Comcast Corporation has completed its offer for NBC-Universal and they accepted in an early morning press conference unveiling a deal that had been privately rumored for months.  Comcast will assume 51% control of NBC-Universal, with NBC-owner GE controlling the remaining 49% stake.

The combined entity, to be known as Comcast Entertainment Group, will bring Comcast-owned media into the home of every American, even those not served by Comcast Cable.

Although company officials said little would change immediately, Comcast has not ruled out dropping the legacy ‘NBC’ brand down the road.  Broadcasting & Cable noted the company may be hinting at its intentions through its domain name registrations.  The trade publication reported Comcast’s registrar locked ComcastNBCU.com and NBCUComcast.com in mid-October, but returned and registered ComcastEntertainment.com ten days later.

Brian Roberts, CEO of Comcast Corporation, joked that NBC’s fourth place position among the major American broadcast networks might “get in the way” of recognizing NBC-Universal’s cable networks, which he characterized as “fantastic.”  Perhaps a change of NBC, which stands for the National Broadcasting Company, to Comcast Entertainment Network might change that perception?

Changes like that, and the implication of renaming a major American network after what most Americans recognize as a cable company has brought significant unease among some examining the scope of the transaction.

Comcast CEO Brian Roberts

Comcast Entertainment Group will control a major American broadcast network, Telemundo – a major American Spanish-language broadcast network, Comcast Cable, the nation’s largest cable system operator, several cable networks, 27 GE-owned television stations in major American cities, a large number of regional sports networks, and more.  It also manages broadband service for nearly 16 million Comcast customers.

Stifel Nicolaus telcom analysts Rebecca Arbogast and David Kaut warned potential investors this deal has a lengthy and difficult regulatory review waiting for it in Washington, DC: “We would expect scrutiny of the transaction’s impact on program access, program carriage and retransmission consent, as well as local TV advertising, broadcast-network affiliate arrangements, program bundling, broadband/Internet video and network neutrality and possibly other issues, including cable pricing…broadband service, labor concerns, spectrum and privacy.”

The dealmakers recognized the challenges and started throwing voluntary concessions to concerned groups.  Unimpressed Comcast shareholders got a bone thrown their way — a surprise 40% increase in their dividend, in hopes that will quiet shareholder unease.

Comcast also sent letters to regulatory officials promising NBC will remain a free, over the air broadcast network and not be converted into a cable-only channel.

The cable operator will also add additional independently-owned cable networks to its lineup to quiet concerns it might favor its own cable networks.  Of course, whether customers want to watch and pay for those channels is another matter.

Finally, Spanish language services from Telemundo and other channels will receive enhanced free on-demand cable viewing options in cities where Telemundo is seen over-the-air.

For broadband users, the deal means Comcast gets a seat at the table of online video provider Hulu.  NBC-Universal was a major proponent of the online video service which gives broadband users free access to broadcast and cable programming.

That deeply concerns Andrew Schwartzman, president and CEO of Media Access Project.  He’s concerned about the enormous market power Comcast Entertainment will have.

“I am especially concerned about the effects the merger would have on evolving technologies for delivering video over the Internet….I also expect a great deal of opposition from the private sector, since the merger has anti-competitive implications for local TV stations, independent cable programmers, advertisers, internet video entrepreneurs and many other businesses,” he told The Hill.  Both Media Access Project and Free Press have called on regulators to reject the deal.

“The American public doesn’t want a media behemoth controlling the programming they watch and how they can access it,” said Josh Silver , executive director of Free Press. “If Washington allows this deal to go through, Comcast will have unprecedented control of marquee content and three major distribution platforms: Internet, broadcast and cable. We’ve never seen this kind of consolidated control.”

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This morning’s Today show on NBC briefly reviewed the deal and what it means for consumers (1 minute)

[flv]http://www.phillipdampier.com/video/CNBC Parsing the Comcast NBC Deal Craig Moffett 12-03-09.flv[/flv]

Sanford Bernstein’s Craig Moffett talks with CNBC about why many telecom sector analysts are underwhelmed by the Comcast-NBC deal (3 minutes)

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GE CEO Jeffrey Immelt and Comcast CEO Craig Roberts join CNBC’s David Faber for an in-depth discussion about the transaction and the changing media business. (28 minutes)

Learn more about NBC’s broadcast operations impacted by this deal below.

… Continue Reading

Phillip "But I Don't Even Want The Golf Channel" Dampier

Time Warner Cable unveiled a new website this afternoon, RollOverOrGetTough, asking customers whether they want the company to “roll over” and pay the prices cable programmers demand or “get tough” and threaten to drop channels that demand too much.

