Comcast-NBC Merger Approved (With Conditions)

The biggest entertainment deal in years is likely to become final.

The merger between cable giant Comcast and entertainment network NBC Universal was approved by the Federal Communications Commission, by a 4-1 vote, and the Department of Justice has cleared the two companies to proceed.

The merger between the two giants started over a year ago, with Comcast announcing its intention to buy a 51% controlling share of NBC from parent company General Electric and other owners. Immediately entertainment and technology pundits slammed the deal as a conflict of interest, and it appears that the Federal Communications Commission was listening.

The biggest concern that corporate watchdogs voiced was that Comcast would withhold NBC Universal shows and movies from rival companies, both in the aging TV market and in emerging online distribution channels. FCC chairman Julius Genachowski distributed his draft of the merger agreement, which included rules stating that Comcast wouldn’t be able to withhold programming from the NBC library during its negotiations with competitors and licensees. Though it’s a long way from the hard-and-fast rules detractors were hoping for, this would prevent Comcast from making a monopolistic push by hoarding its new properties.

According to DOJ Antitrust Division head Christine Varney:

“The settlement ensures the transaction will not chill the nascent competition posed by online competitors.”

And there’s a lot to hoard. In addition to NBC network programming as well as Universal Studios’ film studio and theme park, NBC-Universal’s assets also include cable channels USA, Bravo, Oxygen and SyFy, various cable news channels, The Weather Channel, and Spanish programming network Telemundo.

That’s a lot of content, all of which presents a huge bargaining chip when Comcast will renew distribution agreements with land-based cable and satellite providers. There’s also digital distribution channels like iTunes, Amazon and Netflix to consider. The terms state that Comcast must make a deal comparable to others already in place, for example, if Netflix has an agreement with Fox to stream network TV shows for a set amount, the corresponding deal for NBC broadcast shows must be in the same ballpark.

While you can bet Comcast will leverage its new position, the guidelines set forth by the FCC will bar them from threatening to revoke access to competitors altogether. Comcast will have to continue offering NBC content to all local broadcasting partners, like cable and satellite providers, which allow customers to receive local channels.

This will help avoid a repeat of the iTunes fiasco three years ago, when NBC Universal declined to renew its contract with Apple unless the prices for new episodes were raised. Apple declined, the contract expired and NBC shows like House (NBC produces the show, Fox airs it) and Scrubs were unavailable to iTunes users. Almost a year later NBC relented and the catalog returned – notably after the public launch of Hulu, where TV fans can stream many first-run shows for free.

Speaking of Hulu: as part of the merger conditions, would-be NBC parent company Comcast will surrender its voting rights for the popular video site. Hulu is a joint venture between NBC, Fox, and Disney. Comcast will not be able to block competing content (for example, Fox or CBS shows streamed from their respective homepages) from its internet subscribers.

The FCC terms make a distinction between different kinds of content. Presumably TV shows, movies, news and sports will be handled separately, with different values and terms delineated by Comcast and its partners. The terms also state that when negotiations stall, Comcast must undergo arbitration – this will help avoid situations like the Fox-Time Warner battle earlier this year.

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Expect the final steps of the Comcast-NBC merger to be announced in the next few days.

Source: The Wall Street Journal

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