Comcast, the cable operator, has now taken control of NBC Universal. It’s a huge deal affecting feature films, theme parks and especially pay television. But what does it mean for over-the-air broadcasters — the least mentioned part of the mega transaction?
Initially, Comcast will take control of NBC Universal’s 10 owned-and-operated stations, which reach 27 percent of U.S. households. This will trigger an FCC investigation. Even though a 2002 court decision threw out formal rules preventing a company from owning a cable system and a broadcast station in the same market, the FCC is certain to review any deal that transfers broadcast licenses in so many major markets.
NBC owned-and-operated stations include such major broadcasters as WNBC in New York City, KNBC in Los Angeles, WRC in Washington, D.C., WMAQ in Chicago, WCAU in Philadelphia, KNTV in San Francisco and KXAS in Dallas/Fort Worth.
The FCC scrutiny will certainly allow — or force — Comcast to sell off many or all of the broadcast stations. In fact, many experts think the FCC is almost certain to approve the transfer of the broadcast licenses in exchange for Comcast agreeing to such a sale. Some sources say that’s the plan anyway, since Comcast doesn’t want to own the stations.
In an open letter to policymakers released simultaneously with the announcement, Comcast promised to support over-the-air television. “The combined company remains committed to continuing to provide free over-the-air television through its O&O stations and through local broadcast affiliates across the nation,” said David L. Cohen, a Comcast executive vice president. “As we negotiate and renew agreements with our broadcast affiliates, we will continue our cooperative dialogue with our affiliates toward a business model to sustain free over-the-air service that can be workable in the evolving economic and technological environment.”
However, since Comcast is unlikely to be able to keep the stations, the promises mean little. Though Comcast promised to keep the NBC television network as on on-air service, sources said the cable operator is likely to fold the network into existing or new cable channels.
Sources also reported that Hearst-Argyle, a major NBC affiliated TV station group, could be a likely buyer of NBC’s 10 O&Os. Given the uncertainty about broadcast TV’s future at a time when online video is upending traditional business models and valuations, the TV stations could be sold at a deep discount.
Hearst, Comcast and NBC officials have declined comment. Other major NBC-affiliated TV station group owners such as Gannett or Belo also could be interested in acquiring all or some of the NBC TV stations.
It could take months for the TV station scenario to play out. However, for NBCU to exit the broadcast network and TV station business would cause seismic shock to an industry that is searching for digital strategies while balancing legacy costs and declining advertising revenues. In that sense, the NBCU-Comcast deal will be a catalyst for other transformative changes in over-the-air media.
The deal is part of a broader plan for General Electric to exit the broadcast business entirely. That exit will take seven years to complete. Comcast, say sources, will remain a major pay-television player and will use NBC’s assets for cable television programming.
The NBC Network, now in fourth place, will post a loss this year on declining revenues. The network and O&Os, which have been in an economic free fall, now contribute only about 14 percent of NBCU total earnings. NBCU’s overall revenue growth, which will drop a record 10 percent this year, will never gain more than 4 percent annually over the next five years, an analyst at Credit Suisse reported.
The NBC network’s news and entertainment programs may be transferred to new or existing cable channels. Under one possible scenario, the NBC News, CNBC and MSNBC brands could be organized into a single news unit servicing cable, online and mobile devices. The same could occur with all of NBCU’s and Comcast’s sports, children’s and daytime program franchises, sources said. The programming could also feed Hulu, the Web site currently partly owned by NBCU.