THE CABLE PIPELINE

Reportedly a deal may be close with Comcast/NBCU. Ok, I’ve have been inundated with all the reasons why such a merger should not happen, from Wall Street’s pandering of a short-term profit loss, to the remembrance of the botched deal to acquire Disney in 2004. Well this is different, and the landscape has changed significantly since 2004.

Both Comcast’s (CMCSA,CMCSK) Brian Roberts and Steve Burke are out front selling the deal as a long-term strategy that will put the cable giant in a strong position to compete with  the Telco’s, DBS, Netflix, Boxee, and Apple TV, if that hobby ever comes alive.(see Apple Pitching Subscription TV to Content Owners)  Here is the crux of what the merger represents and what NBCU (GE) has to offer, including (Film) with Universal Pictures, Focus Features, and Universal Studios Home Entertainment; (Digital Media) including Hulu, iVillage, NBC.com, CNBC.com; and the (Television Group), with stations that will obviously have to be sold off where markets overlap.

It smacks of a good fit if you consider what Comcast brings to the table, including a footprint of over 24 million customers, Comcast Interactive Media with Comcast.net, Fancast, Fandango, DailyCandy, thePlatform, and Plaxo; its own stable of cable channels with Comcast Cable Networks including E! Entertainment Television, Golf Channel, Versus, The Style Network, G4, TV One, PBS KIDS Sprout, ExerciseTV, FEARnet, and Comcast Sports Group.

From both a long-term competitive and shareholder equity standpoint, the venture sets well with my analysis. After all, it will not break the Comcast bank and sends a stern message to those who might be thinking this company is not ready to take on all comers in the Digital TV and IPTV markets. 

The one question that remains in the back of my mind is whether Docsis 3 and PON (see SCTE Cable-Tec Expo ’09), technologies will be enough to carry the HFC platform, with a well put together content and footprint combination, and as a long-term strategy position? The Cable Industry continues to be convinced of this technology, and they have been around long enough to make well thought out decisions. But FTTH continues to be accepted worldwide as the (end-all) scenario in pushing broadband content and applications through the pipelines. Comcast should make sure that their vision meshes seamlessly with its pipeline capabilities.

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It is intriguing to read the speculation concerning Comcast’s proposed bid to acquire a majority stake in NBC Universal. And, it is not hard for me to see the opportunities which may abound with such a deal.

 First, let me say that as a distribution platform, Comcast has 24 million customers across the geographical US. Some speculate that Comcast should just increase its size and scope with an acquisition of more cable companies. That may be what analysts want to see; a deal that would increase the pipeline; one that would see stocks immediately rise on the speculation. But this could be the right move for a long-term competitive stance, with an increasing fast and easy access of consumers to content on the internet. I would say emphatically, not so fast.

 Since Comcast is already the largest MSO in the US, and with the FCC smarting over a lost court case involving the 30% Cap in MSO size; it would be impulsive to push the issue in both public and regulatory opinion with a large expansion of its footprint. Size, as we have seen with many mergers, does not necessarily correlate to increased profits.

  Here lay some of the NBC Universal content offerings:

• “Its portfolio includes USA Network, CNBC, Syfy, MSNBC, Bravo, Oxygen, mun2, CNBC World, Chiller, Sleuth, Universal HD, and HD simulcasts. A key revenue generator, the division oversees distribution of the Olympics on cable; retransmission consent for NBC and Telemundo owned stations; and NBC Universal’s content delivery on broadband, linear, and set-top box platforms with services that include video-on-demand, pay-per-view, and set-top box interactive features.”

• “NBC Universal Digital Distribution drives the company’s North American distribution of content across the Internet, wireless, and other emerging platforms, and leads content strategy and development for offerings that include video-on-demand, electronic sell-through, interactive television, and wireless products and services.”

• “Universal has achieved both popular success and critical acclaim with its recent Academy Award winners Atonement, The Bourne Ultimatum, King Kong, Brokeback Mountain, Ray, A Beautiful Mind, The Pianist, and Lost in Translation. Classic, Academy Award-winning films from Universal include All Quiet on the Western Front (1930), To Kill a Mockingbird (1962), The Deer Hunter (1978), and Schindler’s List (1993).”

 This represents a sample of the content which NBC Universal has to offer for a consumer pipeline like Comcast. It goes without saying that CEO Brian Roberts is looking to make a strategic move in nailing down content for its distribution arm in cable. This embodies the short and long-term business acumen of Roberts, a strategic thinker and visionary in charge of the largest MSO, which continues to take hits from internet startups like Hulu, and Netflix. In conclusion, there is not any mystery about the motives of Comcast in this deal for a long-term shareholder equity scenario.

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