Execs tout benefits of Comcast/NBC Uni deal

Conference call: Roberts, Zucker praise 'logical evolution'

NEW YORK -- In conference calls with analysts and media on Thursday, Comcast, GE and NBC Universal executives touted the new opportunities and the financial benefits of the year's biggest media deal that will see cable giant Comcast take a 51% stake in a joint venture with NBC Uni.

Comcast chairman and CEO Brian Roberts said the deal will be immediately accretive to earnings per share and free cash flow, provide double-digit returns and could see financial upside if the economy picks up. Also, Comcast shares in 50% of the new venture's value creation above the initial equity value of $28.2 billion.

Roberts and COO Steve Burke, who will oversee Comcast's 51% stake in the enlarged NBC Uni, also defended their belief in the benefits of playing in both the content and distribution areas, as executives on both sides of the deal emphasized they expect synergies, but didn't bank on any in evaluating the deal.

Plus, Comcast management highlighted several times that they like what NBC Uni management has done in building strength in key audience and content areas, as well as in cross-promoting content.

In a key nod to shareholders who have worried that the costs of the deal could limit Comcast's capital returns to investors, Roberts on Thursday announced a 40% boost of his firm's annual dividend to 37.8 cents per share and $3.6 billion in stock buybacks over the next 36 months.

"Content and distribution go together very naturally," Burke told analysts in addressing one key Wall Street concern of the NBC Uni transaction, adding his team "intends to prove that" at a time when many have spoken out against the benefits of such an approach.

Asked why he believes he can make content and distribution work together when past mergers have failed to do so, Roberts said: "It's a different time and a different deal." He cited Time Warner-Turner, various deals done by Liberty Media chairman John Malone and the News Corp.-DirecTV deal as examples of successful combinations across content and distribution. He also said several times that Comcast likes the cable networks business, where the firm's presence has so far been sub-scale.

Roberts and NBC Uni CEO Jeff Zucker said though that the deal assumes no synergies, with Roberts saying he wanted it to make financial sense before considering such potential benefits. Still, both said there are likely to be synergies in various areas.

"Synergy hasn't been a dirty word at NBCU," said Zucker. "That opportunity exists."

Added Burke: "NBC Universal is really a great case study" on how various media assets can play together well."

Burke also emphasized that there will be no major layoffs to reduce costs. Citing about 30,000 NBC Uni and 100,000 Comcast employees, he said that 99.9% of staff doesn't overlap with the exception of some personnel in program headquarters operations.

As key areas for possible synergies, Zucker cited new offerings in the field of female-centric content as Comcast adds E!, Style and DailyCandy to NBC Uni's strong women's content business, as well as the news, entertainment and sports area, where Comcast's 10 regional sports networks, Golf Channel and Versus will match nicely with NBC Sports.

Burke said the new venture is the No. 1 provider of online content in the women/lifestyle category, No. 3 in news and entertainment and No. 7 in sports.

Burke said Comcast's emerging networks that don't make much money alone, such as G4, Style and Versus, will particularly benefit from being part of a broader bouquet of channels.

Overall, Burke cited three buckets of synergy opportunity:
1. Content benefiting content via cross-promotions and the sale of ads across networks with similar demographics. He said NBC Uni has been a role model in doing this.
2. Distribution helping content via the launch and growth of new networks, use of VOD and the development of new distribution models. Comcast is a case study here, according to Burke.
3. Content benefiting distribution by strengthening VOD, accelerating interactive TV and the launch of new tentpole events.

Executives disclosed few specific plans Thursday, with Burke saying the new venture will experiment with new windows, new VOD packages and the like, with specific plans still to be worked out. "We have many ideas," he said. "Not all will work," but there is great opportunity.

All executives highlighted the key role that cable networks play at the joint venture, which will get 82% of its cash flow from that business (with 8% coming from the broadcast business, 5% from film and 5% from theme parks).

Burke called cable networks and their dual revenue streams "the best part of the media business." He cited a 14.9% compound annual growth rate at Comcast and NBC Uni's cable networks for 2004-2009, with the former clocking in at 16.2% and the latter at 10.6%. While growth is unlikely to remain this high forever, he said the new NBC Uni will bring in solid, predictable gains.

Here are more highlights from the conference calls:

How will the new joint venture affect film release windows?

Roberts said Comcast's focus has long been to get the DVD and cable VOD window closer together, so that there is "one marketing event around the theatrical release" and a second one around a DVD and electronic release. "On-demand can play a big role in the future" of Hollywood, he said, lauding the Universal film studio and its 4,000-plus library titles, as well as Hollywood's tradition of changing and updating its distribution strategies.

Zucker added that NBC Uni has also looked to push into electronic and VOD film delivery. Comcast's approach is "entirely consistent with how we have viewed it," and speeding up the transition to new distribution forms can be beneficial, he said.

Is the broadcast business model broken?

"The business clearly...has gone through a lot of transitions," Roberts said. "We (Comcast and GE) are both committed...to trying to restore it to its number one position." He mentioned that there are clear synergies between NBC and the group's cable networks as NBC Uni has shown with cross-promotions and the like.

Could Comcast move NBC to more of a cable-like business model by pushing retransmission consent fees or would that hurt its cable systems too much?
Roberts said the retrans situation "continues to evolve," but being in both the cable system and networks business, "we can find constructive solutions to allow the broadcast business to strive... and we're still a cable operator trying to manage its cost."

Zucker added NBC and Telemundo programming is popular and important for distributors. "We believe we should be paid for that content," he said.

Which business models will the new entertainment giant pursue in the digital space?

Roberts said consumers want various types of content -- from free content (on the likes of Web video site Hulu) to subscription-based offers and some PPV.

Burke said Hulu's focus on free broadcast content and TV Everywhere's focus on cable networks content are "very complimentary." Overall, NBC Uni is managing Web content very similarly to how Comcast would manage it, he said.

Asked about a widely-debated possible premium tier addition to Hulu, Burke said he is not coming into the NBC Uni deal with preconceived notions and will let Zucker and his team manage things until it closes.

Will Versus or the enlarged NBC Uni's broader sports programming business try to go toe-to-toe with ESPN?
"ESPN is such an amazing business," so it would be "overly simplistic" to say the new joint venture will take on ESPN, Burke said.

Roberts said sports has proven to be a very profitable business.

Will the new NBC Uni remain the broadcaster of the Olympics?
Comcast executives didn't want to discuss the issue, and Zucker said his team would "take a hard look" at future Olympics and make sure any rights deal would make economic sense.