In Depth March 13, 2008, 5:00PM EST

Deal or No Deal

(page 3 of 3)

Comcast’s Roberts is first and foremost a cable guy Bill Cramer

Before agreeing to pay $300 million for 20% of MGM in 2005, he invited his joint-venture partners, including Sir Howard Stringer, then chairman of Sony (SNE) USA, to his second home on Martha's Vineyard. There, Roberts said he would do the deal only if he could get the VOD rights to Sony's movies. Stringer, who says he was startled at the time, is now sanguine. "It turned out to be a good deal for both of us," he says. "The deal wasn't going to get done without Brian, and I think he knew it." Roberts ended up paying $10 million, a relative pittance. Now Sony is a key part of Comcast's library of 10,000 films and TV shows. Since then, Comcast has struck deals with other studios as well.

Yet people close to Roberts say he has been generally wary of programming deals over the years. The company owns several cable channels, including E! Entertainment Television. It also owns all or part of nine regional sports networks and recently joined forces with two studios to create Fearnet, an online horror channel. But Comcast's content has never generated more than 5% of its revenues, compared with 22% for Time Warner and 14% for Cablevision last year. Back in 2002, before the AT&T deal closed, Roberts told BusinessWeek: "We don't have a clearly defined content strategy."

The Disney deal, of course, would have brought a smorgasbord of movies, television programs, and cable networks, including juggernauts ESPN and The Disney Channel. But Roberts, who declined to comment on the deal, walked away after badly miscalculating shareholders' enthusiasm and Disney's willingness to negotiate.

NO JOHNNY HOLLYWOOD

Many investors insist that's for the best. Roberts, they say, is a cable guy at heart, the dutiful steward of a steady and predictable business. Subscribers, especially once they have signed up for the triple play of TV, phone, and Web service, typically stick around. The content realm, in sharp contrast, is hit-driven and hence much riskier.

Roberts certainly doesn't carry himself like a mogul. Unlike Murdoch, who once lived in Los Angeles and still enjoys a good movie premiere, Roberts shuns the Hollywood scene. He isn't flashy (he still travels to New York by train from Comcast's home city of Philadelphia) and doesn't do parties (he labors to be home in time for dinner most nights). Though friendly with Harvey Weinstein, who founded Miramax Films, and Frank Biondi, who used to run Universal Studios, Roberts is uncomfortable in their crowd. At Weinstein's recent wedding to model and designer Georgina Chapman, Roberts was seated at a table with a group of models. People who were there say he seemed ill at ease. "I don't think he was in his element," says Steve Rattner of the media investment fund Quadrangle, who is Comcast's investment banker and also attended the celebration.

Roberts' uneasiness with Hollywood was laid bare in 2003, when he contemplated buying Universal Pictures. Insiders say he was taken aback by studio chief Ron Meyers's $12 million salary (at the time almost twice what Roberts was being paid). As he does with every major transaction, Roberts asked his top executives to vote Yes or No on pieces of yellow paper, according to people who were there. They say the vote went against the deal because owning a studio was deemed too risky. Roberts never made an offer. (He declined to comment on the deal.) Had the vote been different, Comcast would now control USA Network and the Sci Fi Channel, both of which boast highly rated shows and charge lofty ad rates.

Yes, programming is expensive to produce, and the margins can't compete with Comcast's cable business. But movies and TV can generate revenue in several ways, including fees other cable or satellite companies pay to carry programs, advertising, and DVD sales, which have become money-makers for the likes of AMC and A&E. And if Comcast has to pay the higher program costs, better to pay them to itself. Moreover, says Malone, if Comcast owned quality programs it could sell them overseas, where the appetite for cable channels is growing.

Will Brian Roberts make that big transformative acquisition? Malone says the Street's negative reaction to the Disney bid may have made Roberts more cautious. "I think he got a little spooked," he says, adding that he pressed Roberts to hike the Disney bid. But Comcast's recently retired Chief Financial Officer Larry Smith says, "Something is going to come down the road that makes sense" for Roberts. The question is whether he will ignore the naysayers on Wall Street and press the play button.

With Tom Lowry in New York

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