Cable giant Comcast is trying to build an entertainment empire with its purchase of NBC Universal, but analysts warn the deal might not turn out well for consumers. It could bring higher prices and more charges for content that used to be free, even as it reshapes the media landscape.
Investors are still skeptical about the wisdom of cable giant Comcast's bid to purchase control of NBC Universal from General Electric.
But consumers could be the ones with the most at stake, according to analysts.
"I've been scratching my head to see how this deal could bode well for consumers, and it's hard to see," says Tuna Amobi, a media and entertainment analyst at Standard and Poor's. "It's going to be a consolidation of power in the hands of this new behemoth. It's going to virtually impact consumers on every front."
Here are six ways that consumers could be most affected by the deal:
1. Higher Prices — Even For Non-Comcast Customers:Comcast will be adding a number of large and very profitable cable networks to its own growing stable, which already includes E!, the Golf Channel, and 10 regional sports channels. The biggest prizes from NBC are USA and Bravo, but it also owns Syfy, CNBC, MSNBC and Oxygen. The merger could give Comcast new bargaining power when dealing with other cable and satellite firms.
"If Comcast owns this huge chunk, they're going to be in a position to … raise the rates on other companies," says Craig Aaron, the senior program director for Free Press, a nonprofit group that promotes independent media and opposes the deal. "It gives one company so much more bargaining power than exists now."
Comcast could also be in a stronger position to pressure other cable and satellite providers to carry their less successful networks as a condition for getting access to the most popular ones.
The deal is, of course, subject to regulatory approval, and the Federal Communications Commission could demand concessions that would restrict this kind of pricing power. Analysts note that the FCC imposed these kinds of conditions when News Corp., which owns Fox, purchased a controlling interest in satellite provider DirecTV in 2003.
Executives at Comcast also note that if the deal goes through, 6 out of every 7 networks on its cable systems will have no affiliation with Comcast.
2. Paying For Content That Used To Be Free: Comcast's main motivation for the deal is to get access to entertainment content, whether it's from NBC Universal's cable channels or its other divisions, including the flagship NBC broadcast network and Universal Studios.
But with over-the-air stations struggling for revenues, Comcast could be tempted to migrate much of its best content onto its cable channels or its extensive video-on-demand offerings, where it could charge extra.
"What this means is that more and more programming will probably be put behind the walled garden," says Amobi.
Comcast insists that it remains dedicated to providing free broadcast programming, and it is voluntarily committing to keep at least three-quarters of its On Demand library available to subscribers at no extra charge for three years after the deal closes.
Other analysts also point out that Comcast could find that it can make more money by selling the rights to its programming as widely as possible.
"Even though Comcast is theoretically going to have some sort of monopoly control over this content — if in fact there is such a thing — if the demand warrants it, they're going to figure out a way of making it available to others," says Mike Jude, the program manager of consumer communications at Stratecast, a division of the research firm Frost and Sullivan. "At the end of the day, the equation is reaching the maximum number of people willing to see it."
3. Giving ESPN A Run For Its Money (And Yours): Disney's ESPN has been able to command very high prices from cable companies because nobody could match its extensive array of marquee sporting events.
"If there is any silver lining here, it could be on the sports programming side, which is basically a monopoly with ESPN," says Amobi. "If you have another viable competitor, there is theoretically no reason that sports programming costs should continue to spiral."
Comcast has been trying to build its own Versus sports channel (formerly called OLN), along with an array of regional sports networks, to compete, but it's been slow going.
Now, it could get to add NBC's sports lineup to the mix, including rights to tennis and high-profile golf tournaments, along with its history of carrying the Olympics.
4. Stunted Competition In Online Video: Another prize for Comcast is NBC's 27 percent stake in Hulu.com, which currently offers broadcast television shows for free over the Internet. With a growing number of consumers watch programming over the Internet, Comcast gains a foothold inside another potential competitor. It also raises the possibility that Comcast could gain new Internet video customers who don't live in areas served by its cable operations.
Some consumer advocates worry that Comcast could use its programming heft to reduce competition among other emerging Internet video start-ups. "There is powerful motive for them to start starving other online video services to keep content away from them," says Aaron.
But Comcast will not have a management role in Hulu, according to Comcast executives. And regulators could also force NBC to sell its stake before the deal goes through.
More broadly, the Hulu question could be a sign of that the industry is moving towards a stage where how consumers get media matters less than the quality of the programming.
The Obama administration is seen as friendly to the concept of "net neutrality," which envisions a world in which Internet service providers have to provide the same level of service to everybody and can't charge companies higher rates for faster access speeds to their Web sites.
Already, the line between cable TV and high-speed Internet content is blurring.
"In the future, people will buy TV service and it will be delivered over whatever they have," says Jude. "Largely as we go forward, these various operators will be differentiating themselves on the quality of their service packages."
5. More Media Mergers On The Way? After a flurry of media mergers early in the decade, the media landscape had seemed a bit more settled in recent years.
"A few years ago, I thought it was all dead, determined," says Jude. "It has definitely started evolving very quickly."
If this deal works out, however, it could provoke another flurry of consolidation.
"If this deal is rubber stamped and allowed to go through, that is going to encourage other companies to arm up to compete with this behemoth," says Aaron. "We could be sparking a whole new wave of media consolidation, which we argue is bad for consumers, because prices will go up."
6. Or It Could Be Another Failed Merger: Of course, consumers might not feel any of these effects.
While this wouldn't be the first time that a cable or satellite operator tried to build an entertainment empire, other recent deals have failed quite publicly. That means NBC Universal and Comcast are trying to buck the current trend.
"It's a gamble on both their parts," says Jude.
Time Warner recently shed its cable operations, and it finally spun off AOL on Dec. 9 after a disastrous 2001 merger. News Corp. sold its DirecTV stake last year.
"There's more fragmentation of entertainment outlets these days, and the competition on the distribution side has intensified," says Amobi. "It would be a very hard case for me to say this would be a slam-dunk for Comcast."
For one thing, Comcast will now find itself also operating a broadcast network, theme parks, a movie studio, and 27 local stations.
"It's hard to see how that fits into the core competence of Comcast," Amobi adds. Copyright 2009 National Public Radio. To see more, visit http://www.npr.org/.