The merger between Comcast and NBC Universal derives evident advantages. The latter will get an additional advantage of US$ 800,000 as a voluntary nonrefundable fee being payment by Comcast (Dortch, 2010). A number of reasons have prompted this merger. The combined efforts of Comcast and NBCU provide the power of synergy, which maximizes the overall performance in Broadband Communication. Specialization will be achieved that will result into efficiency of service delivery. There also potential risks associated with this merger.
The initial risk is that of Comcast paying US$ 800,000 regularly to the US Federal Treasury (Dortch, 2010). The decree came during the establishment, just before the commencement of the business operation. The compliance to the decree meant that its sustainability was in jeopardy. There is also heavy investment in Standalone Broadband installation. In partnership business, the partners bear the cost of business operation and any possible losses. Comcast-NBCU Corporation will also bear the burden that they could have avoided were it not for the merger. The merger will bring other changes not only in the management, but also in the accounting and reporting. The merger requires signing of different documents to for the whole process to be complete. Some of these are requirements by the law while others are binding the two businesses.
The Merger between Comcast Corporation came as a decree of the Federal Communications Commission after a meticulous insight into the performance of the two Corporations in Washington DC. In the process of striking the merger deal, the commission ruled that Comcast would pay US$ 800,000 as a voluntary nonrefundable fee (Dortch, 2010). This was to settle the cost of the extension of stand-alone Broadband network connection for customers to subscribe. However, the commission anticipated Comcast not to terminate its services to consumers who were no subscribers to its video connection services. Instead, it obligated Comcast to maintain a logical bandwidth and charges to its consumers. In essence, the joint Venture saw Comcast Corporation terminate its business relation with the General Electric Company, and adopt NBC Universal together with its subsidiaries. Comcast would then possess 51% of the total shares of the new company (Winseck, 2012).
The merger is a masterly example of consolidated business ownership. One of the reasons for the merger was the need to promote broadband products as a business solution to consumers. Secondly, it focused on the strategies of creating competitive advantage against competitors, some of whom were already providing satellite and internet video services. The FCC analysis saw the merger as a mechanism to maximize consumer benefits and hence win consumer loyalty amidst perceptible competition in the communication sector. Lastly, the merger was to ensure people with particular needs and disabilities are able to access technology and information. The merged corporation therefore, had the responsibility to broadcast multimedia information in the form of video, through various distribution channels on the internet. It enables partner companies to enjoy joint revenue, and exercise joint resource allocation.
The requirement of the FCC for Comcast to pumping US$ 800,000 regularly to the US Federal Treasury is a risk. Of course, the decree came during the establishment, just before the commencement of the business operation. Compliance to the decree meant that its sustainability was in jeopardy. Another risk was the heavy investment in Standalone Broadband installation. Just like in any other partnership business, the partners bear the cost of business operation and any possible losses. The same is true with the partners of Comcast-NBCU Corporation. It is possible to estimate the magnitude of its possible risks of losses.
Without overemphasizing the risks, there are also many possible rewards. The combined efforts of Comcast and NBCU provide the power of synergy, which maximizes the overall performance in Broadband Communication. Division of Labor and job specialization is highly achievable, hence the efficiency of service delivery. The entertainment industry involves many interrelated processes requiring professional skill. Thirdly, the brand image of the joint corporation becomes impressive because of customer satisfaction and professionalism. The quality of transmission would ensure consumers would watch high quality videos and TV channels.
The public views the merged corporation both as a consumer service and as corporate social responsibility. Consumer service because it provides high bandwidth broadband communication and satellite connection, and corporate social responsibility because it articulates the needs of people with disability (Winseck, 2012). Owing to this, the merged corporation creates an unbreakable bond between its fraternity and the public. In spite of that, Comcast has constantly listen to the sentiments of consumers to enable it maintain a high level of consumer satisfaction, and remain unchallenged amidst possible critics. At the same time, FCC has the responsibility to exercise control by monitoring the contents of information broadcasted to the consumers. Some critics nevertheless argue that the merged corporation will give Comcast power and control to manipulate its consumer’s decisions on the choice of entertainment.
The two companies operate in partnership, Comcast playing the role of cable connection while NBC Universal together with its subsidiaries provides broadcasting Network and channel distribution services. One of the factors, which motivated Comcast to form joint business with NBCU, was the reforms in Telecommunications The new rules allowed TV and radio broadcasting companies consolidated ownership. Comcast owns 51% of the companies’ shares while NBC Universal owns the remaining 49% (Winseck, 2012). However, the condition of FCC that Comcast solely pays US$ 800,000 as payment for the merger. FCC also scrutinized the merged corporation to ensure it complies with the rules and regulations governing the merger.
