Comcast/NBCU aired out once again


The proposed merger of Comcast and NBCU is either one of the greatest things for consumers imaginable, or the worst. It’s great for diversity, competition and localism, or it’s horrible. It all depended on who had the floor at the 2/25/10 hearing in the House Judiciary Committee under John Conyers (D-MI).

Conyers said he is skeptical of the effectiveness of antitrust protections, and stated his belief that vertical integration can be even worse than horizontal consolidation. That makes the proposed merger of Comcast and NBCU very worthy of close consideration. He said that mergers always lead to job loss. “Now we have a proposal before us that I am approaching very carefully.”

Ranking Member Lamar Smith (R-TX) notes that the combined companies would be one of the largest media companies in the world. Usually, though, Congress examines head-to-head mergers; this is vertical instead. Can the combined company use Comcast’s distribution platform to prevent competitors from getting NBC content? The company says access will remain after the merger. The company’s have made commitments that suggest the merger will in fact be good for consumers. The Time Warner merger showed that concerns for consumers can be overstated, Smith noted, even if it also shows that mergers are not always a wise business decision.

The panel included Brian Roberts (Comcast), Jeff Zucker (NBCU), Jean M. Prewitt (Independent Film & Television Alliance), Thomas W. Hazlett (George Mason University School of Law), Mark Cooper (Consumer Federation of America), Larry Cohen (Communications Workers of America), Andrew Schwartzman (Media Access Project), and Marc Morial (National Urban League).

Roberts told Howard Berman (D-CA), who is concerned about local in-district jobs, that this merger is a once-in-a-lifetime chance to transform Comcast, so the motivation is not to look for ways to slim down, it is to continue to grow even more, extending what will be merged to new platforms. And since there is virtually no overlap between Comcast and NBCU holdings, there is no particular motivation to cut employees.

Zucker added that the last couple of years have been difficult; witness ABC’s recently announced reductions in its news department. The Comcast investment actually is good news for NBC employees.

Prewitt, after listening to Roberts and Zucker talk about percentages of programming they run and do not own currently, said that much of it isn’t from independents, it’s from other conglomerates. What independents do get carried tend to be shunted to cable, with less opportunity to succeed and find a large audience. More and more channels are cutting out independents, and this merger can only aggravate the situation.

Cooper said that burying a couple of channels somewhere within a 500 channel lineup is not the kind of commitment that will fix the situation. Great independent programming came back when the networks had to buy it – without the requirement, the diversity went away. He said it is a historical fact that vertical integration undermines diversity. You make more money buying internally and rerunning lower quality shows.

Cooper later repeated out that the merger eliminates local competition between Comcast and NBC, and it changes the dynamic over broadcast carriage on cable throughout the nation.

Cohen said that even if Comcast doesn’t cut jobs, the merger would make it more expensive for other pipeline companies to compete, and that would force them to cut their investments and cut jobs. Further, he said Comcast/NBCU has made no promise not to cut full employees and replace them with free-lancers.

Testimony summaries:

* Brian Roberts, Comcast: Comcast employs over 100K people. Comcast will be 51% managing partner. Will accelerate “truly amazing” multiplatform digital future for consumers. We’ll be more competitive. More diverse programming on more diverse platforms. Will take steps to make sure competitors remain competitive. Committed to help independent programmers reach an audience, will add two independent cable channels a year beginning in 2011. There will no closures, no layoffs. There are no synergies to exploit, which is why some analysts aren’t cheerleading for this merger. Program access rules work, and will continue to work after this merger.

* Jeff Zucker, NBCU: This deal is critical to realizing benefits, NBCU will benefit from Comcast’s investments. There is far more competition in the entertainment market than back when there were three big broadcast television networks. This deal will not change the new competitive dynamic, but it will help NBCU to compete. Diversity will continue to be a focus of NBCU. Workforce will not face layoffs typical of an average merger.

