December 3, 2009

Comcast and NBC Announce $30 Billion Merger; Ask Boards of Directors to Be Available Between 6:00 AM and 6:00 PM on Friday

Merger Announced -- Washington Post

Not sure that I'm cool with this.  Under the proposed plan, Comcast will end up owning one out of every five television viewing hours.  In addition to the NBC network and the Universal Pictures movie studio and theme parks, NBC Universal currently owns 34 TV stations, including WRC (Channel 4) in D.C.  Its other holdings include the Spanish-language network Telemundo, and 13 cable networks, the biggest of which are USA, CNBC, MSNBC, Syfy, Bravo and Oxygen. Comcast will contribute its cable-network group to the marriage, including such channels as E! Entertainment Television, Style, Versus, the Golf Channel, the Major League Baseball channel and 10 regional sports networks.

Unlike what seems like everybody on the Internet, I've been relatively satisfied with my Comcast service, which I've had since I moved back from owning to renting in Arlington (I had DirecTV for about seven years prior).  There are vast swathes of channels I never watch, but I do enjoy the HD channels and NFL Red Zone, for the most part.   Their DVR service is piss-poor compared to the DirecTV Tivo/DVR package -- heaven forbid a series switch up a time slot one week, forget about it -- but I have had no complaints with the Internet service besides a few weird temporary outages.  The biggest complaint I've heard, but not experienced, has been with customer service.  Apparently, they have had some real winners, like this guy here:

In any case, there are some sensible questions to ask if this deal passes merger review at the Federal Trade Commission.
  • Content control -- NBC will obviously be in most-favored-nation position on at least 25% of the nation's television sets.  Probably not going to happen for the main networks, CBS, ABC & Fox, but what's to stop Comcast from taking their respective cable channels (CBS owns MTV, Comedy Central, BET, Logo, VH-1, Nickelodeon, CMT, Spike, etc.; ABC/Disney owns the Disney Channel, ABC Family, 80% of ESPN, SOAPNet, etc., and Fox owns FX, Fox News, the National Geographic Channel, the Reality Channel, and a bunch of regional sports networks) and making them part of premium packages, instead of basic cable packages.   In any case, Comcast will have their own home-grown content (outside of sports) instead of primarily relying on outside content, and that provides significant leverage.  In other words, if we don't like the financial deal we're getting with one of the other networks, we'll take our ball and go home.  Comcast has already played the heavy here in D.C. with the regional sports network MASN (which broadcasts Nationals, Orioles, Wizards, and Capitals games).   DirecTV doesn't carry Versus because Comcast sells it to satellites at a higher rate than other cable systems.  There's potentially a lot intrinsically wrong with owning both the gateway AND the content.
  • Hulu -- NBC owns a big chunk of Hulu.  Comcast is the largest residential provider of broadband in the United States.  The synergy coming out of this is pretty easy to predict.  Max out on the NBC streaming video, promote it through the Comcast broadband marketing machine, starve out competing video sources.  Ballgame. And that's not the worst part of it. Comcast will have the motive to move NBC's video content behind a pay wall that will mean higher costs for consumers, and it would stunt the growth of the Internet as an alternative medium for video service. Placing video content behind a pay wall that is only available to Comcast cable customers is a classic example of "anticompetitive bundling." That is, consumers who want Internet access to NBC programming will be forced to buy the bundle of cable and Internet.
There seems to be some disagreement as to whether it can pass merger review.  The L.A. Times reports that it looks pretty likely.  We'll have to see down the road whether it's another relatively benign consolidation, or whether it's a power play that eliminates choice and nickels-and-dimes us for the experience.

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