NEW YORK/WASHINGTON (Reuters) - Comcast Corp will sacrifice day-to-day control of popular video website Hulu as a condition for regulatory approval of its combination with NBC Universal, clearing the way for the deal to close in the next two weeks.
The Federal Communications Commission and the Department of Justice approved the combination - but with a variety of conditions — more than a year after the companies announced it. The deal creates a new media powerhouse that controls not just how television shows and movies are made, but how they are delivered to people’s homes.
Comcast sees it as a potent combination, particularly as viewing habits change and audiences expect to find their favorite entertainment on the TV set as well as the PC, tablet and smartphone. Not only is Comcast the largest U.S. cable company, it is also the top broadband provider.
That advantage was not lost on the FCC or Justice Department, who made it clear in approving the deal on Tuesday they were worried about Comcast stifling competition from new online video competitors.
As a result, regulators will require that Comcast give up what the Justice Department described as management rights to Hulu, the online video site co-owned by News Corp, Walt Disney Co and NBC Universal.
While Comcast and NBC Universal could remain part owners of the site, they will relinquish voting rights and board representation.
Comcast executives played down the requirement and said they had no plans to sell the stake in Hulu, which has emerged as the premier site for streaming TV shows with a roster of hits like “The Office,” “Modern Family” and “Family Guy.”
“We’re perfectly satisfied with that,” said Comcast Executive Vice President David Cohen. “We continue to have an interest in the growth and advancement of Hulu ... (but) we’re not uncomfortable with the restrictions on governance rights that were imposed.”
Among the other conditions is one that requires Comcast to make NBC Universal programs available to streaming services other than Hulu — so long as those services have deals in place with one or more of NBC Universal’s competitors. Put another way, if Apple TV struck deals with CBS or Fox, it would then have the right to distribute NBC shows on similar terms.
What is more, Comcast will be required to make stand-alone broadband service available to customers at $49.95 per month for three years. That means it can’t force customers to take both its broadband and cable services.
Many of the other conditions will remain in place for seven years, a longer period than regulators usually require.
Once the deal closes, Comcast will acquire a 51 percent stake in NBC Universal from General Electric Co, creating a $30 billion business that would include broadcast, cable networks, movie studios and theme parks.
“We have adopted strong and fair merger conditions to ensure this transaction serves the public interest,” FCC Chairman Julius Genachowski said in a statement after the vote on Tuesday. The FCC voted 4-1 in favor of the deal.
Comcast Chief Executive Brian Roberts thanked regulators, and called it a “proud and exciting day” for the company, which his father, Ralph Roberts, founded in 1963. Company executives said the regulatory conditions would not have any impact on its financial projections.
Other key requirements are intended to ensure that Comcast deals fairly with rival cable and satellite providers since it will now be the owner of major content from NBC and its various cable channels. In other words, it will not be able to withhold content it owns like USA or CNBC from a competing pay-TV company.
The only dissenting FCC vote came from Commissioner Michael Copps, who objected to the merger on the grounds it would give Comcast too much power.
“The potential for walled gardens, toll booths, content prioritization, access fees to reach end users and a stake in the heart of independent content production is now very real,” Copps said in a statement.
Other critics of the deal expressed disappointment, including Minnesota Democratic Senator Al Franken. “With approval of this merger, the FCC has given a single media conglomerate unprecedented control over the flow of information in America,” he said in a statement.
Additional reporting by Yinka Adegoke in New York and Jeremy Pelofsky and Diane Bartz in Washington; Editing by Dave Zimmerman, Robert MacMillan and Phil Berlowitz