Summary:

Maybe it’s just as well that Jeff Zucker is leaving NBC Universal (NYSE: GE) when Comcast (NSDQ: CMCSA) takes over. Zucker and former News C…

NBC On Hulu
photo: NBC on Hulu

Maybe it’s just as well that Jeff Zucker is leaving NBC Universal (NYSE: GE) when Comcast (NSDQ: CMCSA) takes over. Zucker and former News Corp (NSDQ: NWS). COO Peter Chernin banded together for an online video joint venture, checking enough of their egos at the door to make Hulu happen. Now NBCU will be in the trick box of being forced to provide its programming to Hulu without any say in the JV — conditions of the Justice Department’s approval for the Comcast-NBCU merger. Both companies have agreed to the conditions, according to Justice officials.

Unlike the FCC, which simply votes on whether to approve based on conditions, DOJ filed an antritrust lawsuit today opposing the merger along with a proposed settlement that would allow it to go through. That proposal specifically includes this requirement:

Comcast must relinquish its management rights in Hulu, an OVD. Without such a remedy, Comcast could, through its seats on Hulu’s board of directors, interfere with the management of Hulu, and, in particular, the development of products that compete with Comcast’s video service. Comcast also must continue to make NBCU content available to Hulu that is comparable to the programming Hulu obtains from Disney (NYSE: DIS) and News Corp.

Comcast can maintain NBCU’s economic interest in Hulu. Whether it would have a vote in a possible IPO or any other financial areas is unclear. Whether it would retain its ownership is also unclear.

In a call with reporters, Assistant Attorney General Christine Varney said she was more concerned about the possible negative impact of having Comcast on the board. “Whether or not they remain investors is a commercial matter that they will sort out.” (The competitive impact assessment included in the Justice filings refers to Hulu as one of the “most successful” online video distributors, apparently based on its traffic.)

Comcast’s David Cohen posted the company’s version as part of its corporate blog post on the Hulu conditions:

Comcast/NBC Universal may retain its economic stake in Hulu. Comcast/NBC Universal has agreed to give up its voting rights and board representation rights for Hulu. Comcast/NBC Universal will continue to provide content to Hulu in a manner consistent with Hulu’s other broadcast network owners.

Speaking with reporters this afternoon, Cohen expressed no desire to sell the “minority” interest in Hulu (32 percent, to be exact) — and sounded fairly proud that divestiture wasn’t required despite the efforts of opponents to the deal. “We prefer to maintain ownership,” he said.

But he left the door open, noting later that because of the competition issues, Hulu is one of the NBCU investments that Comcast has the least information about.
(Chernin was one of Comcast’s pre-bid advisors following his departure from News Corp.)

Should Comcast eventually choose to sell, Hulu’s other equity partners — News Corp., Disney, Providence Equity — could divvy up the stake and may have first rights in that case.

What does Comcast have to do? The three NBCU board members will have to resign and the company formally will have to renounce certain rights. It will become a “passive economic investment.” The DOJ consent decree calls for Comcast to act on Hulu within 10 days of the final judgment.

The settlement also prevents Comcast anything but aggregated financial statements and info needed in NBCU’s rights to purchase advertising inventory; no “confidential or competitively sensitive information.”

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