This, of course, is rich coming from the company that loves to raise your rates every year, overcharge you for your broadband service with experimental usage caps and “consumption billing,” and has had a long history of owning and/or controlling many of those ‘greedy cable networks.’  Oh, and they won’t give you the choice of paying for just the channels you want to watch, either.

Want to send a message to the cable network bad-boys that demand too much?  Give your customers the right to opt out.

The cable industry has fought a long-running battle with cable programming networks over the fees they pay on a per-subscriber basis to carry those channels.  The revenue earned by those networks helps them acquire programming that is attractive to potential viewers, and the advertisers that follow.  Back in the 1970s and 1980s, most cable subscribers spent their time watching local broadcasters, “superstations” — imported TV stations from cities like New York, Chicago, Atlanta, and Los Angeles, and premium movie channels.  The basic cable networks back then didn’t run off-network TV shows.  Most ran cheaply produced documentaries, talk shows, imported shows from overseas, limited interest cultural programming, or music videos.  Sports programming rarely involved major teams, or major sporting events for that matter.

By the early 1990s, virtually every basic cable network was either owned outright or in part by one of the major national cable or broadcasting companies.  NBC and ABC dabbled in cable themselves, while CBS steered clear after being burned by a terrible experience with CBS Cable in the early 80s.  Launched as a cultural network devoted to opera, theater, and dance, it shut down a year after launching, having attracted minuscule audiences.

The lesson learned — create or buy programming viewers will actually want to watch.  That takes money, and the fees charged to cable operators for cable networks began rising rapidly.  Suddenly, off-network TV shows viewers used to watch on WPIX, WGN, WWOR, KTLA, or WTBS suddenly started showing up on basic cable instead.  The biggest turning point came when sports networks like ESPN started bidding for, and winning the rights to televise major league sporting events.  Nothing costs more than sports, and broadcast and cable networks have been bidding up prices ever since.

As basic cable networks became popular with viewers, their ability to make demands on cable operators grew exponentially.  Suddenly, certain cable networks demanded they be given low channel numbers, that cable companies had to also carry affiliated spin-off cable networks if they wanted access to their primary service, and that programming must always be carried on basic cable — not on some digital cable tier or other similar extra-cost tier.

For years, cable operators didn’t care too much as they just passed the increases on to customers.  Where could viewers go except to the cable company?  I recall the sticker shock customers had when basic cable first exceeded $20 a month, then $30.  Today it’s headed for $60 a month in many areas.  Cable companies attempted to placate angry customers by adding several new channels to the lineup just prior to the rate hike letter, telling them they were now receiving greater value than ever from their cable company.  The following year, those new channels wanted more money, too.

The “500 channel universe” that sounded promising a decade ago is now a nuisance for many subscribers, irritated they are paying for hundreds of channels they never watch.

[flv width=”480″ height=”380″]http://www.phillipdampier.com/video/WIVB Buffalo Report on TWC Campaign 11-25-09.flv[/flv]

WIVB-TV Buffalo reported on Time Warner Cable’s fight against programming prices, but itself (along with sister station WNLO-TV) was thrown off Time Warner Cable’s cable lineup over a contract dispute for most of October, 2008.  LIN TV Corporation, owner of both stations, had reportedly demanded 25 cents per month per subscriber for permission to carry the stations on cable. (1 minute)

In a difficult economy, justifying a $150-200 cable bill for television, broadband, and phone service is harder than ever.  Consumers want new options.  Satellite television provided limited competition, and a few large phone companies are set to deliver a bit more.  But some subscribers have decided paying this kind of money for television every month is outrageous, and they have finally jumped off the merry-go-round.  Some younger people are never getting on, relying entirely on their broadband service to watch television programs and movies on demand.

Time Warner Cable’s attempt to enlist customers in their sudden war on programming rate increases is likely to be seen by many as a classic pot to kettle cable quandary.  The company that still wants to force Internet Overcharging schemes on their broadband subscribers and is now raising rates in many areas has some chutzpah asking customers to fight for them:

Is the Comcast-NBC deal the result of media moguls playing with cable monopoly money?

A few weeks after word broke that Comcast was sniffing around NBC-Universal some on Wall Street are wondering whether a deal is more trouble than its worth.  The deal, valued at $27 billion dollars, would wed the nation’s largest cable operator with NBC-Universal, which owns a broadcast network, a Hollywood studio, and several cable networks.