* Jean M. Prewitt, Independent Film & Television Alliance: Independents are the workhorses in an era of media giants. Provide tons of content, discover talent. Will America continue to be informed and entertained by a diverse pool of creators? This merger must not deny public access to new messengers and new messages. This merger will increase the merged entities to create internal cross-platform synergies that will benefit them, but not consumers and independent creators. Big companies are closing the door on diversity. What’s good for Comcast/NBCU isn’t good for the American public. Conditions must protect consumers and independents. Five companies now produce over 80% of primetime content; independents have declined from 50% to 5%. History will repeat itself, and independents will again be shut out of distribution outlets.

* Thomas W. Hazlett, George Mason University School of Law: Merger is primarily vertical. Does not lessen competition in any one market. The trend in the sector is away from vertical integration. Viacom and Time Warner have been spinning off cable system assets. Good news for consumers is that local MVPD competition is starting to take off, including a cable system, two satellite services and in many places a telco. Comcast is swimming against the tide, gambling it can improve the performance of NBCU. Analysts are split on this, and many are dead set against it. Time Warner thinks that splitting its programming away from cable is the best option, this move is the opposite.

* Mark Cooper, Consumer Federation of America: This merger is not in the public interest, because it eliminates head-to-head rivalry between Comcast and NBCU. Programming concern is particularly strong in local news/sports content, and internet content. Creates the opportunity to deny must-have programming to competitors, and raising the prices of NBCU content to the detriment of consumers. The threat is real and the danger is imminent. Comcast has indicated that it will extend the cable model to the internet. Restricting internet access to cable subscribers is blatantly anticompetitive. Comcast’s promises do not begin to address competition within the industry. Federal authorities must ensure that conditions are enforceable before allowing this merger, including those already pending at the FCC and consideration of new ones. There must be fundamental reform before allowing this to proceed.

* Larry Cohen, Communications Workers of America: 700K members, many in the content area, many working for Comcast and NBCU. Merger will aggravate anticompetitive network behavior, damage internet content model. The merger will in fact lead to the loss of jobs. Comcast will take on debt, and will have to either cut jobs or increase subscription rates, either of which hurts consumers. Comcast has track record of trying to break unions of companies it acquires. Reads litany of anti-union Comcast actions. Comcast fires workers who try to form a union. NBC workers have a collective voice, but Comcast consistently opposes unionism. This merger would allow the entity to increase rates, and raise rates competitors must charge. Comcast/NBC would have the ability to charge new entrants for must have programming, making it harder to enter the market.

* Andrew Schwartzman, Media Access Project: Roberts is motivated by business considerations, not an attempt to undermine democracy, but there is nevertheless antidemocratic potential. Comcast will have more ability to squeeze out diverse voices of independent producers, many of whom even now refuse to testify publicly for fear of retaliation. “There ought to be a law against such abuse, and in fact there is.” Comcast has suggested but has not promised that it will challenge the rule. However, even more fundamental is that the current system doesn’t work – too expensive to pursue. Comcast will be able to withhold programming or force it on competitors at inflated prices. Comcast may agree to be bound by program access rules, but with an expiration date. Still wouldn’t work – if Comcast overcharges itself, it can overcharge everybody else. Comcast may increase retransmission fees for TV, which may be good for TV but that will raise cable rates for everybody. The prospect of consumers saying good-bye to cable and get programming from the internet may be headed off by Comcast’s Xfinity, which will hold key programming and making it available only to Comcast subscribers.

* Marc Morial, National Urban League: GE is selling its interest in NBCU to devote its efforts to its core business. I’d like to see NBCU with an American company; a company with an understanding of communications issues; and a company with a track record of being pro-diversity. NUL is withholding opinion on the merger pending discussions with the companies. However, Comcast deserves respect in this matter. Comcast has good record on diversity, including investment in TV One. Comcast has been a partner to NUL. NBCU has also made strides in its commitment to diversity. There is still much work to be done, particularly in areas of top executives, procurement, governance, philanthropy, programming, including access to capital. Minority businesses should have a fair and equal opportunity to acquire any spin-offs.