Universal Pictures in the dark about Comcast talks with parent NBC Universal

As if the management at Universal Pictures didn't have enough to worry about.

As rumors continue to swirl about an impending executive shake-up at the Hollywood studio, Universal Studios President Ron Meyer and his team apparently had no clue that Comcast Corp. has been in talks to buy a stake in NBC Universal.

When a story about a potential deal between the two companies broke on the industry website the Wrap on Wednesday afternoon, Meyer and his movie chairmen Marc Shmuger and David Linde were heading to Thousand Oaks for a preview of the studio's upcoming Christmas release "It's Complicated," a comedy romance directed by Nancy Meyers and starring Meryl Streep, Alec Baldwin and Steve Martin.

According to a person close to Universal, when Meyer recently met with NBC Universal Chief Executive Jeff Zucker to discuss the future of Shmuger and Linde, who have been under fire for the studio's dismal year at the box office and whose jobs are on the line, he was told that any such decisions had to be put on hold because something "major" was going on with the media company. Zucker did not specify what that was, said the person.

Three people familiar with the situation said that Meyer had been consulting with Zucker about the studio chief's desire to make a management change, when he was told to temporarily table the move. So, the fate of the two embattled movie executives and that of NBC Universal continue to hang in the balance.

On Wednesday, NBC Universal declined to comment on the talks between Comcast and NBC Universal. And, a spokesman for Comcast denied a report from the Wrap that a deal was in place, saying "While we do not normally comment on M&A rumors, the report that Comcast has a deal to purchase NBC Universal is inaccurate."

Well, one thing is for sure: As the title of Universal's forthcoming movie suggests, it's complicated these days at the General Electric-owned media company.

-- Claudia Eller

Photo: Universal Studios President Ron Meyer, second from left, with Universal Pictures chairmen Marc Shmuger, second from right, and David Linde, right, at the premiere of "Funny People" in July. Director Judd Apatow is left and star Adam Sandler is center.

Jeff Zucker tries to calm the NBC Universal troops but doesn't show his cards

NBC Universal Chief Executive Jeff Zucker issued a companywide memo to calm down the staff  in response to the news Wednesday that cable giant Comcast Corp. has had some flirtations with NBC about buying a stake. (See our previous coverage.)

In his update, Zucker doesn't really provide much of an update other than to say "given the attractive nature of our assets, there is always significant interest in NBC Universal." He does note that much of this speculation has been heating up because of uncertainty over French telecommunications conglomerate Vivendi's plans for its 20% stake in NBC Universal. For more on the talks, see our story

Here is a copy of the memo:

By now, you have probably seen or heard stories regarding the ownership of NBC Universal, most recently a flurry of stories in the last day involving Comcast. Stories spread quickly in this new information age, so let me take this opportunity to share an update with you, as best as I can as of today.

Not surprisingly, given the attractive nature of our assets, there is always significant interest in NBC Universal. That has been amplified lately by the annual discussion with Vivendi about its 20% ownership of our company. Vivendi has been a superb owner of NBC Universal, along with GE, for more than five years. They have not yet made us aware of any final decisions about their future with us; should they choose to exit, there are a number of possible things that could happen. It is our longstanding policy not to comment on rumors, and we have adhered to that policy in connection with these rumors.

As distracting as it may be to hear and read about potential changes to our ownership structure, nothing is more important than keeping this company strong.
 
So, we all have to do our best to keep our focus on our day-to-day operations, and continue to deliver the kinds of results that have made this one of the premier media companies in the world. It is an exciting time, and these are exciting possibilities. There is no better team to face the challenges – and opportunities -- of the future than the group we have assembled here.  I do appreciate that these stories often cause anxiety. But, really, the only thing for each of us to do is to do our jobs with the same focus we always have.
 
Thanks, and you will continue to hear from me when there are updates.

