It Looks More Likely GE (GE) May Keep NBCU, Force Job Cuts

With the passing of each hour, there are more media reports that talks between GE (NYSE:GE) and Vivendi for the French company to sell its 20% of NBCU to the American conglomerate have moved closer to collapse. Without Vivendi’s cooperation, GE cannot form the joint venture it is creating with Comcast (NASDAQ:CMCSA) to take the management and eventually the ownership of the entertainment company out of its hands.

At this point the Vivendi/GE conversations may have broken down completely and Vivendi may try to force NBCU toward an IPO of the business. Vivendi believes that its stake in NBCU is worth about $1 billion more that GE is offering according to accounts in both The New York Times and the FT. Comcast is prepared to value 100% of NBCU at $30 billion.

GE may end up holding on to NBCU for at least another year, which would leave it as a sort of orphaned operation. Jeff Zucker, the current CEO of the entertainment company, is slated to keep that role if Comcast takes control. Zucker may find himself running the firm as part of GE although Wall St. views it as a drag on GE’s prospects and it an odd fit with the conglomerate’s infrastructure and industrial businesses.

NBCU faces that same difficulty that all large legacy entertainment firms do. Advertising revenue is growing slowly if at all. The costs of programming are high. Cable is becoming more competitive as new channels are launched. NBCU has a movie studio that relies on blockbusters for its profits.

Zucker needs to improve the NBCU profits, especially if he has to serve GE’s short-term needs. That will almost certainly involve a big cost cutting effort that will put hundreds of more media workers on the streets.

Douglas A. McIntyre