In Their Own Words: Comcast’s Case for–and Against–an NBCU Deal

eightballReporter Sharon Waxman says Comcast has a deal to buy NBC Universal from GE (GE) for $35 billion. Comcast, in a statement, says that’s not true.

Could Comcast (CMCSA) be talking to NBC Universal about…something? Could be–that’s what the Los Angeles Times and other outlets reported last night.

And Comcast’s statement says there’s no “deal,” which doesn’t preclude “talks about deals.” Then again, it’s awfully unusual for a company in Comcast’s position to say anything at all.

Clear as mud? Then this won’t help. Check out these comments from Comcast COO Steve Burke at a Sept. 9 conference hosted by Bank of America, where analyst Jessica Reif-Cohen asked him about his appetite for acquisition.

Burke said he’d love get more cable channels (like the kind NBCU owns). And he said he didn’t want a really big deal that would require the company to use its shares or take on a lot of debt (like, say, a $35 billion deal for NBCU). He said all this, by the way, in the span of a single answer.

I’ll carve it up, and translate for you:

We’ve had plenty of debt, and we don’t want any more right now, thank you very much.

Well, if you look at cable companies over the last 10 or 20 years–I joined the Company 11 years ago. It is really amazing how deleveraged our Company and other cable companies have gotten… We like where we are from a leverage point of view and I think [we] would be uncomfortable if our leverage was significantly higher.

But boy oh boy, are cable channels attractive!

At our core, we believe that content and distribution work well together… I think there are a lot of case studies where content and distribution, particularly in a world where the distribution has technology that can deliver content in new and innovative ways, you really can create a lot of value by putting content and distribution together, particularly if that content is cable content.

And again, when you look at the big media companies, the best businesses that all of us have in the entertainment business I think are the cable content channels and those channels with that dual revenue stream are really good businesses. And I think we wouldn’t be doing our job if we didn’t try to figure out a way to get bigger in those businesses. Those businesses are growing more rapidly than our cable business and if the opportunity came about where we could add cable content to our portfolio, I think we would do it.

But really, we’re not in the market for a mega-deal.

Just to sort of get it right out there, I don’t think that means doing a big deal with our stock. I think all of us think our stock is significantly undervalued. So I don’t think that means doing a big deal with our stock. I also don’t think that means doing a big $50 billion acquisition. I think it is more trying to find opportunities that are complementary with our core business, that don’t take our balance sheet and push it back into a position, which we have worked so hard to get it down.

Never say never!

We are going to try to make sure that we are disciplined and we have high IRRs and good free cash flow generation and we will see if anything comes available. If it does, we will certainly look at it.

Got it? Me neither. The only way I can reconcile Burke’s comments with the notion that Comcast is interested in an NBC U deal would be if Comcast was talking about buying Vivendi’s 20% stake in the NBC U.

Comcast could swing that one without breaking the bank–the conventional wisdom is that it would cost something in the $5 billion range. And it would technically increase Comcast’s cable network holdings, as Burke says he wants to do. But not really: Comcast would be a minority shareholder, with no clear path to control. And it wouldn’t get the “distribution plus content” benefit Burke was talking about last month.

Anyone else have any ideas? Feel free to sound off below.

Report: Comcast Buying NBC for $35 Billion. Comcast: “Inaccurate”

the_office_promo_pic_nbcHere’s the big media deal everyone has been waiting for. Or at least, here’s the report: Sharon Waxman of TheWrap says cable giant Comcast (CMCSA) is buying all of NBC Universal from GE (GE) for $35 billion.

The deal was hammered out by reps at a Tuesday meeting, Waxman reports, citing “two individuals informed about the meeting”. The $35 billion price tag happens to be the value that a recent JP Morgan report assigned to the company.

Comcast, in a statement, says the story is untrue: “”While we do not normally comment on M&A rumors, the report that Comcast has a deal to purchase NBC Universal is inaccurate.” NBC Univesal has no comment.

Clintonian parsers will note that Comcast’s denial has potential wiggle room: It isn’t denying, for instance, that the two companies had or are having talks. On the other hand, this is exactly the situation where corporate pr protocol calls for the “we don’t comment on market rumor and speculation” line.  That way, you have the option to update your statement if the story does turn out to be true. And for what it’s worth, I can’t recall the last time I saw a big, publicly traded company respond to an M&A story with this specificity.

All that said, this is tie-up that has a first-blush logic to it: Comcast is flush with cash, and has shown an interest in branching out into content before — in 2004, it made a run at Disney (DIS). And the drumbeat for GE to dump its 80% stake in NBC U has been more or less constant, even while the industrial conglomerate insisted it had no interest in selling.

Those drumbeats get louder every year around this time, by the way. That’s because Vivendi, which owns the remaining 20% stake in NBCU, has a put option that kicks in every November, and which could theoretically force GE into buying out the stake or spinning the whole thing out to the public.

