Analysis: Comcast buy of NBC U largely a digital play
DIGITAL: Deal is expected to speed day-and-date releases across formats
By Jennifer Netherby -- Video Business, 12/3/2009 8:42:00 PM
DEC. 3 | DIGITAL: The digital TV and movie business is no longer an afterthought.
Comcast’s acquisition of NBC Universal, announced Thursday, is largely being viewed as a digital play, one that could dramatically change how the studio and cable company deliver content to consumers.
During a conference call Thursday to discuss the deal, Comcast chair/CEO Brian Roberts seemed to confirm those expectations, saying the two companies side by side, are “a perfect fit … and will allow us to become a leader in the development and distribution of multiplatform ‘anytime, anywhere’ media that American consumers are demanding.”
Whether it’s streamed episodes of The Office and other shows or iTunes movie sales, many expect the merged company to fully integrate the digital business into the traditional business, allowing consumers to access TV and movie content on whatever device they choose.
“Parsing the business, trying to separate digital from traditional delivery in the future will be a pointless exercise because there will be no distinction—not in how consumers experience it, not in how devices deliver it,” Forrester Research analyst James McQuivey said in a blog post about the deal.
And expect Comcast, which has been the lead booster of the emerging video-on-demand business, to slam shut Universal Studios Home Entertainment’s window between DVD and VOD in a bid to further drive cable and digital VOD rentals.
“Universal, all the studios have moved in a day-and-date direction,” Convergence Consulting Group president Brahm Eiley said, noting that the studio has already put out some releases day and date. “With or without this deal, that’s certainly the trend line.”
If the deal is approved, he says, it’ll only accelerate.
However, the DVD business still delivers the movie business’ biggest profits, and a Comcast-owned NBC U is expected to be just as concerned with maintaining disc sales even as it pushes new delivery channels. “DVD still has some time left,” Eiley said. “That’s why you’re not seeing any major studios except Warner go all day and date.”
Before any change comes, the deal will have to win approval from government regulators.
Comcast, the nation’s leading cable company, and industrial behemoth General Electric announced a definitive agreement for NBC Universal early Thursday after months of speculation.
The merged entity will be 51% owned and managed by Comcast. GE will hold the remaining 49%. Comcast is expected to dial up its ownership in coming years, as GE ultimately sheds the rest of its film and television business.
“With this transaction, I believe our company is strategically complete,” Roberts said during a conference call.
The deal shakes up the media and entertainment landscape, creating a new powerhouse with enormous reach in sports and entertainment programming. Comcast also hopes the inflow of content will spur development of its new TV Everywhere initiative, which is creating models for viewing cable content online.
Cable networks are the heart of the new company, in which Jeff Zucker, president of NBC U, will become CEO, reporting to Comcast chief operating officer Steve Burke.
But analysts say the deal is about more than cable and will give Comcast the ability to distribute content in entirely new ways.
In a research note Thursday, research firm In-Stat, a sister company of VB, said the merger puts Comcast “in the driver’s seat to re-tool their business models and optimize revenue streams from subscriptions, pay-per-use and advertising.”
In his blog post, McQuivey said by next year he expects Comcast to experiment with more delivery options, and suggests it follow Netflix’s Instant Streaming model in delivering content through connected TVs and either the Xbox 360 or the PlayStation 3 game console.
“Comcast, with a controlling share of NBC U, is in a position to start experimenting with digital content experiences that it couldn’t attempt before,” he wrote. “This acquisition will succeed or fail purely on the basis of how quickly Comcast starts that experimentation.”
Convergence’s Eiley said Comcast will be able to try new models, such as selling consumers access to content. “The question becomes, given the change in how people are viewing content, what happens when you get large companies that own everything? What new models will they start applying?”
Comcast and NBC execs didn’t hint at any particular digital plans during the call to discuss the deal.
“We think the way NBC Universal is distributing its video content is consistent with the way we would do it,” Roberts said. “I think we start from the premise that during the year it will take to get this deal approved, NBC U is highly likely to do exactly what we would do.”
Roberts called Hulu, which is partly owned by NBC, complementary to Comcast’s own TV Everywhere initiative to deliver content online to its subscribers. Zucker declined to comment on whether Hulu would move to a subscription or pay model.
In the immediate term, the standout lineup of cable networks, including NBC’s USA, Bravo, Syfy, CNBC and MSNBC, will account for more than 80% of the new, combined company’s cash flow.
Comcast will create a new division called Comcast Entertainment Group to house its interest in the new venture.
Execs said that while the new NBC Universal will technically become part of Comcast, the idea is to create “two Comcasts,” with the cash flow from the entertainment arm poured back into programming.
Additional reporting by Variety
To read complete coverage by Variety, click:
Comcast, GE unveil NBC U deal
Comcast deal faces DC hearings
High praise for Burke
