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Comcast's ambitions

The pay-TV giant is making a bid to control NBC Universal's entertainment assets.

October 06, 2009

Comcast Corp. has amassed the country's largest cable TV operation, serving nearly one out of every four homes that pays for television programming. Yet it's not satisfied just to pipe entertainment and information to subscribers' TV sets and computers. It wants to own more of the content flowing through the systems it has built in California and 38 other states. Its latest gambit is a bid to control the entertainment assets of NBC Universal, including the NBC television network and Universal Studios.

The deal could easily evaporate, which is what happened when Comcast tried to buy the Walt Disney Co. in early 2004. Comcast shareholders jeered the initial reports about NBC Universal, just as they did the Disney acquisition. And even if both companies' managers and directors sign on to the deal, it will still have to pass muster with federal regulators. They'll come under pressure from independent producers and consumer advocates opposed to media consolidation, who have been urging Washington to require cable operators to provide more channels for unaffiliated programmers.

The proposed union is startling, given the companies' size and scope, yet its effect on the media landscape may be limited. There's no consensus on the wisdom of such combinations -- in fact, Viacom and Time Warner have gone in the other direction, spinning off their broadcast networks and cable TV systems. NBC's cable networks already have spots on Comcast's cable systems. And although Comcast might demand that other pay-TV services pay more for NBC Universal's content, it wouldn't have much more negotiating leverage than NBC Universal had on its own. After all, that leverage depends entirely on how popular the programming is, and it's been years since the peacock network's lineup was filled with must-see TV.

The more interesting question is how NBC Universal's approach to the Internet would change under Comcast's control. The former has moved boldly to make many of its shows available online through outlets such as Hulu.com, which it co-founded with News Corp. Comcast, meanwhile, co-founded TV Everywhere, a venture that aims to keep popular cable networks off of Hulu and other free sites so they'll pose less of a competitive threat to pay-TV services. Some analysts speculate that Comcast might try to pull the plug on Hulu or make less of NBC Universal's programming available for free.

That's just guesswork, but so is the future course of the media industry. No one seems to have found the right business models for content online. Until that day comes, experiments such as Hulu make sense. Comcast would be wise to use them to attract new viewers and come up with other ways to make their current subscribers happy with their cable service.

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