Canaries in coal mines
Several canaries in several coal mines:
1. In a filing in the FCC’s net neutrality proceeding, Netflix notes the “growing concern that [cable companies] will use their control over programming networks to stifle competition, including the growing competition from online video providers like Neflix” and urges the Commission to take a broad view of discrimination:
There is substantial discrimination and consumer harm if a network operator uses its ownership affiliation with a program content provider, or even its bulk buying leverage with a video content provider, to deny attractive programming to a competing online service.
2. After today, “The Daily Show” and “The Colbert Report” (owned by Viacom) will no longer be available via Hulu.com, which is 1/3 owned by NBCU. Six companies (Disney, TW, News Corp., Viacom, CBS, and NBCU) control more than 80% of viewing hours in the US. These companies have the power to yank all must-see video from online sites and put it behind pay walls.
3. Comcast’s 2009 10-K (available here via Businessweek) notes at p.69 that about 57% of the company’s cable services revenue comes from video content (including regional sports networks), compared to about 23% from high-speed Internet access - and just about 4% for advertising.
4. According to Broadcasting & Cable (here), if the deal goes forward as planned Comcast’s advertising revenue will jump to 23% of its overall take. Comcast is very excited about the possibilities for cross-platform advertising - its ability to provide a one-stop shopping place for advertisers who want to reach, say, all affluent women in their 40s who redecorate their homes.
5. As Steve Burke of Comcast said at a recent conference, “Now more than ever, content and distribution put together can really change everything as long as you’re willing to lean forward.” He’s talking about the possibilities of addressable advertising. (Recent post about this here.) Indeed, he suggested at the same conference that the NBCU merger was “a bet that the advertising business wil remain robust.”
6. If any of the six content giants combine with any of the four major network providers, the resulting vertically-integrated monoliths won’t be interested in supporting online video that isn’t behind a pay-TV wall. (See the scrap over the Olympics and Sen. Kohl’s questioning.) Why?
Maybe these are two reasons: First, the advertising possibilities are so much greater if the resulting monolith can target ads based on everything they know about the user. Demographic information based on network-provider information, video viewing information, response to ads - all of this added together makes for a powerful targeting arsenal that will be attractive to advertisers.
Second, moving the cable model online (moving sports and other must-have programming behind online pay walls and tying access to this online content to a cable subscription) makes it more difficult for regulators to bust up exclusive deals, potentially avoids regulatory schemes to which traditional cable systems are subject (like must-carry, retransmission consent, program access, and program carriage), makes it easier to destroy local cable competition, makes it easier to discriminate less visibly, and is generally extremely difficult to unwind once it starts happening.
This isn’t good for independent programmers. Nor is it likely to be good for the American consumer.
Comcast sells a lot of expensive video services (including those all-important sports channels) to Americans. How about this performance in a recessionary time:
Our average monthly total revenue per video customer increased to approximately $118 in 2009 from approximately $111 in 2008 and approximately $102 in 2007.
That’s a lot. Will the merger bring these figures down?
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