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UBS: Comcast-NBC Deal All About Cable Assets

Despite the name NBC Universal, Comcast execs speaking at the UBS Global Media and Communications Conference today say that it won’t be that company’s broadcast or film unit that drive growth in a merger of its entertainment properties with those at NBC Universal. Instead, it was the combination of cable assets that was attractive to them, because that’s where the money is.

Comcast CEO Brian Roberts says that more than 8o percent of the new entity’s EBITDA will not come from the broadcast or film business, but comes instead from the combined cable stations. For Comcast, the main upside from the deal comes from NBC Universal being able to offer help in managing and growing its cable assets. Roberts points out, for instance, that the worst performing network in NBC’s cable group does better than the top three networks in Comcast’s portfolio combined.

That’s not to say that the broadcast and film businesses are not important to the deal. Comcast COO Steve Burke says that the NBC broadcast business, which Comcast sees as the network, the broadcast stations, and the TV production, are integral to the rest of the NBC Universal business. That includes synergies that derive from cross-promoting different properties through advertisements and interviews on NBC broadcast properties, as well as the creation of programming that can move to the cable networks. At the same time, because NBC is fourth among broadcast properties, and due to factors related to the broader economy, the broadcast business has a lot of upside.

As for the Universal film studio, things are a little more complicated. While admitting that the movie business is a cyclical ONE, Burke said he saw declines at the studio as part of a more permanent trend. He pointed to the downward trend of the overall DVD business as one area that Universal — and everyone else in the industry — is trying to deal with. At the same time, he said that Comcast could help the industry to find new business models through video-on-demand and electronic sell through products.

The company also needs to figure out how it will manage the transition to online video and digital forms of distribution while maximizing value from existing business models. “The jury is still out as to what the right model is [for video on the internet]. We don’t think people are making lot of money on free video over the internet using the current advertising model,” Burke said.

But Burke went on to talk about how his five kids watch more video on the PC than on the TV. “We want to be there, but on other hand we want to be very careful not to upset the economic models that got us where we are today,” Burk said. “TheĀ  consumer wants to be able to consume on multiple devices, but we have to keep an eye on how this content gets paid for.”

For a more in-depth look at the Comcast-NBC deal, check out Paul Sweeting’s analysis in his new research note over at our subscription research service, GigaOM Pro.