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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If you were a the Denver Meet this past week there seemed to be much enthusiasm about the prospects of a better economic situation; the direction of the Cable Industry initiatives like TV Everywhere; and the general hype of Cable’s future competitive offerings . While attendance seemed, a mixed bag, compared to previous forums, it continued to attract a respectable crowd from a continued cost conscious industry standpoint.

Comcast’s Steve Burke’s comments were of significance in realizing the Internet is changing the digital landscape from a linear programming format to a more flexible alternative in determining both how, when, and where the consumer will view and download content. One answer to that realization is TV Everywhere, which has come to life with a 10,000-customer presence through its Fancast property.

There continues to be some controversy surrounding TV Everywhere since viewing its online content requires subscription to both the Comcast video and broadband offerings. Does this equate to a customer (hostage scenario), or does it mean Comcast is thinking smart by gathering content with programmers, and its current bid for NBCU? (see Keeping Up With Comcast)

It does give some benefit to current Comcast customers, which is probably the point, since without TV Everywhere those subscribers would be migrating elsewhere like Hulu and Netflix to watch their favorite content online. However, the fact remains there continues to be obstacles ahead for Comcast’s initiative with authentication and distribution from programmers to make this a feasible and footprint wide service by the end of 2009. (See TV Execs: Don’t Be Distracted by ‘TV Everywhere’)

With a current model of revenue generating Digital Video, with heavy advertising capabilities, the Cable Industry cannot afford to move quickly to a new business model. In an effort to figure out the Internet Advertising puzzle, Comcast has collaborated with Canoe Ventures, LLC to position itself for a future with direct consumer advertising online rather than the more wasteful broad sweep of ads on video distribution today.

In addition, one should not forget Tru2Way, the initiative that seemed to have been put on the back burner by the Cable Industry, although Comcast’s David Cohen indicated their plant would be ready for the application by years end (see Comcast Wired for Tru2way by Year’s End). This signals a desire to go in its own direction, as evidenced by the missing of an important deadline with Tru2Way TV manufacturers this past summer. This initiative promised an interactive experience through a meshed TV/Internet experience. While some TV vendors have continued to move forward with the application, Comcast must see a better alternative.

Although perceptions of the Denver Meet were positive and uplifting it remains to be seen whether this is just rhetoric or something more substantial in Cable’s move to align itself with current and future customer online preferences. (Stay Tuned!)

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