Commentary

Would Comcast Be Just Another General Electric For NBC?

by Wayne Friedman , Staff Writer, October 2, 2009

Comcast Corp. is one company where media-buying aggression always seemed to make sense: a slower-growing, traditional cable operator, hoping to find other businesses to fuel future growth.

A few years ago -- before the recession -- a deal to purchase NBC Universal would seem to have made sense, matching programming/content with Comcast's growing array of video distribution operations.

Not surprisingly, it was in 2004 that Comcast wanted to buy Walt Disney -- in a hostile move. But Disney had the upper hand, and Comcast receded.

The same key question remains as it did five years ago: What does Comcast know about creating video content? Considering its track record with some of its own modestly programmed cable networks, that would be very little.

Can you picture Comcast in the expensive and usually risky movie business? How about in the network TV business -- where shows fail more than nine times out of 10?

This is not familiar territory for Comcast. In some ways, it would be better if Comcast were more of a hands-off investor/owner like General Electric.

It's true the new movie and TV businesses aren't working with the financial entertainment models of years ago. NBC Universal President and CEO Jeff Zucker has been one executive big on keeping development costs low, for example. Many General Electric investors would surely love to see NBC jettisoned -- long an odd business match among the company's decidedly lower-profile manufacturing, jet engine, credit, and appliance businesses.

Surely video distribution and video content creation make for a better match for Comcast. But many media analysts believe it's hard to make money this way. Look at Time Warner. It spun off its cable operations, opting to run content separately. That said, reports are that Comcast would spin off and merge its media assets in a separate company with that of NBC, co-owned with GE.

But that's not the only problem. GE has operated NBC at a relative arm's distance -- in part because it doesn't know the intricacies of the entertainment business, in part because NBC is still a small piece of the overall company.

That wouldn't be the case for Comcast. If Comcast does acquire NBC, or holds a majority stake in a joint venture with GE, it'll be hard-pressed to give NBC that much leeway.

4 comments about "Would Comcast Be Just Another General Electric For NBC?".

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Douglas Ferguson from College of Charleston, October 2, 2009 at 9:42 a.m.
It makes more sense that Comcast would buy NBCU now than before the recession, if only because the price is lower. I'm sure they calculated the cash-flow multiples for the owned and operated stations and the value of the content library into the deal. Now that running a network is a bean-counter chore, I'm sure the accountants at Comcast are equal to the accountants at GE.
Comcast has deep pockets [I mail them a giant check every month] so if they want to be the Google of the video content world, buying NBCU is a justifiable step. It certainly makes more sense than the sale to Vivendi a while back.
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Brian Hayashi from ConnectMe 360, October 2, 2009 at 10:43 a.m.

Today's programing economics are far more byzantine than in days past - with DVD, YouTube, PVR and even social media, a program no longer needs to prove its worth solely in the overnights - it can recoup its value in through DVD sales.

Now we know that NBCU is a founding partner in Hulu.com. Some people have complained that Hulu isn't available outside of the U.S., and that it doesn't offer all of the shows they want. Those complaints are actually indicators of something far more valuable: that Hulu is not just another YouTube spinoff - of all of the video portals, it has architected itself to respect, and even enhance, the value of TV and movie distribution windows.

The potential value of Hulu is multiplied in light of a recent FCC ruling that allows Comcast to cache video content at its headends, not just at the PVR. This is something that Comcast has wanted even before TiVo and early pioneer Sonic Blue showed up on the scene. Comcast has *always* believed in the value of caching certain programming as close to the consumer as possible, enabling entirely new kinds of programing that is currently unavailable today: for example, the ability to make the entire first and second season of Mad Men available on demand in the week prior to the third season premiere. While to most people it seems like a no-brainer, in fact it is the juxtaposition of the technical (the newly-unfettered Comcast) and the legal (Hulu.com) that makes this no-brainer, in fact, possible.

Jonathan Mirow from BroadbandVideo, Inc., October 2, 2009 at 2:37 p.m.

I think the criticism of Comcast's programming efforts are unjust. Just go and look at the dynamic line-up on their own CET "Comcast Entertainment Television" - where else do you get to see the same public domain John Wayne movie from 1954 three times in one week? Brian (how you doing?) I have to disagree with you about the valuation of Hulu - repurposed broadcast TV will inevitably go the way of newspapers online, maybe holding the line but in the long run becoming irrelevant as new methodologies that really embrace the capabilities of the medium emerge. But then, I generally disagree with everybody.

Brian Hayashi from ConnectMe 360, October 2, 2009 at 4:11 p.m.

Hi Jock, I seem to run into you in all of the best places.

I love that John Wayne movie. I think all Japanese love John Wayne movies. If the yen was worth anything we would buy Comcast and NBCU ourselves if only to share our love of John Wayne movies with our children and friends and neighbors.

As for Hulu - I have given up trying to figure out what happens in the long term and try to focus on the next eighteen months. I hear mapping is pretty cool, btw.