By Dom Serafini
At one point the U.S. TV networks wanted to take over the studios. They lobbied Washington long and hard to the point that the opposite happened, and the studios took over the networks. Then, the new vertically integrated studio-networks started to fight with cable companies to the point where one got so fed up, it decided to buy the other out.
It looks like the U.S. TV networks cannot stay out of trouble. The recent intentions of U.S. giant cable MSO’s Comcast to buy NBC Universal (and, in Canada, MSO Shaw’s to take over CanWest), will open a new set of challenges for the U.S. and Canadian TV industries before and after the deal is consummated, but it will also provide some long-term answers.
In the U.S., the first challenge is represented by NBC’s TV network affiliates. Technically, with cable distribution reaching more than 80 percent of the U.S. population, networks don’t really need local affiliates anymore.
The second challenge consists of competition among MSOs operating in the same market (including satellite, telcos and, soon, ISPs such as Google). With Comcast owning such programming-producing powerhouses as Universal, why should it help the competition by providing premium content?
The third challenge is for the FCC, the U.S. regulatory agency. Because of the deal, it will have to tackle five major issues that are lingering on its agenda, some for a few years now: Net neutrality (the Commission is developing a National Broadband Plan), dot channels, cross-ownerships (all kinds), carriage fee requirements, and excessive consolidation. For the FCC, the Comcast-NBC deal represents the perfect storm.
By owning NBC Universal, Comcast will, in effect, have full control over broadband access, content, distribution and carriage agreements. The fact that NBC owns 27 local TV stations (plus 173 not-owned affiliates), programming of their extra digital channels (the so-called “dot channels”) will also come into the picture.
I’m sure that the whole thing will make for interesting reading for months to come. It cannot be years, because under the GE (owner of NBC Universal) and Comcast deal, the former will have to pay Vivendi (the French conglomerate that still owns 20 percent of NBC-Universal) $2 billion (out of a total $5.8 billion) by September 2010 if the deal isn’t closed by then.
Basically, Comcast would not be buying NBC Universal if Vivendi was still to be in the picture afterward, and for GE, the entertainment group doesn’t mesh well with its nuclear reactor and other businesses.
Personally, I’m in favor of the Comcast acquisition because only when dealing with an enormous entity that could threaten the whole social-political and economical system will regulators, financiers, politicians and entertainment executives be forced to restore sanity. Consumer advocates should realize this and quietly allow the deal to go through. Here the “too big to fail” concept will not work. Witness the Warner Bros.-AOL deal, which was an attempt to control both content and distribution, as well as the Hewlett-Packard/Compaq merger, the AT&T and TCI deal and even the Daimler-Chrysler deal. They were big entities. They failed. But their impact on society was minimal.
Nowadays, only an out-of-this-world entity like the Comcast-NBC deal can cause the big bang necessary to bring back the elements needed by the socio-political-economical process to understand the folly of unlimited consolidation, and thus return the whole thing to more sane, manageable, egalitarian and sound bases.
Don’t get me wrong; I fully understand that on one level, the basis of the Comcast-NBC deal makes sense because those “dumb pipes” (as the naked distribution system is called) need to be “content” with tons of programming. What I question is the size of the deal, not the purpose.
In my view, anything that is too big is also too complicated to run (witness Toyota and GM), too fragile (look at hubs such as Dallas-Ft.Worth and Heathrow) and too unfair to competition, consumers and the socio-political process. Not to mention it stifles innovation.
A newly minted example comes from the different approaches of two U.S. government agencies: NASA, for space exploration, and DARPA, the military research center credited with the invention of the Internet. While the former preferred to keep all its operations under one umbrella, the latter farmed everything out. Now, recognizing DARPA’s superior approach, NASA is following suit.
The sooner the entertainment industry recognizes such logic, the sooner the sector will be revitalized and answers to the technological challenges will be developed.