Comcast and NBC Universal: The Implications of Big Media Mergers in an Increasingly Smaller World





/* Style Definitions */
{mso-style-name:”Table Normal”;
mso-padding-alt:0in 5.4pt 0in 5.4pt;


Comcast's proposed takeover of NBC Universal is expected to completely
restructure the entertainment industry's landscape. Analysts, investors, and
public interest groups alike have responded strongly to the anticipated
agreement, which is expected to be finalized imminently. The merger of the
largest American cable company with one of the largest entertainment
enterprises in the world would give the combined entity control over
approximately one out of every five viewing hours in the United States. [1] Not
surprisingly, the deal will be heavily scrutinized and raise considerable
questions of antitrust law, media diversity, and the future of internet usage.
This article will explore the implications of big media mergers in light of the
Comcast-NBC proposal.

II. Facts
Comcast Corporation (Comcast) is not only the largest cable company in the
United States, but also the largest internet service provider and the third
largest home phone provider. [2] Comcast has 25 million television subscribers,
15 million internet service costumers, and 6.4 million household telephone
service accounts. [3] Its current assembly of cable networks includes E!, Style,
Golf Channel, and G4. [4]
NBC Universal, Inc. (NBCU) is a media and entertainment company created by the
merger of General Electric's (GE) NBC and French Media Group's Vivendi
Universal Entertainment (Vivendi). The two companies own 80% and 20% of NBCU
respectively. [5] NBCU owns and operates 26 television stations, the Spanish
language network Telemundo, and a dozen cable networks including USA, Barvo,
Syfy, and CNBC. [6] It also has a 27% stake in the internet venture Hulu. [7]
Vivendi has an annual option to sell its stake in NBC to GE between November
15th and December 10th of each year. Vivendi has been negotiating to get
the best value for its investment, as the Comcast-GE agreement hedges on
Vivendi's decision to exercise this option. GE has recently reached a tentative
agreement with Vivendi to buy its stake in NBCU for $5.8 billion. [8] Following a
successful Vivendi buy out, GE would then sell 51% of its total ownership of
NBCU to Comcast, who would merge its cable-TV channels and contribute $4 to $6
billion to the joint venture. Comcast is expected to buy the remaining 49% of
NBCU from GE over the next seven years. [9]
The companies have agreed to value NBCU at about $30 billion dollars, and the
Comcast-NBCU union is estimated to have an annual revenue of about $42 billion.
[10] The combination of these two entities would be, according to the public
interest group The Center for Digital Democracy, "the equivalent of
Godzilla swallowing the Rockefeller Center." [11]
Given the union's size, significant opposition stands in the way of the merger.
The deal must pass review by the Federal Communications Commission (FCC) as
well as review of its antitrust connotations by the Justice Department or the
Federal Trade Commission (FTC). [12] NBC's affiliates and competitors hold
considerable sway over the federal agency approval of the deal and may chose to
stand in the way of the union. [13] Additionally, public interest groups are
pressuring the Obama administration to oppose the deal, citing that it would
both stifle media diversity and have a negative impact on the availability of
free internet information. [14] Even without the external pressures, regulatory
review of the merger could take more than a year. [15]





/* Style Definitions */
{mso-style-name:”Table Normal”;
mso-padding-alt:0in 5.4pt 0in 5.4pt;

III. The Case against Consolidation
United States antitrust law aims to eliminate transactions that threaten
the competitive process. Mergers and acquisitions are regulated under the
Clayton Act, which states:

person shall acquire, directly or indirectly, the whole or any part of the
stock or any other share capital… of the assets of one or more persons
engaged in commerce or in any activity affecting commerce, where… the effect
of such acquisition, of such stocks or assets, or of the use of suck stock by
the voting or granting of proxies or otherwise, may be substantially to lessen
competition, or to tend to create a monopoly." [16]

merger would be a vertical integration, in which one company seeks to control
several different steps of the production and distribution of a product or
service. By controlling both production and distribution of programs, Comcast
could retain an unfair advantage. There are several ways in which the
Comcast-NBC merger could substantially lessen competition.
The anti-competitive measures could include, but would not be limited to,
Comcast blocking its competitors' access to NBC prime-time shows and local
newscasts [17] or raising the distribution costs for other pay-TV providers to
access NBCU networks. [18] The new Comcast-NBCU may also be dominant enough to
refuse to carry cable channels owned by rivals and force its rival channels to
offer lower fees. [19] Expanding beyond television, the new entity may even
produce big-screen movies and then control the release dates of the movies to
give itself an advantage over movie-rental businesses like Netflix. [20] Additionally,
the Comcast-NBCU deal could lead to a wave of similar media mergers that would
further decrease competition as Comcast's competitors struggle not to be left
behind. [21]
The internet and "network neutrality" are further issues in
contention. Comcast-NBCU could use its control in violation of the tenet that
broadband providers should treat all internet traffic equally by favoring its
own media content. [22] It could also "remove a competitive rivalry"
by eliminating the availability of free television programs on the internet through
its stake in Hulu. [23]
Many public interest groups are calling for a return to smaller, local media
channels and opposing the media oligopoly. They argue that a few, large media
corporations would undermine the diversity of offerings and consumer choice in
the industry. [24] Antitrust law, they state, is not solely about price; it is
about choice, and this includes the choice of quality and editorial viewpoint
that a media oligopoly lacks. [25] Since media products inevitably bear the
perspective of their corporate parent, the number of firms required to ensure
media diversity is larger than that required to preserve price competition. [26]
These organizations also assert that a lack of media diversity not only limits
consumer choice, it harms democratic discourse and stifles minority voice as
well as affects how women and people of color are portrayed in the media. Due
to media giants crowding out local businesses, women and minority ownership of
television stations is unacceptably low and the proportion is continually
decreasing. Women, who comprise 51% of the population, own 4.97% of television
stations, and minorities, who comprise of 33% of the population, own 3.26% of
all stations. [27] In addition, media diversity is believed to be an important check on
government power. [28]

