Comcast shifts the media landscape

Synopsis: Comcast's planned purchase of NBC-Universal from GE has the potential of changing the nascent coalition structure of the video-delivery ecosystem.  Barring any regulatory hurdles or other last-minute difficulties, Comcast will soon become a major player in the content area, giving them the ability to make credible strategic moves which weaken the hand of the coalitions of which they are not a core member.

In my last post, I discussed the movement of the video content delivery market toward a set of coalitions sharing a growing market for portable, digital consumption of media, often without a television.  For content providers such as TimeWarner or Disney, generally their dominant strategy is to put their content on as many platforms as possible.  Fear of piracy as well as a lack of control of the delivery side drive them towards the disparate coalitions who create software allowing for legal content delivery to popular consumer devices such as the PC, Mac, Xbox, PS3, or iPhone.  To create a more controlled environment favoring the content creators, NBC-Universal created the successful Hulu site along with their partners.  However this content-coalition is now under threat, because a company on a vastly different side of the content-delivery spectrum, Comcast, is apparently in the final stages of engineering a purchase of NBC-Universal from its current owner, GE.

What would a Comcast-NBC merger mean for the two coalitions directly involved?  For TV Everywhere, probably not much, at least in the short run.  In fact it could strengthen this initiative, because now a major 'over the air' network, NBC, could participate sooner rather than later.  At present most of the coalition's minor partners are all cable networks.  However, it must be pointed out that it also gives Comcast credibility to threaten to take their content - and their vast delivery network - and run into the arms of Hulu, which they will also have a huge stake in after this potential merger.  TimeWarner, at least in the short run, will not take such a threat seriously because Hulu isn't profitable or at best barely so, whereas Comcast makes billions selling ads to the local markets where their cable systems are in place.  In the longer run, though, it could drive better concessions and shift the balance of power in the TV Everywhere relationship in Comcast's direction.  However, Comcast must be wary of TimeWarner turning to DirecTv or its former cable division (now a separate entity) in order to roll out the authentication scheme.  Thus the TV Everywhere coaltion is likely to remain stable in the short run regardless of the results of this merger.

Hulu, on the other hand, may struggle to survive this merger.  As mentioned above, Hulu could be a useful foil for Comcast were they to make a strategic move, but the economics don't really work in Hulu's favor - and there is no guarantee that they ever will despite its popularity.  After all, You Tube is widely used but even Google has trouble monetizing it despite their massive expertise in web advertising and analytics.

What about the other coalitions, such as iTunes, Netflix, and Amazon, all of whom sell or rent Universal pictures (the movie arm of NBC?)  In my opinion they are under the greatest threat, because TV Everywhere now has Warner Bros, New Line and Universal studios in its coalition, assuming Comcast/NBC stays in.  If TV Everywhere can get Sony, Disney and few other major movie houses to join it, then the studios could potentially defect from one or many of the online movie stores.  None of the online providers would be particularly appealing on a broad basis should they lose access to most if not all the major Hollywood studios.  At the very least, it is likely TimeWarner and NBC-Universal should be able to improve the pricing they squeeze out of Apple and the others who use the online store delivery/rental model.