal.  They are concerned that the combined company would not only lead to increased costs to consumers for cable TV, but it would also inhibit media diversity.  Bernstein Research estimates that the new entity “would be calling the shots for one out of every five viewing hours in the United States.”

The deal between these media giants is likely to face intense scrutiny by both the Federal Communications Commission and either the Federal Trade Commission or the Justice Department, which would analyze the antitrust issues.  The deal would combine NBC, a maker of television programs, with Comcast, a distributor of those programs, raising antitrust issues of vertical integration.  Rudolph J.R. Peritz, a New York Law School Professor, has said the “antitrust questions would revolve around the extent to which the merger might foreclose an important source for content.”   Peritz believes that “the antitrust agencies are much more lenient in analyzing vertical integrations than they are in horizontal ones.” 

Some analysts believe the deal will be approved but only with restrictions to address Comcast’s increased ownership of programming and distribution.  Comcast could be forced to sell some networks or television stations.  These analysts compare the deal to News Corporation’s purchase of DirectTV that was approved in 2003 with significant conditions attached.

Public interest groups, on the other hand, hope for greater government scrutiny of the deal. Jeff Chester of the Center for Digital Democracy, has called the proposed deal “the equivalent of Godzilla swallowing Rockefeller Center.,” and believes the potential combination of “the country’s leading cable ISP and multichannel programmer with a broadcast/cable/studio powerhouse will be a political test for the Obama team at the FCC, FTC or DOJ.”