IV. The Case for Consolidation
Despite widespread concern, antitrust experts find little proof that the
merger would substantially lessen media competition due to people increasingly
distributing leisure hours across a variety of diversions aside from television
viewing [29]. Additionally, regulations are already in place to prevent Comcast
from refusing to sell its programming to its competitors. [30] The merger may
even increase competition in some areas, such as sports, where Comcast could
become a potent rival to Disney's ESPN. [31]
The merger comes at a difficult but convenient time for both companies. Comcast
has been losing hundreds of thousands of subscribers each year to its
competitors, such as satellite television providers who are able to offer their
channel packages at lower prices. [32] Additionally, suppliers like NBCU and
Walt Disney have been charging higher prices as broadcasters like FOX and CBS
have declared an intention to start charging for their programs. [33] Comcast
is losing business rapidly to selective, cheaper programs on the internet. [34]
NBC, too, has seen a slow and steady decline since the 1990s. [35] Ratings have
steadily decreased with the number of quality, "must-see" programs [36],
which are replaced by cheaper-to-produce reality television. Good television
programs with intelligent, well-written scripts and capable actors are becoming
progressively more costly to produce while the station's revenue are decreasing
due to an increasingly lower demand in television advertising [37], the sole
means by which broadcast stations bring in revenue. [38]
Comcast's move may be just what both companies need in order to bounce back.
Having control of a significant amount of the content being produced would give
Comcast the freedom and power to experiment with how to best deliver its
programs. [39] The union would also allow for Comcast's enhanced utilization of
the internet and allow both companies to benefit from Comcast's efforts to
reach additional platforms. [40] The combination of the leading and third
largest online video sites, Hulu and Comcast's Fancast, could boost the
availability of media content on the internet. [41] The flow of money back to
the studio would allow the continued and increased production of more quality
television shows, benefiting the viewers. [42]
The new company would likely speed the development of new and innovative forms
of advertisement, such as interactive television ads. [43] The merge also has
the potential to revive the video on demand industry and accelerate its availability
and acceptance. [44] Additionally, Comcast-NBCU can serve as a major boost for
the cable industry, as big public companies tend to drive big public
industries. [45]

V. Analysis
The Obama administration has vowed to encourage media diversity and to play
tough on the enforcement of antitrust regulations. [46] The merger will almost
indubitably pass considering the significant players' substantial size and
considerable clout. While such a large-scale merger inevitably has risks, the
mandated FCC and Justice Department or FTC approval serve as powerful checks on
Comcast. Comcast will have to make many concessions in order to attain such
Regulators will work to ensure that competitive rivalry is maintained. The
government may forbid Comcast from denying access to content to its competitors
and from discriminating against cable channels that it does not own. [47] The
government may mandate binding arbitration in any disputes that arise. [48] It
may go as far as to force Comcast to dissociate from local stations in fear
that it will hold too much clout in negotiations. [49] It will reiterate its mandate
of net neutrality. Comcast may also have to compromise on its exclusivity over
its regional sports programs by granting its competitors access. [50]
Additionally, Comcast may have to divest some of NBCU's assets to please the
regulators. [51]
Two similar mergers in the past were America Online's (AOL) purchase of Time
Warner Inc. (Time Warner) in 2001 and News Corporation's (News Corp.)
acquisition of The DirecTV Group (DirecTV) in 2003. In both instances, the FCC
imposed additional regulations as a check against the media giants' control. It
required Time Warner to offer services additional to AOL on its cable internet
network, and it prohibited News Corp.-DirecTV from discriminating against its
competitors' television channels and called for mandatory
arbitration for dispute resolution. [52] The FCC will likely analyze and look
to these past cases while deliberating the Comcast-NBCU deal.
In both cases, the consolidations spawned similar outrage and alarm to the
current Comcast-NBCU deal. Opponents of those mergers predicted rising
programming prices, significant impairment to competition, decrease in media
diversity, and a restructuring of the entire media landscape. [53] In both
instances, the consolidated entity proved harder to maintain than expected.
Whether through poor management, ill-advised business decisions, or unfortunate
circumstances, both companies suffered significant losses and the apocalyptic
predictions fell short. [54] Time Warner currently plans to completely divorce
itself from AOL, while News Corp. successfully sold its stake in DirecTV
to Liberty Media in 2008. [55]
The alarm toward the Comcast-NBCU merge may be similarly overstated. Comcast
may become the most powerful player in the entertainment industry and lead its
competitors by example, or it may follow in the footsteps of its predecessors
and regret its sizeable decision. What the future holds for Comcast and for the
entertainment industry is unclear, but we should not fear to move forward and
let the future play out.

