Traditional television viewing patterns are collapsing and the industry needs to quickly figure out how to profit in a world where people can watch TV shows anytime, anywhere, NBC Universal's TV chief said.

The challenge now was drawing viewers to network shows at designated times when people can either record those shows or turn to online outlets to watch at their convenience, said Marc Graboff, Chairman of NBC Entertainment and Universal Media Studios.

Networks need to figure out how to make their content more immediately available in a lucrative way, such as by charging viewers to stream episodes shortly after airing -- narrowing viewing "windows" -- or providing them to multiple outlets, he told an industry conference.

The biggest U.S. networks are currently struggling with declining advertising revenue, dwindling viewership and rising production coasts.

"The audience is so fragmented at the expense of television shows. Windows are starting to collapse," he said at the Variety Entertainment and Technology Summit, echoing comments from other TV industry leaders such as Dana Walden, chairman of 20th Century Fox Television.

Graboff was coy about a potential deal to sell NBC Universal, now majority owned by General Electric Co, to Comcast Corp. They are reportedly in talks and a deal is expected soon.

Asked how such a deal would affect NBC, Graboff said while such a marriage was still "speculative" at this point, he believed Comcast was also considering ways to better monetize content in ways outside the traditional models.

"At some strategic level, Comcast must be thinking, 'if we own a content company, we can help drive how the model changes usage.' That must be one of their motivations for doing this," he said, referring to a hypothetical case.

Analysts believe that if Comcast were to succeed in its overtures, it would likely try to experiment with windows.

"If alternative windows start generating revenue, then they may make up for the holy grail (of network viewership)," said Graboff. "The way to counter it (high costs and declining viewers) is to make a show more immediate, such as streaming it for a dollar the next day," and then offering it in various other media.

He said NBC's investment in popular video-viewing site Hulu was a step in the right direction but admitted its content owners may have been hasty in offering the programing for free on the popular video-viewing network to counter piracy.

Graboff said the network's controversial move to shift "The Jay Leno Show" to prime-time five weeks ago was doing "better than expected." Company officials on a conference call last week said the show was exceeding ratings estimates.

He admitted that the network's 11 pm newscast, immediately following the show, has fallen in ratings, but noted other network's 11 pm news had also seen ratings drop.

NBC's decision to shift the late night talk show host to 10 pm has been described as a strategic business move enabling NBC to use a low-cost program at the slot instead of more expensive, scripted shows.

Leno averaged almost 12 million viewers during the first week of his new show, but averaged only about 5.6 million viewers last week, according to reports.

"It's doing better than projected we'd do, but right now it's too soon to tell," Graboff said.

Comcast Corp. and General Electric Co have agreed to make NBC Universal CEO Jeff Zucker the head of their proposed joint venture, but the structure of a new board is still being negotiated, sources familiar with the matter said.

The two sides have been in talks to reach a deal that would give Comcast a 51% stake in the NBC Universal venture, which would also house the cable networks now belonging to Comcast. They recently agreed to value NBC Universal at about $30 billion, sources previously told Reuters.

Under the terms being discussed, Zucker will lead the new entity, with no clauses for him to leave after a specific period, the sources said on Tuesday. They spoke on condition of anonymity because the details have not been made public.

Comcast declined comment. NBC did not return calls seeking comment.

As part of the proposal, NBC Universal would become a joint venture, 51% owned by Comcast and 49% by GE. Comcast would contribute around $4 billion to $6 billion in cash, as well as its collection of cable networks to pay for its stake.

There has been a lot of speculation about who would head the new company, especially since Peter Chernin -- the former president of News Corp. -- has been advising Comcast.

The sources said Zucker would be chief executive, but no decisions had been made on what role Chernin might play, if any. Discussions about what the new board would look like are ongoing, the sources said.

Next few days critical

One of the sources said progress made in the talks over the next few days are "critical" and would determine how quickly the deal gets done.

Vivendi, which owns 20% of NBC Universal and has to agree to a deal, is in talks with GE and is determined to get the best value for its investment. Those talks are progressing, but "going slow," one of the sources said.

