Comcast strategy a tough road

NBC Uni deal would be tricky but offers opportunity

NEW YORK -- Comcast's interest in pushing more aggressively into the content business has led many on Wall Street to point out the ill-fated attempts of others to wed content and distribution power.

Just as many, however, see a possible combination of Comcast's cable networks with NBC Universal in a new entity, which Comcast would control, as a play to hedge its bets and take charge as the future of content and distribution giants comes under attack in the digital age.

For one, it could help Comcast avoid future business risks in distribution. If content is king and digital platforms continue to grow, critics have warned that cable and other distributors risk becoming "dumb pipes" and that consumers could increase "cord-cutting," or disconnecting pay TV service, to save money if so much content is available free online.

Comcast could devise a strategy to make content and distribution work together to shore up the beleaguered economics of the media industry. Gabelli & Co. analyst Christopher Marangi said the firm could "accelerate TV Everywhere and (cable) VOD day-and-date" offers of films.

Sanford C. Bernstein analyst Michael Nathanson put it more strongly in a report Friday, saying the different parts of the sector have been in too much conflict and disarray, allowing new competitors -- including DVD rental-kiosk firm Redbox -- to eat established players' market share.

But a Comcast-NBC Uni deal "could begin a new, better chapter for media economics," he said. "Someone needs to man up. For goodness sake, let's hope that someone is (Comcast CEO) Brian Roberts."

Nathanson also called for a better cable VOD system for pay movies (with better terms for studios and new windows for cable), suggesting that Comcast, if it makes a play for NBC Uni, take video service Hulu inside a walled garden to restrict free broadcast content online and saying it could develop on-demand broadcast TV offerings with specialized ad opportunities "that derail the growth of DVRs."

What new culture and management style would Comcast bring to NBC Uni and its creative businesses? While some within studio operations have talked about NBC Uni's clash of cultures with GE's financial focus and discipline, the Comcast team also is known for being results- and goal-oriented, though maybe in a lower-key way.

"They are good businessmen and smart operators," cable industry veteran and consultant Steve Effros said of Comcast. "They are smart enough to know what they don't know and hire smart people to do it."

What could this mean for the Hollywood parts of NBC Uni?

"I don't expect you will see Brian Roberts running around Hollywood," Effros said.

Roberts, who has a reputation for being more comfortable at the bargaining table than at glamorous parties, "is not going to get into the middle of creatives and run (the entertainment operations) from Philadelphia. But (he and his team) will set clear goals and targets, because they are very results-oriented," Effros said.

Former Disney/ABC executive and Comcast COO Steve Burke, who put Disney stores on the map and later ran local ABC TV and radio stations, is expected to be a key player if Comcast pulls off a merger with NBC Uni.

"Comcast has guys like Burke who have content experience," Effros said.

Jeff Shell, president of Comcast Programming Group and former CEO of electronic programming guide firm Gemstar-TV Guide, also could provide expertise.

Although there are no major rules to which a deal would run counter, the Justice Department likely would hear antitrust concerns from critics of media concentration, and the FCC also could require conditions. As the largest U.S. cable operator, Comcast had about 23.9 million video subscribers as of June 30.

Sanford C. Bernstein analysts predicted in a report that a deal would "likely bring with it a heavy regulatory burden, including likely arbitration provisions in the event of programming disputes, possible divestitures of broadcast stations in Comcast markets and an unforeseeable range of seemingly unrelated "Christmas tree ornament" provisions that would likely festoon the final deal (like net neutrality. etc.)."

Their bottom line: "Regulatory provisions could more than offset any potential gains."