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Editorial

Can Comcast connect?

In buying NBC Universal, it must find new ways to court consumers who have many media choices.

December 04, 2009

New Year's Day will mark the end of one of the unhappiest decades ever for the entertainment industry -- a span that saw piracy skyrocketing, music sales plummeting, home video revenue shrinking, mega-mergers going sour and audiences dwindling. The new millennium coincided with the dawn of a new digital era, one that empowers consumers and creators at the expense of the conglomerates that own much of the programming people watch on their television sets and listen to in their cars. Nevertheless, executives at Comcast, the nation's largest cable TV operator, believe it's a propitious time to take over NBC Universal, owner of the also-ran NBC network and hit-starved Universal Studios. Wall Street evidently agreed; investors drove the company’s stock up 6.5% after the $30-billion deal was announced.

Some consumer advocates warn that the acquisition could lead to a bevy of anti-competitive abuses. The new, combined company would have an incentive to crush online video upstarts, shut out independent cable networks and gouge local advertisers, they warn. It's worth exploring these issues, and Washington's newly invigorated regulators are likely to do so. But they should also be realistic about the competitive landscape, which the Internet is transforming.

Much of the concern about media consolidation stems from the enduring power of traditional media outlets. Programs aired by NBC, CBS, ABC and Fox continue to attract the biggest audiences on TV. A little more than half a dozen companies own most of the networks carried by cable and satellite operators, which serve 90% of U.S. households. At the same time, online upstarts such as YouTube and Facebook are claiming an increasing share of consumers' time and attention. YouTube alone delivered more than 220 million video streams in April to U.S. viewers -- per day.

Among other challenges, Comcast has to cope with its cable subscribers running off to competing services and free or low-cost options that stream programs through the Internet, such as Sezmi. If it tries to win by withholding NBC Universal's programs from rivals, Sezmi.it will soon discover what the music industry learned the hard way this decade: Making it more difficult for people to get content legally will simply drive them to alternative sources of entertainment, including online bootlegs. It may be, as analyst Henry Blodgett suggests, that Comcast is buying NBC Universal to hedge against the gradual demise of its cable TV business. If so, we hope the company will do so by finding novel ways to make content more available and more valuable to viewers, rather than just trying to defend business models whose time is quickly passing.

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