Every year between mid-November and mid-December, Vivendi has to decide whether to exercise its "put" option to sell its NBC Universal stake.

This year, Vivendi is eager to dispose of its stake, which it acquired as part of a 2004 deal to create NBC Universal, and is negotiating the valuation with GE, sources have said.

Last week, Comcast and GE agreed on the valuation for NBC Universal, ironing out what had been a key obstacle in talks.

The valuation -- and the amount that Comcast will end up paying for NBC Universal -- are complicated, because the new company is expected to be able generate cash to pay down $9 billion in debt that would be added to its books as part of the deal. It would use that debt to buy the rest of the company from GE.

GE has negotiated a redemption option that would give it the right to redeem all or part of its stake in the new company in exchange for cash at the three-and-a-half year mark and at a seven-year mark, sources have said.

Also, the terms of the deal now allow Comcast's cash payment to be determined partly by NBC Universal's financial performance, sources told Reuters this week.

If the unit's performance worsens between the signing of the deal and the closing, Comcast could end up paying less.

Comcast has long wanted to buy media assets to create a content powerhouse spanning broadcast TV, cable and film. Chief Executive Brian Roberts said last month he would look at all opportunities in content.

Many of GE's shareholders have urged the conglomerate to offload NBC Universal, whose broadcast and cable networks, movie studio and theme parks are considered misfits among GE's mostly industrial operations.

http://www.hollywoodreporter.com/hr/content_display/television/news/e3i8d89a411d4e37fb5cc6f401054c97a74

Wow. Comcast really got the wool pull over over their eyes. They bought the house and didn't even bother killing the rat's next int he attic. Pathetic.

And what the [!@#$%^&*] is wrong with these people at the networks? Don't they know that people are NOT gonna pay for content streamed online?

It would have been better for them to stuff a few more ads between the segments of the show, like CBS is starting to do. And besides, Hulu doesn't even broadcast in 720p or 1080i for that matter. I bet if Hulu went paid tomorrow, they still wouldn't offer high quality streams. Pathetic. But not surprising.

Edited November 11, 200916 yr by bellcurve

NBC Uni-Comcast: Why the deal?

It's not just about those trendy cable network assets: Comcast's plan to acquire 51% of NBC Universal also is about seemingly boring things, including VOD and changing business models.

However odd a couple these players appear on paper, a NBC Uni/Comcast combo could transform the way content owners and distributors do business. A preliminary deal could be unveiled as early as Sunday.

The cable giant has done much to react to changing consumer viewing patterns by expanding its on-demand content library, boosting the number of films released on VOD the same day as DVD and getting more cable shows and other content online. It has done so via initiatives with such names as Project Infinity, launched last year, and TV Everywhere, launched this year.

"Comcast has long felt that if you put enough proper programming on-demand, that is how consumers will want to watch," cable industry consultant Steve Effros says. "If you can satisfy customers more, they are going to be more willing to stay with you."

There is more revenue to be made if people stick with the more expensive digital cable service or choose content that costs more, like day-and-date film releases, of which Comcast offered nine in 2007, 35 in 2008 and as many as 100 this year.

Comcast chairman and CEO Brian Roberts said in 2007 that the biggest benefit of expanding day-and-date releases might be to increase the stickiness of his firm's cable services.

Comcast has grown its on-demand library to more than 17,000 pieces of content watched by 23.8 million video subscribers, including 18 million digital video customers. The 13 billion views of on-demand content since the cable giant launched its service in 2003 is well ahead of the 6 billion song downloads Apple's iTunes reported at the start of the year.

Comcast has managed to expand its on-demand and day-and-date offerings via deals with nearly every major Hollywood player. "The problem has been that program owners have been reluctant to change their linear release practices," Effros says. "Comcast wants to do more and get the industry closer to the tipping point."

That is a key reason why it has set its sights on NBC Uni after not managing to pull off a deal for Disney in 2004.