Bernstein Research, which has favored cable stocks for years, has been the source of considerable unease about the deal.

“Media moguls see it almost as a birthright to buy and sell assets, but most of it clearly has not worked out,” said Craig Moffett, who covers the cable industry for Bernstein. “The value of the deal is the conceptual value of vertical integration, and most of it is against the law as a regulatory matter.”

Moffett’s comment was part of a piece in The New York Times raising questions about whether a Comcast-NBC deal would create more problems than it would solve.

David Carr, writing for the Times, suggests the heady days of media moguls building celebrated giant corporate empires might be behind us, particularly in telecommunications.  Carr, among others, raised memories of the AOL-Time Warner deal, when an upstart pre-dot.com-crash online service  managed to build enough value to buy a content mega-company like Time Warner for $164 billion dollars in 2000.  Just nine years later, AOL has become a forgotten relic, a shadow of its former glory.  Even if the idea of wedding AOL’s online network with Time Warner’s content sounded like a good idea at the time, in the end it just didn’t work out, and Time Warner CEO Jeff Bewkes is devoting plenty of attention spinning AOL away, right down to peeling the letters “AOL” off the front of the building.

Deal proponents suggest Comcast’s cable systems combined with NBC-Universal’s content would give Comcast diversity in its business model, which relies almost entirely on its cable systems.  Opponents say it will preoccupy Comcast with trying to integrate its focused cable-oriented business with a Hollywood studio and a legacy television network and the distractions that come with both.  The deal also comes with a 30% stake in Hulu, which is good and bad according to Carr.  It’s good because it gives the cable operator some control over a video distribution channel that could directly challenge its cable interests.  It’s bad for precisely the same reason, practically begging for regulatory hurdles from a more sensitive-to-antitrust Obama Administration.

Carr suggests if Comcast is in the acquiring mood, it might want to keep its focus on the remarkably stable cable industry in a downturned economy.  One such company, Time Warner Cable, the nation’s second largest cable operator, is a candidate according to Carr, and like Comcast is almost entirely focused on the cable television business.

Of course, such a deal would also certainly attract regulatory attention because of its size and scope.

The Wrap last night reported that Comcast, the nation’s largest cable company, was deep in talks to purchase a [potentially controlling interest in NBC-Universal, a report Comcast was disputing as of late last night.

Comcast, the nation’s leading provider of cable, entertainment and communications products and services, is in talks to buy the entertainment giant NBC-Universal from General Electric, according to knowledgeable individuals.

Deal points were hammered out at a meeting among bankers for both sides in New York on Tuesday, executives familiar with the meeting said.

Two individuals informed about the meeting said that a deal had already been completed at a purchase price of $35 billion.

A spokeswoman for NBC-Universal had no comment. Comcast responded with this statement: “While we do not normally comment on M&A rumors, the report that Comcast has a deal to purchase NBC Universal is inaccurate.”

Bloomberg News also reported interest by Comcast in a deal with two of NBC-Universal’s owner-partners: GE and Vivendi of France.  But they noted that three unnamed people with knowledge of the deal claimed Comcast would acquire only a 50% stake in the company, not 100% control, contingent on Vivendi selling its 20% stake to Comcast.

If such a deal were concluded, the NBC television network, two cable news channels, The Weather Channel, and Universal Studios would effectively be under the Comcast umbrella.  Comcast, already the nation’s largest cable company, would have a major ownership interest in a large television content-producing family of companies.  Cable companies have recently feared being owners of “dumb pipes” in an increasingly concentrated entertainment marketplace, and a deal with NBC-Universal would allow Comcast to have ownership of a significant amount of the content they distribute over their cable television and broadband networks.

TV Everywhere, a pet project of Comcast and Time Warner, leverages video content from cable networks distributed to “authenticated” cable or pay television subscribers over broadband networks.  Content owners have had the liberty to govern the terms and conditions of the distribution of their content within the scope of the project.  Outright ownership or control of the content by cable companies provides a much more predictable outcome.

Who foots the bill for an estimated $35 billion dollar investment in a completed deal for NBC-Universal?  Comcast customers, of course.

Mark Cuban, owner of HDNet, maintains a personal blog

Mark Cuban is on another tear this week.  Stop the Cap! reader Michael referred us to the latest.  This time it’s TV Everywhere, the cable industry’s answer to online video they get to own and control.

