In The Room: Brian Roberts’ One That Got Away

Good evening, I’m Dylan Byers.

Welcome back to In The Room, my bi-weekly private email that takes you behind the scenes of the media industry. Tonight, an exclusive scoop on Brian Roberts’ latest M&A play: a proposal to merge NBCUniversal and Electronic Arts that almost came together—and still could, down the line.

Brian Roberts’ One That Got Away

For months, the media elite have been wondering what the Comcast impresario might buy to scale up in the content wars. Turns out, Roberts had a plan that almost came together.

DYLAN BYERS

For the last four years, What's Brian Roberts going to buy has been a perennial parlor game question among the Sun Valley set. It all started in 2018, when the Comcast-NBCUniversal chief tried and failed to intercept Bob Iger's takeover of the Fox entertainment assets and settled for Sky, instead. The question came up again last year, when David Zaslav masterfully executed his stealth merger with WarnerMedia. The former Time Warner media assets, after all, would have been a boon to NBCUniversal, helping them compete more aggressively with Netflix, Disney, et al. And the question came up again this year after Microsoft C.E.O. Satya Nadella agreed to pay $69 billion for Activision Blizzard, an asset that would have provided NBCU with a massive infusion of new I.P. and immediate entry into the highly lucrative gaming space.

Whether Roberts was too cautious, too late, too difficult, or too smart to land any of these is a matter of debate. He tried hard for Fox and is said to have wanted WarnerMedia. Whether or not he wanted to pursue Activision, he certainly never got around to having serious conversations about it. Whatever the case, the question stands, and remains as pressing as ever—especially as Peacock, NBCUniversal's streaming play, languishes behind its competitors. Though Roberts has said that NBCUniversal doesn’t need mergers and acquisitions to achieve scale, the conventional wisdom among many of his peers and competitors, as well as among a considerable set of investors and analysts, is that, as a matter of fact, everyone does. Moreover, the Roberts family has traditionally been among the most acquisitive in the business.

Back in January, after news of the Microsoft-Activision deal broke, I noted that Roberts had few good options left: ViacomCBS, with a market cap of $21 billion, was too small to deliver meaningful scale to NBCUniversal; and, regardless, any potential acquisition would have required a divestiture of overlapping assets like the CBS broadcast station. The other option, I wrote, was Electronic Arts, the formidable gaming company, which had a $40 billion market cap at the time that has since fallen to $36 billion. While not as big as Activision, the Redwood City-based company would have given NBCUniversal a significant stake in the gaming world. An acquisition of EA would also have created opportunities for synergies between NBCUniversal’s vast catalog of sports rights and Electronic Arts’ popular EA Sports franchise, including Madden.

As it turns out, Roberts saw this logic as well. In the wake of the Microsoft-Activision deal, Roberts approached Electronic Arts C.E.O. Andrew Wilson with a proposal to spin off NBCUniversal and merge the media and gaming giants, four sources with knowledge of the proposal told me. The general terms of the proposal, which lawyers and bankers for both sides negotiated for several weeks, would have seen the Roberts family take majority control of the combined entity. In the configuration most seriously discussed, the company would have been run by Wilson. If the deal went through on those terms, NBCUniversal C.E.O. Jeff Shell would likely have been elevated to another role at Comcast, one source with knowledge of the plans said. Shell was involved in deal discussions, I am told.

The proposal ultimately fell apart within the last month due to disagreements over price and structure. Jennifer Khoury, the chief communications officer for Comcast, declined to comment. Electronic Arts spokesperson John Reseburg said his company would not comment “on rumors and speculation relating to M&A,” and added: “We are proud to be operating from a position of strength and growth, with a portfolio of amazing games, built around powerful IP, made by incredibly talented teams, and a network of more than half a billion players. We see a very bright future ahead.”

In recent years, as media companies have taken greater interest in the rapidly-growing gaming industry, Wilson and Electronic Arts have held talks with a number of different potential suitors, including Disney, Apple and Amazon, sources with knowledge of those talks told me. Several sources familiar with these talks say EA has been persistent in pursuing a sale, and has only grown more emboldened in the wake of the Microsoft-Activision deal. Others say that EA is primarily interested in a merger arrangement that would allow Wilson to remain as chief executive of the combined company. Representatives from Disney, Apple and Amazon all declined to comment.

Meanwhile, another notable idea that has been bandied about among the Sun Valley set in recent years would see Disney spin off ESPN and combine it with Electronic Arts. As I reported last October, Bob Chapek came into his job more open than his predecessor to entertaining an ESPN spin off. There is also some notable history between these two companies. In early 2018, following the sudden resignation of ESPN chief John Skipper, then-Disney C.E.O. Bob Iger tried to recruit Wilson to be head of the sports network. Wilson passed, and the job went to Jimmy Pitaro.

Nevertheless, Wilson continues to eye a Disney tie-up: Electronic Arts approached Disney as recently as March in pursuit of what sources described as “a more meaningful relationship” than licensing deals—though it’s not clear whether that meant an ESPN-EA tie-up, some sort of try-before-you-buy arrangement, or a direct sale. Whatever the case, Disney decided not to pursue those conversations. Indeed, the market seems so focused on Disney+’s subscriber growth, and Chapek has other important items on his grocery list, such as buying the enormously expensive rights to the Indian Premier League, the country’s top cricket league, which is essential to its international strategy, and potentially buying Roberts out of Hulu in a few years.

For now, then, Electronic Arts remains a potential merger target for Roberts. And, as always in matters of M&A, it’s possible that the two parties could come back to the table.

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