NBC's Universal deal is good for owners of cable networks.

NBC Chairman Robert Wright said "attractive cable brands" were behind his company's decision to buy Vivendi Universal SA's U.S. entertainment assets.

That's good news for Cablevision Systems Corp., Liberty Media Corp. and other companies that may try to sell networks.

NBC, a unit of General Electric Co. and the most-watched U.S. broadcast network, valued Vivendi's TV and film studios, networks and theme parks at $13.8 billion. Analyst Jordan Rohan said much of that is for USA Network, the Sci Fi Channel and Trio.

"The cable networks were really the gems of this transaction," said Rohan, a media analyst at Soundview Technology Group Inc. Referring to the value NBC is placing on Pads-based Vivendi assets, he added, "I wouldn't be surprised if at least half of it is for the cable networks."

Cablevision, the largest cable-television company in the New York area, may sell three channels it was offering as part of Edgar Bronfman Jr.'s failed bid to buy the Vivendi's assets. Those channels are American Movie Classics, the Independent Film Channel and WE: Women's Entertainment.

Cablevision spokeswoman Kim Kerns declined to comment about the company's plans. There also has been speculation that others that may go up for sale, including A&E Television Networks, which is jointly owned by Hearst Corp., Walt Disney Co. and NBC; and the Discovery Channel, an education network 50 percent owned by Liberty. CourtTV, jointly owned by Liberty and AOL Time Warner Inc., could change owners, as well.

The NBC-Vivendi agreement is "definitely going to trigger a tremendous amount of activity," said media analyst Jack Myers. "The valuation of cable networks is going to increase tremendously over the next 24 months."

Disney spokesman John Spelich had no immediate comment on whether the company might be interested in buying or selling stakes in cable networks. AOL Time Warner spokeswoman Mia Carbonell said her company isn't considering selling its stake in CourtTV.

Liberty, which has been boosting its ownership of properties amid investor criticism that its numerous minority stakes make the company's value hard to assess, didn't return a call seeking comment about its plans for the stakes in Discovery Channel and CourtTV.

Malone and Redstone

In July, Liberty Chairman John Malone said he would pay $7.9 billion for the 57 percent of home shopping network QVC Inc. he didn't already own. Malone was among those who expressed interest in Vivendi's cable networks and other assets.

The selection of NBC also sidelined one other media executive with a demonstrated appetite for cable networks: Viacom Inc. Chairman Sumner Redstone.

Redstone paid $1.2 billion earlier this year to purchase the 50 percent of the Comedy Central Channel he didn't already own. He had also expressed interest in Vivendi's cable networks.

The cable-network unit of Viacom, the third-largest U.S. media company, had revenue growth of 18 percent in the fast six months of the year and contributed more operating profit than any other division. U.S. cable networks have gained viewers at the expense of broadcast channels in recent years and will get a bigger share of advertising spending, making them more attractive assets for media companies, Myers said.

Basic cable television is now watched by 48 percent of U.S. households that have their sets on during primetime, compared with 41 percent three years ago, according to Nielsen Media Research.

The cable channels NBC would get from Vivendi--the fourth is NewsWorld International--may also help NBC extract higher affiliate fees from cable operators such as Comcast Corp.

USA ranked seventh among the cable networks for prime-time slots during the second quarter. Sci Fi ranked 16th, higher than NBC's Bravo, MSNBC and CNBC cable networks. With profit expected to decline at NBC next year as programs such as "Friends" go off the air, the combination of fees and advertising sales from Vivendi's cable networks would help the combined company's results.

A final agreement on the joint venture, in which NBC would own 80 percent and Vivendi 20 percent, may be signed as early as the end of this month. The transaction is expected to be completed next year.

Economics of cable

Janco Partners analyst Matthew Harrigan said Vivendi's cable properties were probably worth about $7 billion, based on their cash flow. NBC executives wouldn't comment. Cable operators like Comcast, the biggest U.S. cable company, generally pay cable networks a per-subscriber fee for their programming.

These so-called affiliate fees give networks like USA and Sci Fi a second source of revenue. That distinguishes them from broadcast networks such as NBC, which are entirely dependent on ad sales.

The distribution of video content--via both cable and satellite--is becoming concentrated in fewer hands. Comcast tripled its basic-cable subscriber base to more than 21 million after it acquired AT&T Broadband last November, and is almost double the size of its biggest rival, Time Warner Cable.

The concentration of distribution power may make it more difficult for stand-alone cable networks to maintain rates they charge or get higher affiliate fees, analysts said.

Owning: more cable channels insulates companies front the likelihood a cable provider will drop a channel from its menu, leverage NBC will gain if its Vivendi bid succeeds.

Still, not every cable acquisition has benefited the buyer. The $5.2 billion Disney paid for the Fox Family Channel in 200l is now seen by Janco analyst Harrigan as being too high. So is the $2.3 billion Viacom paid in 2001 for BET Holdings Inc., a channel catering to a mostly black audience.

Those were "some fancy prices," Harrigan said. General Electric, he added, is being more conservative. "This is a more disciplined valuation than some of the price tags we've seen in the past."