Merger Mystery: What Will A Combined NBC/Comcast Be?

Sen. Al Franken isn't joking around when it comes to Comcast buying a controlling interest in NBCU to form one of the world's most powerful media conglomerates. The former star of NBC's "Saturday Night Live" is leveraging his opposition of the deal into a larger campaign "to the lopsided influence of special interests on behalf of middle-class Minnesota families," according to the Minnesota senator's Web site.

Franken is taking donations to "support the vocal opposition (me!)," although he doesn't explain how the money collected will be used. "I don't trust Comcast and NBC to be honest brokers on this deal," he says on his website, sporting an oversized Comcast-NBCU logo in a slashed oval.

Those are fighting words that Franken and Senator Russ Feingold (D-Wis.) have already put in writing to Comcast and NBCU executives, requesting answers to their tough questions about the proposed deal.



Despite the need for rigorous scrutiny of such media consolidation, the Comcast-NBCU review is beginning to look like a three-ring circus. Franken wants NBCU and Comcast to agree to universally make all of their programming available online, not just for Comcast cable subscribers.

Franken doesn't specify whether it should be free or paid access, although he acknowledges that "the Internet is the future of the media business," which means Comcast-NBCU are going to have to make money somehow. Maverick media entrepreneur Mark Cuban has accused Franken of failing to realize that the gobs of additional bandwidth needed to service all of that online content will translate into higher Internet costs  for consumers.

Feingold has joined the chorus with an acerbic letter to Comcast and NBCU executives, asking if they would stop bundling channels, divest all their Internet TV interests, and tie cable rate increases to the rate of inflation. "Will you also lock in the rates you charge for content either for cable network carriage or through retransmission consent?" Feingold was quoted as saying.

Whether or not intended, a confidential report to Congress released this week took the edge off the private and public grilling.

From all accounts, this confidential report appears to bet against this mega-merger turning out to be much different than others that have failed in the past. Vertically integrated post-merger entities "have so many pieces with conflicting market incentives that it proves impossible for executives to craft an internally consistent profit-maximizing business strategy, much less exploit market power to undermine competition," the report advises Congress.

The report prepared by the Congressional Research Service assumes the merger will be conditionally approved by the Department of Justice (DOJ) and the Federal Communications Commission (FCC), according to accounts. The report also appears to bet against significant changes in the marketplace that would prompt the merged company to take drastic action, such as weaning NBC from a broadcast network into a full-blown cable net that consumers would pay for.

If true, that's pretty amazing.

These times in media are all about significant marketplace changes. It is difficult to imagine the status quo surviving as digital interactivity is layered into everything about media, entertainment, communications and commerce.

That future, peppered with uncertainty, should be at the heart of the Comcast-NBCU review, which should not be conducted on the premise that the status quo will be in place a year or even five years from now.

Where are the companies' combined five-year plans and projections for where precisely revenues will come from and the costs that will be supported? Where are the new business models? Where is the honest talk about what has to change?

To say we're not there yet is to admit we don't really know what pragmatically will happen to advertising and subscription rates and opportunities, the access and variety of content and the integration and monetization of interactivity with consumers.

At the very least, the Comcast-NBCU merger review should be about what we don't know -- and that's a lot.

More about Diane Mermigas consulting and speaking opportunities atMermigas on Media; more analysis at BNETandSeeking Alpha.

6 comments about "Merger Mystery: What Will A Combined NBC/Comcast Be? ".
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  1. Douglas Ferguson from College of Charleston, March 2, 2010 at 10:54 a.m.

    Former (and admitted) coke-head Al Franken.
    Nuff said.

  2. Paula Lynn from Who Else Unlimited, March 2, 2010 at 1:39 p.m.

    Congratulations ! You deserve to have the recognition of your own column.

  3. Gerald Troutman, March 2, 2010 at 2:42 p.m.

    The use of the quaint term 'five year projections' rather surprised me. The combination of managing to quarterly results (to maximize annual executive bonuses) plus the near daily rush of media providers towards the next "new" renders long term planning statements meaningless - except perhaps to the mostly clueless stockholders.

  4. Dave Woodall from fiorano associates, March 2, 2010 at 5:40 p.m.


    Regarding the CRS's report that NBC won't likely be converted to a subscriber-based cable net: Think about it; With the NBC affiliates' conversion to digital signals, Comcast/NBCU have access to their own mini digital cable system...that just happens to be delivered over the air.

    The reality is that Comcast doesn't currently control distribution of its own content across the vast majority of the country. While the largest system operator in the country, Comcast still only penetrates 24 million homes (a figure that pales in comparison to the NBC television network's penetration) and must rely on other system operators to form the nation-wide network for its cable nets - a situation I'm sure Comcast would like to remedy.

    While eventually all of our media will be delivered via an Internet-like network, the digital backbone in this country is currently nowhere nearly robust enough to accommodate the data load; and won't be for quite some time. Until it is, Comcast will simply make the most of the hand they've been dealt.

    Oh yeah, @Douglas Ferguson: Nice, relevant, intelligent comment. You can go back to your Young Republicans meeting now.

  5. Penelope Tsaldari from Serve Me Well, March 2, 2010 at 10:09 p.m.

    Diane Mermigas is such a fine writer! Great read even though it send my blood pressure sky high. Ya, know I hate to participate in name calling - about anyone, even charlatan politicians but listening to the likes of Al Franken (can’t bring myself to call him Senator) Gisshiz Louise! Look who is calling the kettle black. On the other hand they all belong in one big kettle to let it sit here and simmer over hot coals. NBCU executives have shown themselves to be such uneventful, unimaginative and unproductive broadcasters. What a waste of time. Finegold is another dirty fork stuck in the eye of the American public. Her husband has been receiving federal contracts under her watch that we’re supposedly non competitive. Hope I’m wrong about that. What a mess! Diane, did some fine reporting.

  6. Stan Valinski from Multi-Media Solutions Group, March 3, 2010 at 5:35 p.m.

    2 things:

    Doug: this is media we are talking about. Did you live or do any business with media in the 80's? 90% are "former coke heads". Including your hero George W.

    Franken and his political brethren are so outside their knowledge bases on this that the comments reek of pandering to the masses. The quixototic image makes Franken look foolish. He is now a total sellout. Too bad, his strength was political humor. Conversely his Stewart Smalley bits were the worst of SNL's bad ideas. Carried on now by the incessant fixation on an unfunny ESPN duo.

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