NBCU might be better fit with Comcast than with GE

Dwight Schrute, the egomaniacal paper salesman on The Office, calls NBC Universal Inc. home. So do Jay Leno, Tina Fey, The Real Housewives of New Jersey, the Olympic Games, and the Incredible Hulk Coaster, a ride at Universal Studios' theme park in Orlando, Fla.

But like the misfits who populate the Scranton office of Dunder Mifflin, Schrute's fictional employer, NBC Universal never lives up to the hopes of its corporate parent. Its earnings fell to $539 million in the second quarter of this year, a 41 percent drop from a year earlier and a drag on its majority owner, General Electric Co.

Now, the question is whether Comcast Corp., which has reached a preliminary agreement to acquire a 51 percent interest in NBC Universal, has a better shot at pumping up profit there than GE does.

In theory, Comcast has a big edge. With 24 million cable TV customers and 14 million subscribers to its high-speed Internet service, the Philadelphia cable giant already controls a huge segment of the entertainment audience.

Comcast needs programming to send out over its pipes. That is where NBC Universal could help. Comcast could wed its entertainment assets, including the Style Network, E! Entertainment, and its sports networks, to NBC Universal's Bravo and USA Networks, CNBC, and Universal Pictures.

The traditional NBC broadcast network - which encompasses 10 owned-and-operated stations including NBC10 in Philadelphia and such popular shows as 30 Rock - also would be part of the deal.

"NBC Universal may be more valuable to Comcast than it is to GE. Comcast has a locked-in client base. GE does not," said Eric Bradlow, codirector of the Interactive Media Initiative at the University of Pennsylvania's Wharton School.

NBC Universal and GE, a manufacturing and financial conglomerate, always struck industry experts as a strange pair.

"Entertainment is something of an odd fit when you're looking at jet engines and financial services," said Allen Sabinson, dean of Drexel University's College of Media Arts and Design. "Comcast, with its Internet and cable assets, is incredibly well-positioned to make the best use of cable and television assets, a tremendous [movie] library, plus sports and news and all of the other programming."

But consumers' ability to watch TV on the Internet is both an opportunity and a threat to Comcast: Why pay for cable when you can watch TV for free on the Web?

That question may be spurring Comcast executives to add programming that will attract audiences and advertising revenue.

Combinations of content and distribution have not often paid off in the past (witness the disastrous merger of AOL and Time Warner Inc.) And while NBC Universal's cable properties have grown, the broadcast network has lost viewers and advertisers, and programming that seemed lucrative has not paid off. NBC Universal lost $200 million on the 2008 Summer Olympics, for example.

Universal Pictures has had its ups and downs recently: The Will Ferrell comedy Land of the Lost lost about $40 million, while Fast & Furious, the third film in the street-racing franchise, has proved the most profitable and generated more than $350 million in worldwide box-office revenue.

Even so, the Universal Pictures film library, which includes To Kill a Mockingbird, Schindler's List, and Atonement, could boost sales of Comcast's On Demand movies.

Plus, NBC Universal owns part of Hulu.com, the popular Web site where viewers can watch programming from Fox, NBC, ABC, Comedy Central, MGM, and several other networks. That fits with Comcast chief executive officer Brian L. Roberts' vision.

"Our view is to offer consumers whatever they might want, on whatever device they want, and when they want it," he has said in the past.

If Comcast can make that happen, it could help fend off stiffening competition from satellite TV and Verizon Communications Inc.'s FiOS TV product.