An investment in MGM later that year, as part of a broader group that included Sony and private-equity firms, gave Comcast a stake in a Hollywood icon but no day-to-day management control. It did, however, get the right to distribute MGM and Sony content on its VOD platform. Comcast and MGM also collaborated on creation of the MGM Impact VOD action channel.

But having a controlling stake in a major player like NBC Uni could boost Comcast's effort to change the user experience and business models.

Gabelli analyst Christopher Marangi says a deal could "accelerate the success of TV Everywhere." That is key as Comcast executives have expressed concern that consumers otherwise might cut their cable connection as online viewing continues to rise.

Sanford Bernstein's Michael Nathanson recently argued that players in the entertainment sector have been in too much conflict and disarray to take advantage of the digital age. That has allowed new competitors, from DVD-rental kiosk firm Redbox to iTunes, to eat established players' lunches.

But a Comcast/NBC Uni deal could begin "a new, better chapter for media economics," Nathanson says. "Someone needs to man up; for goodness sake, let's hope that someone is Brian Roberts."

Although it would upset the status quo in the entertainment industry, the deal could benefit content firms and distributors, he argues.

Nathanson suggests that Comcast could use NBC Uni to push for a better VOD system for pay movies, with better terms for studios and new windows for Comcast. The company also could develop on-demand broadcast TV offerings with specialized ad opportunities "that derail the growth of DVRs."

Still, despite the positives, deal talk worries Comcast investors as an acquisition could take a year to go through regulatory approvals. "The Street does not like the deal because they would rather get a 100% claim on Comcast's growing free-cash flow," Northlake Capital Management's Steven Birenberg says.

General Electric, which controls 80% of NBC Uni, is expected to have options to get out of its investment altogether during the coming years. "We expect this will significantly reduce Comcast's willingness, if not ability, to increase shareholder returns," Collins Stewart analyst Thomas Eagan says. Overall, he expects Comcast shares to remain in a tight range because of "the overhang of an NBC Uni deal."

As for NBC Uni staff, they fear the obvious if a deal goes through: personnel cuts. They also are torn about current GE ownership, with some arguing that the devil could benefit from a takeover.

NBC Uni president and CEO Jeff Zucker apparently would remain in his post, but with Comcast holding a majority stake, he would report to the cable giant.

Comcast COO Steve Burke, who reports to Roberts, would be the point person ensuring the Hollywood conglomerate performs to Comcast's liking. How long Zucker would stay aboard after a deal closes remains an open question.

Jeff Gaspin, who has risen to chairman of NBC Universal Television Entertainment, and NBC Universal Cable president Bonnie Hammer, who is credited with the cable unit's meteoric rise, are likely to play bigger roles.

If a deal doesn't go through, both companies would suffer.

GE essentially has admitted that it doesn't see the media space as a core business. If things don't jell with Comcast, an exit in stages could begin weighing on the sentiment of GE investors who these days prefer outright ownership of assets -- or their sale. It also would further distract NBC Uni staff, who have dealt with five owners during the past 20 years.

For Comcast, "the implications are arguably even worse," Sanford Bernstein analyst Craig Moffett says. Not only would management's image suffer from missing out on another big content deal, but also shareholders would fear more acquisition attempts, he argues.

"Comcast has again clearly signaled its desire to be in the content business," Moffett says. "In the absence of a deal, investors would be left waiting for the next shoe to drop."

http://www.hollywoodreporter.com/hr/content_display/television/news/e3i15bf1f059c2570606e5aec24b95e7c7e

Well I can't wait to see what comcast does with NBC. NBC needs a few prayers.

From The Hollywood Reporter:

"There is not a lot to say," NBC Universal president and CEO Jeff Zucker said here Thursday when asked about the potential sale of a 51% stake in his company to cable giant Comcast Corp.

"I'm (also) incredibly interested" to see what will happen, he said when asked about the situation. "Time will tell."

Current controlling shareholder General Electric and Comcast have agreed on pretty much all key terms of a deal, according to sources. But GE is still in talks with 20% stakeholder Vivendi to buy out the smaller partner, a condition that must be met for a potential Comcast deal.

