December 2009

Welcome to the news business, Comcast. With the sale of NBC Universal, the nation's biggest cable operator gains a network news division, two cable news channels, and a set of local stations with long histories covering their communities. With the news assets comes a public service responsibility, one that Comcast said it recognized and respected. NBC's morning show, "Today," and evening newscast, "NBC Nightly News," are among the nation's oldest and most-watched news programs. Until now, Comcast has been an expert at wiring homes for cable, but not in gathering or reporting the news. Its entertainment and sports networks do produce newscasts, though. For the 23 years that General Electric has owned NBC, it has pledged not to influence the network's news programming. Comcast said it would "continue those policies" and "extend these policies to the potential influence of each of the owners."

Lawmakers sent statements after the announcement of the Comcast-NBC Universal deal, calling for hearings on the deal to see if it could hurt consumers with higher prices and less diverse programming.

Sen. Herb Kohl (D-WI), who heads the Antitrust and Competition Policy Subcommittee, said he will hold a congressional hearing to assess the merger's impact on diversity in programming and on how people access media content on the Web.

Senator Jay Rockefeller (D-WV), chairman of the Commerce Committee, said he has "serious questions" about the deal. "A joint venture of this magnitude would benefit from regulatory oversight. When major media companies swell to control both content and distribution, we need to make sure consumers are not left with lesser content and higher rates." Senate Communications Subcommittee Chairman Senator John Kerry (D-Mass.) said his subcommittee will keep a close watch on a Comcast/NBCU deal.

House Commerce Committee Chairman Henry Waxman (D-CA) wants hearings on Comcast/NBCU "at the earliest practicable date." He said he would work with Communications Subcommittee Chairman Rick Boucher (D-VA) to schedule the hearings.

House Judiciary Committee Chairman John Conyers (D-MI) said his committee will need to scrutinize the deal as well.

The Federal Communications Commission, which will review the merger along with antitrust regulators, issued a brief statement saying it will give the deal a thorough review. "The FCC will carefully examine the proposed merger and will be thorough, fair, and fact-based in its review," said spokeswoman Jen Howard. FCC Commissioner Michael Copps said, "The push to combine content and distribution continues and, as the economy recovers, we will see more proposed media industry combinations. While I look at each proposed transaction on its individual merits, my long-standing skepticism about the harms imposed by so few controlling so much persists. And this particular transaction raises a multitude of important questions: What is its impact on the prices consumers will pay? Would the combination mean more newsrooms (but perhaps fewer reporters) controlled by one entity? How would the transaction affect minorities and diversity on the airwaves? Would this merger lead to fewer voices on both traditional and new media? Does the nature of the transaction make even more urgent the need for FCC network neutrality rules? What about the future of competition in the several markets these companies serve?"

The response out of Washington Thursday was swift to the announcement of the Comcast/NBCU deal and the promises the company made to make it more palatable in Washington. Free Press, the Consumer Federation of America, and Public Knowledge all have concerns about the union.

Analysts at investment firm Stifel Nicolaus early on said they expect a Comcast/General Electric jointly owned NBC Universal to pass government muster. They argue that while they expect the Department of Justice to be "more open" to concerns about vertical integration -- owning both the content and the distribution -- it would be tough to establish that the combo would be sufficiently anticompetitive" to warrant blocking the deal. They suggested baseball-style arbitration for disputes over regional sport nets, collective bargaining for small cable operators and program access guarantees as likely precedent for those conditions. They also pointed to the rise of AT&T and Verizon as video competitors who would likely push hard for conditions, as well as online video interests like Hulu, in which NBCU has a stake, as factors that would complicate the analysis.

Stacey Higginbotham writes that regulators will likely require non-discrimination clauses that mean Comcast won't be able to block access to certain content for other pay-TV providers or ISPs in search of a competitive advantage. But by simply owning the assets Comcast is able to profit off the fees paid for its cable channels by its competitors who want to carry those channels. It's worthwhile to note that in a letter detailing its commitment to the public interest, Comcast focuses mostly on appeasing worries about consolidation in the current media landscape of pay-TV, rather than making promises about the new media landscape of web TV. Simply by owning these assets, Comcast could take a significant chunk of them off the web, or put them behind its TV Anywhere efforts, now dubbed Xfinity, under its control.

[Commentary] When I think about the current crisis in the print industry, this is where I begin—a traditional technology struggling to adapt to a new, disruptive world. It is a familiar story: It was the arrival of radio and television that started the decline of newspaper circulation. Afternoon newspapers were the first casualties. Then the advent of 24-hour news transformed what was in the morning papers literally into old news. Now the Internet has broken down the entire news package with articles read individually, reached from a blog or search engine, and abandoned if there is no good reason to hang around once the story is finished. It's what we have come to call internally the atomic unit of consumption. Google is a great source of promotion. We send online news publishers a billion clicks a month from Google News and more than three billion extra visits from our other services, such as Web Search and iGoogle. That is 100,000 opportunities a minute to win loyal readers and generate revenue—for free. In terms of copyright, another bone of contention, we only show a headline and a couple of lines from each story. If readers want to read on they have to click through to the newspaper's Web site. (The exception are stories we host through a licensing agreement with news services.) And if they wish, publishers can remove their content from our search index, or from Google News. The claim that we're making big profits on the back of newspapers also misrepresents the reality. In search, we make our money primarily from advertisements for products. Someone types in digital camera and gets ads for digital cameras. A typical news search—for Afghanistan, say—may generate few if any ads. The revenue generated from the ads shown alongside news search queries is a tiny fraction of our search revenue.