TOPICS > Nation

In NBC-Comcast Merger, Concerns Linger Over Concentration of Media Power

January 19, 2011 at 4:48 PM EST
Loading the player...
Ray Suarez and Jessica Vascellaro of The Wall Street Journal examine the marriage of the nation's largest cable and Internet provider with one of the largest entertainment companies in a $30 billion deal approved by the Federal Communications Commission on Tuesday.
LISTEN SEE PODCASTS

TRANSCRIPT

GWEN IFILL: And now to another business story: the impact of that major merger between NBC and Comcast.

Ray Suarez has the story.

RAY SUAREZ: It’s a media marriage that’s not quite like any other to date: a merger of the country’s biggest cable and Internet provider with one of the largest and best-known entertainment companies.

There’s been much concern about the concentration of power that would result from pairing Comcast with NBC Universal. But, yesterday, the Federal Communications Commission, in a 4-1 vote, blessed Comcast’s $30 billion purchase.

That approval came with some conditions, though, to try to prevent Comcast from stifling competition on the Web from smaller players.

We explore the impact of the deal with Jessica Vascellaro, media reporter for The Wall Street Journal.

And, Jessica, why would Comcast, already a big media company in its own right, along with being a cable and Internet provider, want a big, complicated conglomerate like NBC?

JESSICA VASCELLARO, The Wall Street Journal: Well, Ray — and thanks for having me on — it’s a little bit of a hedge.

So, Comcast is the U.S.’ largest cable operator, also sells Internet connections and broadband. But, you know, that business is maturing. People have television service. By some measures, the number of people who are subscribing to pay TV service is even falling.

So, it’s an older business. It faces new competition from Internet rivals. For NBC — for Comcast, NBC is a lot of new content. It’s some new businesses that are making a lot of money, but it’s also the opportunity to differentiate their pay TV service to fend off competitors.

RAY SUAREZ: It’s been about a quarter-of-a-century since GE bought NBC. Why was GE, once such a dominant network — why was NBC, which was once such a dominant network, ripe for being purchased by somebody else?

JESSICA VASCELLARO: Well, NBC is, you know, quite a large business, NBC Universal. And it has parts of the company that are doing very well, like the cable networks.

The broadcast network is not doing very well. You know, it’s fourth in prime time. It’s lost a lot of its luster. This is not necessarily a big part of the bottom line at NBC, but it’s a big part of the image of NBC. And I think that this was a — financially, a very sort of smart transaction from both Comcast’s side and GE’s side.

So, I think, for GE, it was time, and it made a lot of financial sense.

RAY SUAREZ: During the run-up to the FCC approval, critics of the merger expressed concern about a deliverer of content, like Comcast, buying a producer of content, like NBC.

Were those concerns answered by the FCC, and are they being answered by the Justice Department in its deliberations?

JESSICA VASCELLARO: Well, both regulators came out with a lot of conditions that critics of the deal, you know, say do mark a step towards addressing those concerns.

And probably the most important ones, broadly, are that Comcast can’t withhold NBC programing from competitors. So, it can’t prevent DirecTV from offering NBC content to its subscribers. At the same time, this extends to the online video landscape.

So, in many instances, it couldn’t prevent — prevent Netflix or some of these emerging providers from carrying their content, if they also had similar deals with other media companies. So, that — that was a big concern going into it on many people’s minds. And the FCC and the DOJ have laid out some pretty clear ground rules on that.

RAY SUAREZ: But don’t these conditions sunset? Won’t Comcast/NBC eventually be able to withhold content from Hulu, let’s say, the — the computer desktop, instead of television, provider of popular entertainment shows?

JESSICA VASCELLARO: Well, not for the next seven years. So, most of — not all the conditions are seven years, but many of them and the online video condition you mentioned are for seven years.

And seven years is a long time in the media world and particularly, I think, in the digital world. But, of course, it’s something that competitors are going to keep an eye on. There’s a mechanism the FCC has provided for someone to sort of arbitrate and go to them to say, I don’t think Comcast is being fair on the price they’re charging me to carry NBC content.

And I think, you know, we can expect to hear people — or to watch people pay close attention to this issue.

RAY SUAREZ: OK, so you have mentioned the fast-growing video online industry and its concerns. But there were some — some goodies in there, too, weren’t there, for local newscasters, for Spanish-language broadcasters, for people who want to make sure that there’s a steady stream of children’s programming, right?

JESSICA VASCELLARO: There are.

And, you know, Comcast sort of agreed to a lot of these conditions voluntarily and sort of raised some of them. You know, they’re agreeing to carrying a certain amount of local content, diverse content, kids’ content, basically addressing concerns that they’re not going to take their service and squeeze it into the most profitable or reserve it for the most profitable types of content, that they’re looking out for the public interest, too.

RAY SUAREZ: Now, some of the same media giants that expressed concerns about this merger have been snapping each other up for years.

During this approval period, did they testify and brief against the merger, or do they want to be free to do the same thing when their time comes?

JESSICA VASCELLARO: You know, it was very funny to watch.

A lot of different media companies sort of played different moves at different times. You saw some — one that jumps to mind, Bloomberg, who has a business network that competes with CNBC, which NBC owns. So, they were pretty vocal in pushing on conditions that would really require Comcast to keep their network in the same sort of part of the channel grid, so people wouldn’t — would be able to find it. So, they were actually one of — pretty vocal on that.

Towards the end, we saw some media companies, Disney and News Corp., Time Warner, talk to the FCC about some of the online video conditions. They had some concerns that it was maybe too early to start laying down some ground rules around who has to strike a deal with whom in the online video world.

But I would actually say, for the large part, you know, media companies were pretty quiet throughout what amounted to about a year of deliberations. And, as you point out, it comes at a time when they’re really looking deep at their own business. They’re casting about for partners who are going to help them make this digital transition.

So, everyone’s strategy is sort of up in the air right now.

RAY SUAREZ: Jessica Vascellaro joins us from New York. Thanks a lot.

JESSICA VASCELLARO: Thank you.