"The answer is we just don't know," Zucker said. "There's no news to report." GE and Comcast have been hoping to announce a deal before Thanksgiving.

Zucker on Thursday also expressed interest in getting retransmission fees for NBC from distributors - an issue that would see Comcast face diverging interests in different parts of its business, defended the TV affiliate system while saying it needs financial fixes and once again discussed Jay Leno's new talk show.

He made his comments in a chat with CNBC anchor Erin Burnett at the Paley Center Thursday morning. His evasive comments about a potential Comcast deal came after several moments of laughter and silence on his part in reaction to the interviewer's opening question. Burnett had asked whether he was enjoying his last few days reporting to a guy named Jeff, namely GE chairman and CEO Jeff Immelt. Zucker then quipped: "I knew I shouldn't have asked Erin" to do this interview.

"They're looking at the value of content," Zucker said when asked by Burnett about key drivers for any potential acquiror of NBCU. Plus, buyers must like the strength of NBCU's assets, especially the company's fast-growing cable networks, Zucker argued. "Today NBC Universal is a vastly different company" than when NBC was founded, with more than two-thirds of the company today having "nothing to do with either NBC or Universal." He reiterated that 75% of profits come from the core cable networks, which Zucker said is still not widely understood.

Asked about a push by CBS and - more recently - Fox to get retransmission fees from distributors, Zucker said the market seems to be increasingly moving into that direction. "We would expect to play in that, and that would be very advantageous," he said. Asked how long this shift in business models will take to play out, he suggested three to four years. He wasn't asked how he expects Comcast would approach the issue if it took a 51% stake in NBCU as its cable systems business would face higher costs from retrans fees, while the content businesses would benefit.

Questioned whether people will be ready to pay for content in digital formats now that more and more industry giants are pushing for new revenue streams, Zucker argued that "the interest in NBC Universal proves that there is value." He added: "Quality content wins out."

However, he later admitted that "we probably gotta do a better job...at being smarter" in primetime where the NBC network hasn't done "a very good job" in recent years.

Burnett also asked her boss Thursday whether he still believes in spending a lot of money on movies and primetime shows, even though hits are hard to predict. "We certainly believe in spending appropriately," Zucker replied, adding that in hit-driven businesses it is easier to avoid bad moves than pick sure winners.

Burnett also asked Zucker about some of his experiments with new approaches and business models, such as the move to give Jay Leno a daily 10 p.m. talk show.

Zucker said he felt it was "unfortunate" that some of his previous comments on the production cost efficiency of Leno's talk show made it seem like NBCU is more focused on making money than on producing memorable TV. Instead, he argued his team wants to do "whatever it takes to put on the best television."

That also goes for news operations at a time when everyone can be a journalist or citizen reporter or Twitter user. "It's cheap to be first, but expensive to be right," Zucker said. NBCU is investing in "credibility and experience," he added.

Asked about the network affiliate system, Zucker said: "We don't want to throw it out. We think it still works incredibly well," even though the economics need to be fixed. "We shouldn't diminish that" and underestimate its power.

Asked by TiVo CEO Tom Rogers how companies can react to a drop in profitability at their TV stations in recent years, Zucker responded: "We can't look at this as a TV station anymore," suggesting that companies must instead look at the broader local media space as an opportunity. Plus, cost measures have been key.

Overall, he said he is more upbeat about the local business going into 2010 than in a while.

NBCU's local business could see double-digit growth in the fourth quarter for the first time in more than two years, he said.

Asked about the state of the advertising market, Zucker said "the auto market feels a little better." Vancouver Olympics ad sales are "going quite well," and the firm is on track to do well there, he added.

Will the 2014 and 2016 Games be on NBC? "It's something we would like to stay in and continue," but only if it makes financial sense, Zucker said. Industry observers have pointed to the strength that a combination of Comcast and NBCU would have in the sports arena.

Edited November 20, 200916 yr by Sylph