TV Everywhere is a concept put out by TV distributors that basically says that if you pay for cable or satellite, you should be able to watch the content you want, where you want. Everywhere. To some people this is not a good idea.  As is always the case,  many people think tv programming should be widely available for free on the internet.  Of course the content is never free. Someone has to pay to create it and we purchasers of cable and satellite services pay the subscription fees that pay the content companies and allow them to create all that content. Someone always must pay for free. Its unfortunate that there are some incredibly greedy people who think their entertainment needs should be subsidized. We aren’t talking healthcare, we are talking The Simpsons.  No one in the country has the right for their Simpsons to be subsidized.

I am uncertain why Mark is tilting at windmills here, fighting a battle with arguments that are beside the point.

He should know, as an independent programmer, permitting another cartel for video program distribution online has the potential to place control of that content in the hands of the pay television industry.  Agreements to carry a cable network on a cable system could easily become contingent on participation in TV Everywhere once it becomes more established.  Mark knows all about restrictive carriage agreements.  Some of his networks were trapped in a mini-premium HD tier on Time Warner Cable, despite his wishes to see them a part of the general HD lineup.  Once Time Warner Cable threw his networks off their cable systems nationwide, presumably so would go our online access to it as well.

For consumers, the basic concept of TV Everywhere seems like a positive development, if it brings online video content people want to see without charging them yet another fee on their pay television bill.  Consumers, raise your hand if you have a problem with more online video.

In fact, the loudest concerns about the entire endeavor these days are coming from the content producers and owners themselves.  They are the ones worrying about giving content away.

The Wall Street Journal chronicles the concerns:

While 24 networks are taking part in the Comcast trial, including Time Warner’s Turner cable networks, broadcaster CBS, AMC, BBC America, and Hallmark Channel, Walt Disney Co. (DIS) has so far avoided the “TV Everywhere” experiment because it doesn’t offer the Disney networks enough money in return for allowing their shows to be streamed over the Web.

“A new opportunity to reach consumers is very attractive … [but] we want to do so in a way that delivers proper compensation [to us] for that value,” said Disney Chief Financial Officer Tom Staggs, who spoke at the Goldman Sachs media conference on Tuesday.

That brought out Jeff Bewkes, Time Warner CEO, who scoffed at the demands for compensation.  Bewkes reminded Disney who is paying the bills.

“[The content providers are] not the ones who are going to the effort and expense of making this possible,” he remarked. “The ones that are making this possible are the distributors – the telcos, the satellite companies, the cable companies.”

Second, nobody is arguing that TV programming should be given away “free” online with absolutely no compensation.  The existing online video models are primarily advertiser supported.  The advertisers pay the costs to make the service available, and viewers endure online commercials during each ad break.  Some networks want to cram a ton of ads equaling the number a viewer would see on their television (get ready for more Snuggie and door draft stick on tape ads). Others are more realistic and will place a maximum of 30 seconds of commercials during each break.  Finding the right balance will be important — too many ads and consumers will pirate the content to avoid the ads.  Run smaller amounts and consumers will easily tolerate them.

Third, nobody I am aware of is arguing TV needs to be “subsidized.”  What does that even mean?

Besides the skirmish between content providers and the companies that want to distribute TV Everywhere, the concerns I’ve seen expressed include:

• The concentration and control of online video content through a cable industry-controlled authentication system that is long on generalities and short on specifics regarding how it will operate.  How do non-cable subscribers get “authenticated.”  What procedures are in place to protect the competitive data other providers will have to share with any authentication process?  How about customer privacy?  Is there equity of access to TV Everywhere regardless of the pay television service the consumer subscribes to?
• The credibility of the broadband providers’ argument that their networks are already overcrowded to the point they must “experiment” with usage caps, consumption billing, and other Internet Overcharging schemes.  Apparently their networks aren’t nearly as congested as they would have us believe, considering the fact they are participating in a project to place an even greater load on those networks.
• Mark seems to support content portability, namely the ability for a subscriber to place that content on any device for viewing.  Good luck.  Content producers go bananas over content that can be downloaded and viewed on any device or computer, because such open standards are also open to rampant piracy.

TV Everywhere can be a consumer value-added service for pay television providers, if it’s handled in a consumer friendly way.  The cable industry does not have an excellent track record of keeping their customers in love with them.  My personal concern is that what TV Everywhere gives away for free to “authenticated” subscribers today will tomorrow be packed with advertising, carry an additional fee for access on your cable bill, and will be just one more excuse to try and ram usage caps and consumption billing down the throats of the broadband customers trying to take advantage of their broadband service.