January 18, 2011
By Michael Grebb
And so let be written: Comcast and NBCU are now one. The FCC’s approval and Justice Dept. sign-off minutes later this afternoon essentially consummates this marriage of distribution and content powerhouses. It has been a long and winding road for Comcast as it tirelessly lobbied and cajoled policymakers over the last year or so. The company has spent millions in the process and “voluntarily” offered up a number of pre-emptive concessions, including more channel space for indie programming and various promises not to unfairly discriminate against other content owners and distributors.
At the end of the day, however, it’s all about getting the deal done. The truth is that any concessions Comcast now must endure as part of the FCC approval pale in comparison to what would have been the alternative: watching yet another big content whale slip away into the deep, blue sea. Comcast COO Steve Burke knows that stinging feeling well, having tried to court The Walt Disney Co. in 2004 in what became a messy hostile takeover that eventually went South. Burke ended up with nothing but a whole lotta heartache (and perhaps a bruised ego). And one gets the sense that a well-respected operational genius like Burke wasn’t about to let the same thing happen again with NBCU. One big difference: NBCU was a willing suitor. Another: Burke made it known early on that Comcast would aggressively address any concerns—at least to the degree that policymakers could cover their collective keisters with consumer groups and other entities that raised concerns over the combination.
To be sure, Comcast-NBCU will tower over the media business. Unlike other big content owners such as News Corp., Disney and Viacom, NBCU will be the only major content powerhouse with a big distribution partner. (Cablevision’s Rainbow Media had been the closest parallel, but even that was on a much smaller scale. And now even Rainbow will be a pure content play following its planned spin off from Cablevision). Meanwhile, News Corp., which used to control DirecTV, turned over control to Liberty Media in 2008 as part of Rupert Murdoch’s attempt to keep John Malone from worming his way into his News Corp. empire. The $13.6 billion deal worked out for both sides—but it left News Corp. without a major distributor under its control. All of this means that Comcast stands alone when it comes to the marrying content and distribution in the world of television and broadband.
The prospect of this much power concentrated in one company has certainly created much anxiety. That’s to be expected. And it’s mainly why the FCC attached several conditions to the deal, all of them outlined in its Tues press release. Conditions include an “improved” arbitration system for content disputes involving Comcast-NBCU and “conditions designed to guarantee bona fide online distributors the ability to obtain Comcast-NBCU programming in appropriate circumstances.” In addition, while the new entity won’t be required to divest NBCU’s stake in Hulu, it’s barred from taking managerial control of the entity. Meanwhile, it can’t “unreasonably” withhold programming from Hulu to prop up its own Xfinity site (or for any other reason). There’s also language about Comcast providing content at “non-discriminatory” and “economically comparable” prices and terms in various situations, as well as requirements that it offer “standalone broadband Internet access services at reasonable prices and of sufficient bandwidth so that customers can access online video services without the need to purchase a cable television subscription from Comcast.”
As always, the devil’s in the details. What constitutes a legitimate, “bona fide” online video distributor, for example? A background call with FCC officials Tues afternoon was a bit murky, as they mentioned a “case by case” determination based on whether the company in question has been involved in piracy and has the right “financial qualifications,” among other considerations. So would YouTube, which often struggles to police its uploaders and take down pirated material, qualify under those loose guidelines? Who knows? And how do you define “unreasonable” when determining what content Comcast makes available to Hulu? And how much bandwidth is “sufficient” for someone to feel like they’re able to adequately enjoy their broadband connection?
Yep. You guessed it. It’s a boon for Washington lawyers. They will haggle over these details for years as Comcast-NBCU’s competitors and detractors do what they can to slow this newly powerful entity from rolling over them like turtles in the path of a souped-up steamroller. Many of these conditions will be forgotten as Comcast-NBCU works out private deals with some of its biggest rivals. Others will be sticking points and weapons for those with few other options. And much of the outcome of any disputes will greatly depend on the makeup of the FCC after 2012 when many complaints will still be pending. A new President means a new FCC chairman, after all. Much of this is completely unpredictable.
Comcast’s voluntary commitments, which are now part of the merger’s official conditions, include: increasing local news coverage; expanding children's programming; enhancing Spanish-language content options; offering cheaper broadband services to the poor; and providing high-speed broadband to schools, libraries and underserved communities, among other public benefits. It all sounds wonderful—although it’s certainly unclear how the FCC will measure these benchmarks and to what degree the Commission will require hard evidence that Comcast is in compliance.
To be sure, the deal’s most ardent critics remain unimpressed by the conditions or commitments. Said Free Press pres/CEO Josh Silver only minutes after approval: “The FCC has opened Pandora’s Box, and we can soon expect a whole new swarm of mega-mergers that will have dire consequences for media and the Internet… While the FCC has adopted conditions, they are insufficient short-term or voluntary fixes that will fail to prevent permanent harm to competition, consumer choice and the future of the Internet. This deal will drive up cable and Internet costs for subscribers, while further eliminating diverse, independent media content that is already woefully lacking in the commercial media.” Tell us how you really feel, Josh. On the other hand, ACA—which had worried the deal would hurt small cable operators—lauded “meaningful conditions” in the approval, especially streamlined arbitration rules that will make that process cheaper and faster for small ops.
In the end, Comcast got what it wanted Tues, and Steve Burke will finally get to run a big content company. The only question is whether other big content deals will follow. After all, Rainbow Media just looks like it’s going to be so lonely out there by itself… Anyone… Anyone?