In the meanwhile, Comcast's stock has taken a beating this morning, falling 7% to $15.69  on the news that it again wants to get bigger. It's deja vu for the cable company, which five years ago made a run for Walt Disney Co., a play that also was not met warmly by Wall Street.

-- Joe Flint 

Photo: Jeff Zucker. Credit: Gary Friedman / Los Angeles Times

Comcast wants content and NBC Universal has it

The nation’s largest cable television company, Comcast Corp., is kicking the tires of entertainment giant NBC Universal, according to people familiar with the situation.

Comcast, which has almost 25 million subscribers, has been looking to expand its entertainment offerings for several years. In NBC Universal it would get not only a big broadcast network and movie studio, but several powerful cable channels, including USA, Syfy, CNBC, MSNBC and Bravo.

NBC parent company General Electric Co. has long denied that it is interested in selling its vast entertainment holdings. However, the industrial giant is facing the possibility that its minority investor, French telecommunications company Vivendi, in six weeks will exercise an option to unload its 20% stake in NBC Universal. That would require GE to come up with $4 billion to pay Vivendi – or find new investors to take the place of Vivendi.

This isn’t the first time that Comcast has made a play for Hollywood.

Five years ago, Comcast made an unsuccessful run to buy Walt Disney Co. for $54 billion – a move that backfired because investors promptly punished Comcast’s stock. Even this week, one Wall Street analyst suggested that Comcast’s stock continues to be undervalued because of concern that Comcast executives are thinking big again. 

In this case, Comcast may be looking at acquiring a big chunk of NBC Universal, but not the entire company.

Taking an ownership interest in NBC Universal would be substantially less than what Comcast would have paid for Disney. A recent analyst report from JP Morgan analyst Stephen Tusa said NBC Universal was worth between $30 billion and $35 billion. A separate analysis by Sanford C. Bernstein & Co. valued NBC Universal closer to $23 billion.

That would still be a pretty big nut for Comcast to swallow, however. The cable giant has a market capitalization of $48 billion, and has about $4 billion in cash.

Comcast in deal talks with NBC Universal

Cable giant Comcast Corp. is kicking the tires of NBC Universal, according to people familiar with the situation.

Comcast, the nation's largest cable operator with almost 25 million subscribers, has been looking to increase its content holdings for several years. In NBC Universal it would get its hands on not only a big broadcast network and movie studio, but also several powerful cable channels, including USA, Syfy, CNBC, MSNBC and Bravo.

NBC parent General Electric has often denied that it is interested in selling its entertainment holdings. Of course, if history is any guide, Comcast doesn't necessarily wait for an invitation before making a play. Five years ago it made an unsuccessful run to buy Walt Disney Co. for $54 billion.

The price tag for NBC Universal would be substantially less than that. A recent analyst report from J.P. Morgan analyst Stephen Tusa valued NBC Universal at $30 billion to $35 billion. However, such a deal would likely be very complex because there would be huge tax implications for NBC Universal parent General Electric, which first bought NBC in 1986 for $6.5 billion. 

That is still a pretty steep price tag for Comcast to swallow. The cable giant has a market cap of $48 billion and about $4 billion in cash so if it were to buy all of NBC Universal, it would be a highly leveraged transaction.

Speculation that GE may be looking to unload NBC Universal has heated up as of late in part because the French conglomerate Vivendi, which holds a 20% stake in the entertainment unit, may look to unload its interest before the end of the year. There have been questions raised as to whether GE -- which has first dibs on the Vivendi interest -- could muster the $4 billion - $5 billion needed to buy back the stake or whether another company such as cash-rich Time Warner or Comcast would step in and buy it.

Whether Comcast is making a serious run at all of NBC Universal outright or just in acquiring a stake in the company or forming a joint-venture remains to be seen.

In a statement, Comcast denied a report from industry website The Wrap that it had a deal to buy NBC Universal, but it declined to elaborate on any other talks it may be having with NBC Universal. A spokeswoman for NBC Universal declined to comment.