More theoretical ammunition for a deal: Comcast is one of the few potential buyers who could swallow up all of NBC U. While might be lots of people interested in NBC U’s cable properties (USA, Bravo, SciFi, etc) there aren’t many who also want the company’s flailing broadcast property.

And while Universal’s film library is potentially attractive to some buyers, many of them — like Time Warner (TWX),  for instance — have no interest in the film studio, because they already have one.

If you want to play out the theoretical implications for digital, things could get very interesting. NBC is one of the founding partners at Hulu, the free Web TV portal that’s caused consternation for Comcast and other cable providers, who worry that the site is undermining the value of the TV programming they spend big money on. And Comcast and Time Warner have been trying out a “TV Everywhere” strategy that is in part a reaction to Hulu’s initial success. But let’s let the dust settle for a minute before we head in that direction.

Hollywood’s How-to Guide to Web Piracy

This one circulated around the Web earlier this month, but I didn’t see it until Pali Capital analyst Rich Greenfield included it in a note yesterday: A 10-minute presentation, delivered by Paramount COO Frederick D. Huntsberry, that gives a through, if rudimentary, tutorial on how steal the movies his company makes.

As the intro to the video notes, Huntsberry was delivering his  chat at Federal Communications Commission hearing earlier this month. And as best I can tell, he was trying to alarm the FCC by pointing out just how easy it is to grab this stuff.

Along the way, he notes how many “legitimate” companies participate, in their own way, in the piracy value chain. Everyone from small storage startup Drop.io, which allows users to host big data files for little or no charge, to Google (GOOG) and Yahoo (YHOO), which can point people toward pirate havens gets tarred with his brush.

Not surprisingly, the video inspired all manner of invective from my fellow bloggers, who railed about Huntsberry’s lack of sophistication, his temerity in asking the FCC for help in stopping piracy, and other offenses real and imagined.

I find it hard to get worked up about it, though, since I hear this stuff from media executives all the time. The big difference, though, is that the ones who are most impassioned about it usually don’t want the FCC to stop piracy. They want the industry to offer compelling alternatives to piracy.

For instance, here’s a site someone who works for a very big media company points me to with some regularity. Said executive says it’s the latest and greatest in piracy. I wouldn’t know, because the download scares me off (and in case my employer is wondering – I don’t condone piracy, but I do write about it). But I’ll take said executive’s word for it.

In any case, the idea is not to tip me off about a great place to hoover up a camcorded version of “Pandorum”, but to point out how fast this stuff evolves, and how difficult it is stop. I don’t see any harm in noting that, right?

Why Google and Yahoo Will Have to Keep Waiting for Mobile Money

phone boothMore and more people are using their phones to get onto the Web. When will advertisers follow in their footsteps?

Be patient, says a new report from Bernstein Research, which says that mobile ads will reach $2.2 billion by 2013. That’s a decent chunk of change, but still a small portion of the estimated $32 billion that will be spent on Web ads that year. And for Google (GOOG) and Yahoo (YHOO) it won’t be nearly enough to provide a meaningful boost to their business.

Bernstein analyst Jeffrey Lindsay isn’t down on mobile, by the way. Just realistic. He argues, sensibly enough, that mobile Web use is different than the kind you do at work or home: When you get online via your phone, you tend to look for specific bits of information, then hop off, as opposed to endless surfing from your desk or couch.

Which means that even as people transition to phones with good Web browsers like the one on Apple’s iPhone (AAPL), their mobile Internet time won’t replace the time they spend on their PCs — it will just augment it. Translation: By 2013, Lindsay figures that mobile will make up about 7% of Web page views. Click chart to enlarge.

bernstein mobile page views

What will that mean for Yahoo and Google, both of which have been talking up mobile as a big growth sector? Not that much, Lindsay says. He figures US mobile ads could generate $300 million for Yahoo in 2013 — about 4% of revenues.

And he thinks Google, who dominates mobile search in the same way it does in the wired world, could generate $600 million — less than 2% of its revenues. His math:

yhoo mobile breakdown bernstein

Not included in Lindsay’s analysis: Any mention of the mobile ad opportunities specific to the app ecosystem Apple is creating. As I noted earlier this week, Apple has now pushed out 2 billion apps to iPhone and iPod touch users, and the majority of those could support ads, if there’s a market for them.

[Image credit: mistress_f]

Time Warner’s $4.2 Billion AOL Fire Sale

tim_armstrong_lgWhen AOL CEO Tim Armstrong isn’t busy hiring former Google (GOOG) executives, he’s preparing for his company’s spin-off from the Time Warner (TWX) mothership, which is is supposed to happen by the end of the year. So when it does, how much will the Internet company be worth? Try $4.2 billion, says JP Morgan analyst Imran Khan.

Khan’s estimate is the first one I’ve seen floated in public so far. The analyst has proven to have a pretty good grip on AOL’s business to date, so I’m taking it seriously.