VI. Conclusion
While the panic toward the Comcast-NBCU entity may be overstated, the
significance of the merger should not be overlooked. Comcast-NBCU would not
only be influenced by past mergers, it will give insight into the requirements
and regulations to be imposed on furture deals. The government is not likely to
treat such a merger lightly, and the resulting entity will not be an easy one
to manage. The merger may very well be a large asset for Comcast, but the
concessions and compromises that Comcast will be forced to make will also
benefit its competitors. If Comcast manages the new entity well, the union can
serve to boost the economy. Viewers can benefit in receiving more quality
programming through a wider array of platforms. Technology is relentlessly
changing, and business principles and administration will inevitably evolve
with it. With the increasing availability of alternate platforms for media
communication, Comcast may lead the entertainment industry into a more
modernized future.



End Notes

[1] Yinka Adegoke & Jui Chakravorty, FCC conditions on Comcast-NBC could
hurt synergy
, Reuters, Nov.
11, 2009, available at

[2] Id.

[3] Malcomn Berko, Malcomn Berko: Taking Stock, The State Journal Register, Oct. 7, 2009, available at

[4] Mike Farrell, 3 Reasons Why Cable Should Cheer the Marriage, Multichannel News, Nov. 16, 2009, available

[5] Max Colchester & Sam Schechner, Vivendi, GE Dig In Heels at Talks
Over Price for NBC Universal Stake
The Wall Street Journal
, Nov. 23, 2009, available at

[6] Farrell, supra note 4.

[7] Id.

[8] Tim Araingo & Bill Carter, With Deal, G.E. Clears Path to Sale of
, The New York Times, Nov.
30, 2009, available at

[9] Bob Fernandez, A preemptive strike against Comcast-NBC deal, Philadelphia Inquirer, Nov. 14, 2009, available

[10] Farrell, supra note 4.

[11] Id.

[12] Vivendi to Decide on Selling NBC Stake: Reports, RTT News, Nov. 15, 2009, available at [hereinafter

[13] Wayne Friedman, Malone: NBC/Comcast Merger Would Juice Broadcast Ops,
Media Daily News, Nov. 23, 2009, available

[14] RTT, supra note 12.

[15] Meg James, Comcast aspires to be major global communications player,
Los Angeles Times, Nov. 16, 2009, available

[16] 15 U.S.C. §18 (2009).

[17] Fernandez, supra note 9.

[18] Brian Stelter, Intense review is Expected for NBC Deal, The New
York Times
, Nov. 8, 2009, available at

[19] Shira Ovide & Amy Schatz, Comcast-NBC Deal Would Draw Lengthy
Scrutiny in Washington
, The Wall
Street Journal
, Nov. 16, 2009, available at

[20] Fernandez, supra note 9.

[21] Robert Lande, Antitrust and the Media – II, The Nation, May 22, 2000, available at

Joelle Tessler, Comcast, NBC deal will face tough antitrust review, Associated Press, Dec. 2, 2009, available

Fernandez, supra note 9.

[24] Lande, supra note 21.

[25] Id.

[26] Id.

[27] S. Derek Turner & Mark Cooper, Out of the Picture 2007: Minority and
Female TV Station Ownership in the United States (2007), available at

[28] Lande, supra note 21.

[29] Ovide et al., supra note 19.

[30] Id.

[31] James, supra note 15.

[32] Id.

[33] Id.

[34] Id.

[35] David Bauder, Broadcast pioneer NBC prepares for cable takeover, Associated Press, Nov. 14, 2009, available

[36] Id.

[37] Tim Arango & Bill Carter, An Unsteady Future for Broadcast, The New York Times, Nov. 21, 2009, available

[38] Ken Auletta, Why Oprah Needs Cable, The
New Yorker
, Nov. 20, 2009, available at

[39] James, supra note 15.

[40] Id.

Mark Guarino, Three ways the Comcast-NBC merger
could change television
, The
Christian Science Monitor
, Dec. 2, 2009, available at

[42] Nicolas Carr, The Price of Free, The
New York Times
, Nov. 13, 2009, available at

[43] Suzanne Vranica & Sam Schechner, Two-Way Communications, NBC Could
Push Comcast Toward Interactive Ads
, The
Wall Street Journal
, Nov. 16, 2009, available at

[44] Farrell, supra note 4.

[45] Id.

Tessler, supra note 22.





Alan Albarran, Lots of Layers in
Potential GE-Comcast Deal
, GLG News,
Dec. 2, 2009, available at

Tessler, supra note 22.

Adam Thierer, A Brief History of Media
Merger Hysteria: From AOL-Time Warner to Comcast-NBC,
The Technology Liberation Front, Dec. 2,
2009, available at