For Comcast, getting all or some of NBC Universal would give it programming assets to match its distribution clout. It currently only owns a handful cable networks including E! Entertainment Television, Versus, the Golf Channel, G4 and 10 regional sports networks. None of its cable networks have the commercial success of NBC's assets.

While NBC has lots of assets, many of its entertainment holdings are struggling. Its Universal Studios is in a slump at the box office and its management the NBC network is mired  in fourth place in both viewers and demographics. It's big gamble this fall, putting Jay Leno on in prime time, has not delivered big ratings yet although it may prove to be a smart financial gamble. In the first half of 2009, NBC Universal made $1.6 billion on revenues of $7.5 billion. Its revenue accounts for less than 10% of General Electric Co.'s total revenue.

-- Joe Flint

Previous Posts:

Vivendi's Levy stays mum on plans for NBC Universal stake

New round of speculation starts on GE's plans for NBC

Leno is giving TiVo a rest

The good news: More people are watching NBC live at 10 p.m. -- now that Jay Leno is in the time slot -- as opposed to recording the hour and watching it later, according to TiVo, which tracks how its 3 million customers are using their digital video recorders.

The bad news: About 20% of the people who do record Leno with their TiVo watch it within an hour of its original airing, which means in theory it is slicing into the audience for local news at 11 p.m. and Conan O'Brien at 11:30 p.m.

"While Leno is succeeding in reducing the amount of time-shifted viewing for NBC's 10 p.m. time slot, he certainly isn't 'Tivo-proof' as nearly 50% of viewing is still time-shifted," said Todd Juenger, vice president of TiVo Audience Research & Measurement. "Moreover, those time-shifted viewers are nearly twice as likely to watch within one hour, displacing NBC's 11 p.m. time slot."

Of course, anytime someone records a show and watches it later it means that they are not watching live TV at that moment (duh). Who's to say whether that 20% who are recording Leno and watching it later were Conan fans anyway or didn't get their local news from a different station? Who's to say they even usually watch television at that hour?

This is the problem with statistics. You can try to make them say anything. It's interesting to note how many TiVo users are opting to record Leno versus how many were recording NBC's dramas last season. To go beyond that and try to mind-read what those users are missing while they are catching up with Leno is a reach.

Just remember what Talking Heads once sang: "Facts all come with points of view, facts don't do what I want them to."

-- Joe Flint

Photo: Jay Leno. Credit: Matt Sayles

Vivendi's Levy stays mum on plans for NBC Universal stake

Vivendi Chairman and Chief Executive Jean-Bernard Levy declined to say what the French conglomerate will do with its 20% stake in General Electric Co.'s NBC Universal. 

"This is not something we should decide now," Levy said at the Goldman Sachs Communacopia Conference in New York.

Levy said that the window for the company to trigger its option on whether to keep its stake in NBC Universal or exit opens in two months and that until then the company is keeping quiet.

If Vivendi does decide to exercise its option, GE would have the right to buy Vivendi's stake. If GE declines, then Vivendi could spin it off to the public. That deal is in place until 2016.

Last year, the weak economy made it a less than ideal time for Vivendi to unload its stake, Levy said.

Levy's decision to keep quiet will probably do little to end speculation about what GE is going to do with NBC Universal (see our previous post on NBC Universal and Vivendi) Last week, JPMorgan analyst Stephen Tusa valued NBC Universal at $30 billion to $35 billion, and added that the unit "is commanding no value in the GE stock price." (That value, by the way, is off from $44 billion in his April 2008 report.)

-- Joe Flint

Photo: Jean-Bernard Levy. Credit: Francois Mori / Associated Press.

 

NBC won't spin Jay Leno numbers yet, but it has some spinning to do

Looking to avoid another premature declaration, NBC will not issue a press release today anointing Jay Leno as the new king of prime time as it did with Conan O'Brien in late night when he premiered in June. That turned out to be a rush to judgment, as Conan's numbers quickly dropped off and CBS' David Letterman overtook him in viewers and closed the gap in key demographics.