But for the record, note that not only is the $4 billion number a pittance of the company’ value during the original Web boom (remember those days?), it’s markdown from the $5.5 billion Google assigned to the company when it wrote down its 5% stake earlier this year. Which was, of course, a markdown from the $20 billion value Google had given it in 2005.

Here’s how Khan got to his number (click chart to enlarge).

aol valuation

AOL’s Google Reunion Grows Yet Again: Former YouTube Ad Guy Shashi Seth Joins Up

sethOf course, Time Warner’s (TWX) AOL has hired yet another Google (GOOG) veteran. That’s what the company does under the Tim Armstrong regime.

Today’s example: Shashi Seth, the one-time “monetization” boss at YouTube, who was most recently running sales at Cooliris, the video Web wall start-up. His new job: Senior vice president of global advertising products, reporting to Armstrong’s lieutenant (and Google vet, natch), Jeff Levick.

I thought Seth’s job title sounded a whole lot like that of Senior Vice President of Global Sales Development Erin Clift, whom AOL brought out to meet with reporters last week. But AOL folks tell me Clift is still there and has a much different role: She’s the “agency and market guru” and he’s a product guy.

Seth will be working out of AOL’s Silicon Valley outpost with new hire Brad Garlinghouse, who comes to AOL not from Google but via Yahoo (YHOO).

Here’s the release.

NEW YORK, NY – September 29, 2009 – AOL announced that Shashi Seth has joined the company as Senior Vice President of Global Advertising Products, responsible for building and scaling AOL’s advertising platform and developing industry-leading products. Seth comes to AOL from Cooliris, where he served as Chief Revenue Officer. Prior to that he was with Google, where he served most recently as head of monetization for YouTube.

“Shashi is unmatched in the industry as an innovator with an outstanding track record of developing new and better ways to serve advertisers on the Web,” said Jeff Levick, President of Global Advertising and Strategy at AOL. “As we move forward on our strategy of becoming the world’s largest provider of display advertising, Shashi will play a critical role in creating the best products in the business for our advertising partners.”

“I’m grateful to have the opportunity to come to AOL as it moves toward becoming an independent company,” said Seth. “The company already has an incredible combination of scale and a suite of great advertising products and technology, and I’m looking forward to working with AOL’s talented team to build on this strong foundation.”

Seth will report directly to Levick from AOL’s expanding Mountain View offices, joining Brad Garlinghouse, who was recently appointed to lead AOL’s Communications efforts and lead the company’s West Coast AOL Ventures efforts.

Prior to coming to AOL, Seth was with Cooliris, where he was responsible for revenue generation and business development. At Google, Seth was responsible for building advertising products, exploring all monetization opportunities, and defining business models for YouTube. Before that, Seth was the Product Lead for Web Search at Google. Prior to Google, Seth was with eBay, where he was responsible for building and managing eBay’s successful APIs & Platform. He has also worked for the Gap, where he launched their online stores, and co-founded two startups. Seth started his career at NASA Langley Research Center, where he built flight simulators and avionics equipment. Seth holds a Bachelor’s degree in Mathematics and Statistics from the University of Kanpur, India, a Masters in Computer Applications from the University of Pune, India, and a M.S. in Computer Science from the University of Miami.

How to Market an iPhone App: Get Apple to Market Your iPhone App

apple adThere are 85,000 apps* in Apple’s iTunes store. If you’ve built one of them, how do get yours to stand out?

If you’re lucky, you can get the press to do some marketing for you. And if you’re really lucky, you can get Apple to do your marketing for you.

The newest set of Apple ads focuses on apps made by big brands — like Barnes & Noble, Pizza Hut, Gap, Epicurious and Zagat — who can certainly afford their own promotional pushes.

And certainly those guys paid cash, or some other kind of compensation, for the consideration, right? Not as far as Advertisting Age can discern: The trade mag notes, with a bit of dismay, that there isn’t any kind of application process to get into Apple commercials, and that “the marketers in question didn’t request to be in the commercial at all.”

As far as I can tell, that mirrors Apple’s overall policy for iTunes, whether you’re talking about music, movies or apps: Unlike traditional retailers, or even competitors like Amazon (AMZN), there’s no way to buy shelf space at Apple’s digital store. If you want Apple to shine a spotlight on your stuff, you just have to hope that someone there likes your stuff. AdAge:

Apple did not immediately respond to requests for comment on the story, but it’s clear the company looks for apps that use as many aspects of the iPhone as possible, such as sound, shaking, GPS or the camera. It also seemed to favor anything that highlights features of the newest operating system, such as in-app payment. Additionally, it appears that brands are given more credit for good user experience than whether or not they can match Apple’s own cool factor.

Pizza Hut, for instance, doesn’t have many common associations with the tech giant but its app was the first from the quick-service industry that let users place delivery orders.

*Note that Apple’s app ecosystem has grown faster than its ad agency expected — the new campaigns announce that there are 75,000 apps, but that number is 10,000 short, according to a release Cupertino put out yesterday.