Comcast’s NBC takeover may prompt industry makeover

After 13 months of pointless scrutiny, federal regulators have done what they were certain to do all along, and blessed the most momentous media deal of this still-new century: The takeover by Comcast, the biggest U.S. cable operator, of NBC Universal, one of the country’s premier sources of news and entertainment.

The scope of this deal exceeds its nearly $14 billion price. That’s because Comcast controls the pipes. True, it’s also a content mill in its own right—with a dozen regional sports networks, the Golf Channel, E! Entertainment, and online properties—but its real business is sending TV and Internet into one in every five U.S. cable households, 17 million in all.

Now it gets a majority stake in NBC Universal, with 25 local TV stations, including those of its Telemundo subsidiary—the no. 2 Spanish-language network—and more than 200 affiliates, reaching 99 percent of U.S. homes. Plus, NBCU includes the legendary Universal Studios and theme parks, the USA Network, Bravo, Syfy, Oxygen, and The Weather Channel.

Although NBC has looked bad lately with its dithering over Jay Leno and its limp prime-time lineup, it is still a TV giant. As USA Today noted, Comcast is getting the top-rated evening newscast (NBC Nightly News), morning newscast (The Today Show), and Sunday talk show (Meet the Press), as well as the leading TV business news source (CNBC), and MSNBC, the cable partnership with Microsoft.

So this deal is big, the biggest mashup of media distribution and production might since the Hollywood studios were forced to shed their theater chains in 1948. You’d think that in an era when media-bashing is so popular somebody might decide to take this public.

But the curious fact is that concentration of media power is one of those subjects, like love of flag, where our normally fractious political partisans find rare common ground. They all say nothing. And the media themselves, with obvious conflicts of interest, are happy to believe the story is too obscure or too complicated for their G-rated audience.

That’s fine for Comcast. For the rest of us, not so fine. For starters, the deal will cost us. A study conducted for a cable operators group by William Rogerson, formerly the Federal Communications Commission’s chief economist, concluded that consumers will pay $2.4 billion more for cable service over the next nine years.

Why? Rogerson’s study looked at Comcast’s ability to raise fees it charges other cable systems for the vast range of program offerings it will control, and the knock-on effect those increases will have on cable rates industrywide.

His analysis hints at a more basic reality: The same reasons the deal is good business are why it’s bad public policy. When a media company that dominates distribution also becomes a major content producer it acquires enormous power. Indeed, that’s the main business reason for doing the deal.

That power insulates the company from the bracing influence of the marketplace, and gives it huge unfair advantages over rivals, independents and upstarts, and sweeping control over what new services are made available, to whom, and at what price.

If you’re Comcast, you’ll use your cable systems to favor your program networks, and your program networks to favor your cable systems.

Look at your leverage: You can help your program networks by consigning their competitors to the Siberia of cable channels so nobody will find them. You can deny competing networks or online services access to your cable customers altogether. You can withhold your most popular networks from other cable systems to weaken them. You can lean on independent networks to keep off rival cable systems if they want to get on yours. You can strong-arm rival cable systems into carrying even your weakest networks by packaging them with the popular ones.

Regulatory approval of the merger prohibits some of that, but these abuses are notoriously difficult to document, let alone undo.

Comcast could never really argue that its plan was in the public interest, which it unquestionably is not, so it resorted to wholly irrelevant pageantry to disarm opponents. It announced vague agreements to launch a rainbow of cable networks, perhaps 10 in all, four for African-Americans; four for Latinos; one or two for Asian-Americans.

It also promised arrangements with nonprofit news outfits in five cities where NBC owns stations, giving the nonprofits undefined support (and assuring the stations cheap, quality content.) Again, the promise is vague, and again, it’s nothing that couldn’t happen without the merger, but it still prompted a gullible New York Times headline:  “Nonprofit News May Thrive in Comcast Takeover.”

If so, we might at least see one bit of public benefit in a deal that the public, and the rest of the industry, will be paying heavily for.

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One thought on “Comcast’s NBC takeover may prompt industry makeover

  1. I agree that it’s a bad public policy for the owners of “the pipes” to control so much of what moves through them. I notice, though, that there was less concern expressed when Time-Warner — whose cable systems were major players in the “pipes” area — also controlled a lot of content, including CNN. Indeed, in an egregious example of the risks Mr. Wasserman discussed, Time-Warner famously tried keep the competing Fox News Channel out of its system in New York City.

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