Leno's first-night numbers were very impressive, but there is an asterisk next to them. While he drew almost 18 million viewers, his competition was weak. ESPN did have football, but rival broadcasters CBS and ABC were in rerun and movie mode. Furthermore, the end of the U.S. Open delayed CBS' schedule, so Leno didn't even square off against a full hour of "CSI Miami." On the demographics front, Leno easily won among viewers ages 18 to 49 and 25-54 but was strongest with the over-50 crowd. For a more detailed report on Leno's first-night performance, please see our analysis at our sister blog Show Tracker.  

As the competition increases and the novelty wears off, Leno's numbers will no doubt come down. NBC knows this and has been wisely lowering expectations with advertisers and the media. 

NBC also has to do a sell job. For some 15 years, the network has stressed the importance of the 18-49 demographic and the high median income of its audience. With sophisticated comedies and dramas like "Friends," "ER," "Frasier" and "The West Wing," it was no wonder that NBC's typical viewers had deep pockets.

Now five hours of its prime-time schedule is filled with a show that appeals to a decidedly older audience that has less money to spend. NBC has said repeatedly it is programming for margins, not ratings. That's fine, but after changing the way the game is played on Madison Avenue, it will be interesting to see how successful NBC is at again changing the rules.

-- Joe Flint

Photo: Jay Leno with Jerry Seinfeld. Credit: NBC/Justin Lubin

Leno's opening numbers won't tell the story

At 8 a.m. Tuesday, the early ratings for Jay Leno's opening-night performance will start hitting desks and the immediate Tuesday-morning quarterbacking will begin.

One night of numbers, heck, one week of numbers, particularly when the competition is soft, is not going to tell us a whole lot. Leno should do well. NBC has unceasingly promoted him, and his first-night guests include not only Jerry Seinfeld but also MTV Awards showstopper Kanye West will pop by to do the Hugh Grant mea culpa.

When he was on in late night for NBC earlier this year, Leno averaged about 5.2 million viewers and the network has recently been indicating that a similar performance in the 10-11 p.m. slot is all it would take for the show to be a financial success. Considering that last season, NBC averaged about 8 million viewers in that hour, it is not a high bar.

Right out of the box, Leno should easily top that number. But down the road when the competition kicks in and the novelty wears off, it might be another story.

The most important number to look at when determining whether NBC's gamble is paying off is how the local stations are doing at 11 p.m. after Leno's show ends. Local news is where TV stations make their money, and if Leno's small audience drags those numbers down, NBC's affiliates will start getting antsy.

Then there's Conan O'Brien. It's unlikely that Leno's new 10 p.m. time period will help Conan. The question is whether Leno hurts Conan and if so, how bad. Hurt Conan (whose numbers are already down) and you potentially hurt NBC's "Today" show too, because if people are turning away from O'Brien that means the TV's on a different channel when they wake up in the morning. Yes, even in the age of the DVR and remote control clicker, this is what some network executives think, even if there isn't much logic to it any longer.

Naturally there will be a rush to judgment on Leno's early ratings. Rivals are no doubt hoping Leno opens huge against reruns because that will make the inevitable declines when the real competition starts all the more dramatic.

NBC will counter that it is programming for "margins, not ratings." Yes, five hours of Leno are cheaper than five hours of dramas. What NBC doesn't say is that it takes only one successful drama to make more than enough money to cover for the four nights of not-so-successful dramas and line its pockets. We're guessing that "Law & Order" and "CSI" have made more money in the last decade than "The Tonight Show." A lot more.

Barring Leno completely tanking this week, it will be several months before one can determine whether NBC made the right call. One wonders, though, what the in-case-of-emergency-break-glass-plan is at NBC.

