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Comcast seeks to break into the movie business
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Comcast seeks to break into the movie business - 17-November-2009, 12:34

For more than a decade, Brian Roberts, the scion running the country's largest cable television system, has envisioned transforming his company into more than just a collection of, as Wall Street calls cable, "dumb pipes."

So Roberts' Comcast Corp. has been bulking up. First, it became the conduit of television, then an Internet service provider and a telephone company. Along the way it has been building regional sports networks, launching entertainment Web sites and snapping up such cable channels as E, Style, G-4 and the Golf Channel.

But despite Roberts' muscle and ambition, Comcast lacks the big prizes in media: a Hollywood movie studio and broadcast network. Gaining control of NBC Universal would change that.

"Comcast wants to become a major global communications player on the same scale as a Disney, Viacom, Time Warner or Fox," said Marc Nathanson, who founded Falcon Cable TV. "Brian Roberts and his management team see this move as one of survival."

Thrusting Comcast into the upper echelons of the entertainment firmament would cast the cable operator beyond its traditional role of distributing programs made by others, a lucrative business, but one that may have . Comcast would become one of the world's largest owners of programming. That would not only assure Comcast a powerful voice in determining how and when consumers watch movies and TV shows, but also provide a hedge against one of its fastest-rising costs: the content that flows through the "pipes."

Holding up the deal is a decision by French telecommunications firm Vivendi on whether to sell its 20 percent stake in NBC Universal to General Electric Co., which owns 80 percent of NBC Universal. Comcast will not move forward with the deal until Vivendi agrees to exit, according to people familiar with the negotiations.

Owning NBC Universal is about more than fortifying the Robertses' family empire, which is a $34 billion-a-year business, with 24 million subscribers, reaching nearly 1 out of every 4 TV homes in the country.

Competition, once not a major worry, has grown fierce. Satellite television providers and telephone companies offer similar TV channel packages, often at lower prices. Comcast, like many cable operators, has been losing hundreds of thousands of subscribers each year.

At the same time, program suppliers, including NBC Universal and Walt Disney, have been charging cable companies higher fees to carry their channels. Broadcast networks have said that they intend to charge cable operators for their over-the-air channels that they once retransmitted free of charge.

"Comcast's fear is that it will become more difficult to pass those price hikes on to viewers because of the increased competition," said Jason Bazinet, a media analyst with Citigroup Global.

"If you are Brian Roberts, buying a content company is a hedge against these rising programming costs," Bazinet said. Comcast then would help set prices.

"For Comcast," he noted, "you would be collecting as many checks as you are cutting them."

Analysts said Comcast's core business, providing bundles of channels to consumers, will become more vulnerable as people increasingly select the TV shows and movies they want to watch on computers via the Internet.

"Cable companies for years have made their living by selling consumers hundreds of television channels bundled together," said James McQuivey, a Forrester Research analyst. "But the future is going to be very different, and cable companies instead will be selling an 'entertainment experience.' "

This isn't Comcast's first run at buying an entertainment company.

Five years ago, Roberts made a $54 billion bid for Disney, whose ABC television network had been languishing. But Comcast investors rebelled, driving down the value of the stock, and Disney's board deemed Comcast's offer too low.

Roberts withdrew his bid, but he remained interested in making, as Wall Street puts it, "a big content play." Now, at NBC Universal, its NBC network has fallen off a ratings cliff, and the Universal movie studio has released a string of costly duds.
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