The type of business combination that exists between the two companies is both a joint venture and a merger. It is a merger venture because the two have a combined ownership of assets, which were formerly under single companies. Similarly, the administration of the joint venture is a joint responsibility exercised through power sharing between staff from both companies. The key partners in the business combination are Comcast and NBCU. There are other subsidiaries participating in the background, such as Universal Theme Park and Universal study (Winseck, 2012). Still critics argue that Comcast exercises more control on the business operations than the co-partner and the subsidiaries (Noam, 2009).
General electric sold 51% of its NBC shares to Comcast, remaining with only 49% in 2009 (Hoyle & Doupnik, 2010). The decision of General Electric to sell its share of NBC came due to shareholder’s worries related to financial depression and infrastructure cost. Since the merger, combined Comcast /NBCU have made remarkable performance to an extent of being the largest TV cable network services provider. Comcast is still determined to expand the network coverage of its local news and increase its channels. It also plans to provide broadband internet access to Libraries and learning institutions (Winseck, 2012). As an expansion strategy, Comcast intends to run sales and advertisement promotions, in order to accelerate the sales of its broadband internet services in wider market coverage.
The transaction involving the sale of NBC stock to Comcast only considered the stock perspective. Had it considered the cash value perspective then the value of dollar then the amount would have been a real issue of concern. Perhaps it would have required re-negotiation since foreign currency exchange rates fluctuate daily. General Electric simply realized it was becoming non-effective in managing NBC Universal, and so withdrew from active management through the sale of shares. During the deal, the stock valuation placed NBC Universal at US $30 Billion (Benkler et al, 2010). Comcast agreed to pay General Electric US$6.5 Billion (Winseck, 2012). Along with that, Comcast agreed to contribute part of its programming assets to the merged Corporation. The joint venture allows General Electric to continue investing in NBCU in terms of cash and infrastructure development. It also allowed General Electric to share the benefit of NBCU (Hoyle & Doupnik, 2010). In the profit allocation at the end of a financial period, the system allocates each partner is allocated benefits in direct proportion to its share in the business stock..
The combination of Comcast and NBC Universal is evident in the profitability reports as well as the customer satisfaction indicators, and the alignment of its daily operations to its core objectives. Customer satisfaction is an intangible non-quantifiable attribute, which only manifests in consumer opinions and expressions. Since the merger, Comcast offers the most watched TV geek program, which is a clear indicator that Comcast has a wide market capture (Hoyle & Doupnik, 2010. Comcast/NBC profitability rises gradually, with the latest increasing by 30% (Winseck, 2012). The core objective of Comcast/NBC Universal is to provide information access to people with disabilities. Comcast has ensured that information is accessible is available everywhere and in various form.
The partnership between Comcast and NBC Universal is governed by rules and regulations stated in the FCC’s consent decree with a comprehensive compliant plan. This plan defines guideline to what Comcast has to do. One of the responsibilities of Comcast in the partnership is to provide customer service training to its sales team and customer service representatives. This is to reinforce product awareness among its staff. Secondly, Comcast has to guarantee online availability of Standalone broadband services for purchase for both the new and old consumers. The third responsibility is to organize sales promotions on Comcast’s Broadband internet services, to sensitize consumers on availability of new products in the market. Finally, Comcast is obliged to provide performance starter services at its retail locations and using its assigned dealers (Dortch, 2010). General Electric on the other hand continues to invest its resources but avoids active participation in the running of the Broadband Internet business.
Even though partnership is a good business idea, there are inevitable challenges that accompany it. One of the challenges is relating to the management. Every partner wants to have influence on every the events in the business. Comcast for example receives criticism from opponents about its influence on the merger. Another challenge is about legal bindings controlling decision-making (Dortch, 2010). Joint ventures are obliged to adhere to strict consents, which cause bureaucratic hiccups.
References
Benkler, Y., Faris, R., Gasser, U., Miyakawa, L., & Schultze, S. (2010). Next generation connectivity: A review of broadband Internet transitions and policy from around the world. Cambridge, MA: Berkman Center for Internet & Society.
Dortch, M. (2010). Comments of the Coalition of Organizations for Accessible Technology (COAT). Washington DC, USA: Federal Communications Commission.
Hoyle, S. & Doupnik, M(2010). Fundamentals of Advanced Accounting 4th edition. Notre Dame: University of Notre dame.
Noam, E. (2009). Media Ownership and Concentration in America. New York: Oxford University Press.
Winseck, D (2012) The Future with High-Speed Broadband Conference. Ottawa, anada: School of Journalism and Communication, Carleton University.