Here's a scenario: If Conan's performance continues to slide, and Leno's is lackluster, NBC swallows hard, puts Leno back on in late night, and pays a whopping penalty to Conan to leave.

-- Joe Flint

ESPN is thinking Olympics and it's not just about going for the gold

ESPN is looking to snag the Olympics away from longtime rights holder NBC, a top executive at the cable sports behemoth told USA Today.

In an interview with Mike McCarthy, John Skipper, ESPN's executive vice president of content, promised that when it's time to negotiate for the 2014 and 2016 Games, "we'll be there."

Of course, this isn't the first time Walt Disney Co.'s ESPN has pursued the Olympics. It, along with News Corp.'s Fox,  was outbid for the 2010 and 2012 Games by General Electric Co.'s NBC Universal, which shelled out $2 billion to keep the Olympics on its broadcast and cable networks. NBC has been the U.S. home for the Olympics since 2000 and it may take more than a big bid to unseat them.

In explaining why ESPN wanted the Olympics, Skipper talked about the production values it could bring to the Games, but that's not the cable sports giant's only motivation. What Skipper didn't bring up is how the professional sports leagues including the NFL, Major League Baseball and the NBA are putting more of their content on their own cable networks and ESPN also wants the Olympics as a hedge against that loss of that powerful programming. ESPN has been gobbling up other sports as well, including a $500-million, four-year deal for college football's Bowl Championship Series.

ESPN charges cable and satellite operators almost $4 per subscriber per month just to carry the flagship channel. Most distributors also carry ESPN2 and some of the other spinoff channels, meaning that they are coughing up a lot of money. If ESPN loses some of its big sports packages, distributors will balk about the fees they're asked to pay. ESPN is the cash cow for parent Disney, so digging deep into its pockets to bid on the Games shouldn't be a problem.

But the Olympics are as much about relationships as it is about money and production values, and no one is in tighter with the International Olympic Committee than NBC's Dick Ebersol. He just scored even more brownie points with the IOC for helping to squash the United States Olympic Committee and Comcast Corp.'s efforts to start a cable channel here that the IOC was dead set against (see Company Town's take here). While Skipper may be feeling confident about ESPN's chances of landing the Games, a betting man might want to stick with the incumbent.

Furthermore, now that NBC's out of the 10 p.m. drama business and will be saving all that cash by programming Jay Leno in prime time, it has even more money to spend on sports.

-- Joe Flint

Photos, from top: ESPN's John Skipper; NBC's Dick Ebersol. Credits, from top: Lisa Kyle / Los Angeles Times; Aris Messinis / Associated Press

Disney, Hearst, NBC strike complex deal to simplify cable ownership

Walt Disney Co., General Electric Co.'s NBC Universal and Hearst Corp. have finalized an agreement to merge several cable networks together, for now anyway.

Under the terms of the agreement, A&E Television Networks (AETN), which is owned by all three companies, will acquire Lifetime Entertainment Services, which is owned by Disney and Hearst. The channels that will now make up A&E Television Networks are A&E, History Channel, Lifetime Television, Biography and a handful of smaller networks.

Although the deal is being positioned as joining the three companies together, ultimately it is part of an ongoing process to reduce and eventually eliminate NBC Universal's stake in the entity. When the deal is completed, Disney and Hearst will each own 42.5%, and NBC Universal will have a 15% stake. The companies said there are "mechanisms" that could require NBC Universal to exit the partnership no later than 15 years and quite possibly sooner.

For NBC, which only had a 25% in AETN prior to the merger, the deal makes sense because it will be part of a bigger more valuable entity, even if its piece is smaller. The company still has a strong group of cable networks of its own with USA, Syfy, Bravo and MSNBC among others.

Abbe Raven, president and chief executive of AETN, will oversee the new entity, and Andrea Wong, the high-profile CEO of Lifetime, will report to her. There will likely be layoffs once the deal is completed. The companies said the combination is expected to "yield substantial cost efficiencies."

-- Joe Flint