Comcast’s Roberts Sets Course With NBC U and OTT in Mind

Brian Roberts, chairman & CEO, Comcast

Brian Roberts, chairman & CEO, Comcast

June 7, 2010 – Declaring his intention to break free of cable’s restrictive legacy technologies, Comcast CEO Brian Roberts last month shed important new light on how the revamped company with its anticipated controlling interest in NBC Universal plans to deal with Internet-driven challenges.

“Whether you’re in newspapers or TV you have to find new business models,” Roberts said at one point during the annual Cable Show in Los Angeles. “We’re inside an eco-conversation that’s a lot different today than it was 24 months ago.”

While acknowledging that a proliferation of access options poses significant problems for cable and other distributors, Roberts said it should represent a huge opportunity for content owners, which probably goes a long way toward explaining why Comcast is hoping to win federal approval of its deal to acquire a majority stake in NBC Universal. “[I]t seems to me in that world of more distributors and the same basic content, content values are going to go up,” he said.

In fact, Roberts showed just how far that perspective influences his thinking about cable, even though, as he put it, cable will represent 80 percent of the new company’s business. “Video wants to be on any device at any time, but there are different business models as to what that shows and how it wants to monetize,” he said. “So we’re in the business of building the technology to let the content providers figure out what that business model wants to be for any particular point in time.”

This perspective assumes the grounds for cooperation trump the traditional tensions that are intrinsic to dealings between content providers and distributors. “People are going to have their issues, but we all need each other,” Roberts said. Assuming cable operators and content providers can work together to build responsive business models, over-the-top “net net is going to be an opportunity,” he said.

Roberts got some encouragement along these lines in a discussion with top executives from Time Warner, CBS and Fox about cable’s need for shorter windows in the release of movies and other content into VOD distribution. “We all agree we have to shorten windows and make devices work in a way that works for the consumer,” said Time Warner CEO Jeffrey Bewkes.

Bewkes, describing VOD as “the most powerful thing we’re talking about here,” called on the cable industry to transform its approach to offering programming on demand. “Get your VOD robust…Get your interfaces to be stronger and better,” he said. “Use interfaces that are on the Internet and bring them to TV systems, and put the whole thing on broadband.”

Fox Filmed Entertainment chairman Tom Rothman, while expressing concern over too freely exposing TV programming outside of traditional windowed syndication, agreed that VOD movie revenues are a key to future prosperity. “Since its peak, the DVD business has lost $6-$7 billion,” Rothman said. “Our model shows an increasing number of transactions with VOD to where, within two years, digital will make up and exceed what was lost.”

“We appreciate what’s being said here about day and date,” said Roberts. “It’s been a long time coming.”

But even as he noted that Comcast under its new Xfinity brand is expanding its VOD portfolio to 80,000 hours of content, including 11,000 movie titles, Roberts made clear the Xfinity vision goes well beyond simply adding programming to VOD. When people turn to other sources of programming “it’s probably not because we don’t have a lot of the content they want,” he said. “One of our problems has been it can be more fun and cooler on some of these other platforms. The technology is moving faster, so we’ve got to get on that bus. We can’t stay on our bus.”

But while Comcast and the rest of the cable industry “need to speed up innovation, it has been very hard to do,” Roberts noted. In fact, when asked about his company’s progress with its TV Everywhere initiative (branded as “On Demand Online”), Roberts acknowledged it was not measuring up to the simplicity standards set by online entities.

“[Comcast Digital Media president] Amy Banse and the team have launched a great product,” he said, “but it’s too complicated in the very beginning to get it authenticated – too many steps to get authenticated, too many clicks.

“We can learn from the Apples and Amazons of this world [where it’s] one click,” he continued. “Simplicity is what tends to always win. It isn’t our strong suit, and we’re going to get better at it.”

Comcast is launching a new version of On Demand Online by fall that “makes it easier,” he added. While acknowledging that licensing content for On Demand Online across all its channels has also been a struggle, this aspect of the initiative is also looking up. “We have some 30 networks participating with more coming in every day,” he said.

As many parties concerned over the ramifications of the Comcast-NBC Universal deal have noted, control of the programming giant would position Comcast to make aggressive use of content to support its strategic ends, possibly in ways that would put others at a competitive disadvantage or at least sway them to match NBC Universal’s moves in ways that are advantageous to Comcast. This could apply to everything from licensing for TV Everywhere and VOD availability of prime-time programming to the extent to which content is made available to OTT outlets to VOD movie release windows to how retransmission consent deals are negotiated in the broadcast arena.

Roberts acknowledged some of these concerns, especially in the delicate area of retransmission consent, where the separation between cable and broadcast station interests is fundamental to how the market works. In a discussion with Roberts at the Cable Show, former News Corp. COO Peter Chernin, now founder and owner of Chernin Entertainment and The Chernin Group, said, “You’re sitting on both sides of the business, and you have a flat [cable] video business. You have these aggressive ‘asks’ on the part of content holders. How do you balance that? What’s fair? You’re in a position to decide.”

“There’s no five-second sound bite to that question,” Roberts replied. “We asked ourselves that question at great length. Is it a reason not to proceed [with the deal]? Does the schizophrenia become a problem?”

The Comcast team concluded “there is a fair,” Roberts said, noting that, taking Comcast and NBC Universal out of the equation, “there’s going to be 75-76 percent of the distribution market negotiating with 90 percent of the content market.” The market will “find its water level,” he said.

“You’ve got competitive platforms that are driving change in the supply-demand equation,” he continued. “There are adjustments cycling through the system, and there have been for awhile. Fortunately for cable, putting my cable operator hat on, we have broadband; we have commercial services; we have telephony, advertising. We have a very strong, healthy business.”

At the same time, he noted, Comcast wins to the extent retransmission fees drive funding to content production. “Broadcast is going to have another revenue stream, which will allow it to make better content and get more viewers, and that’s probably a good trend for NBC,” he said.

Indeed, Roberts suggested Comcast can play a role in redirecting the proceeds from retransmission fees into broadcast program development. “[Such fees have] been paid for awhile in FX or MSNBC or ESPN2 and other networks that went to the head of the class in exchange for retransmission,” he noted. “So can we play a role in establishing a model where we’re making sure not all the good programming in broadcast gets siphoned off into cable? Is that something we can help to be a part in the conversation?”

Roberts stressed that Comcast’s ability to invest in content will differentiate what NBC Universal has experienced as a unit of GE. Noting GE was more interested in investing in its core business, Roberts said, “As great a company as GE is, [NBC is] not the core of what they do. You can’t say that about the new Comcast. The core of what we do is making great content, distributing content, understanding the consumer and embracing technology.”

Two straight quarters of surging ad sales in broadcast combined with Comcast’s ability to tap investment funding, including $10 billion raised after the deal with GE was signed, bode well for the company’s ability to build good content, Roberts said. “Viewing is up; broadcasting appears to be having a good year,” he said. “We’re going to do everything the opposite of the trend line they may have been on.”

Roberts declined to speculate on how Comcast would deal with editorial control issues, especially when controversies arose over news or other coverage. “The real world is, let’s have that conversation in 12 months or six months when we’re playing with live ammunition and it’s not theoretical,” he said. But he stressed his commitment to NBC News as the “single most awesome asset that comes in this deal” and to “getting that right and keeping it down the middle.”

And, he promised, “We’re not going to try to ‘Comcastize’ NBC Universal.” In fact, he added, “We don’t even have a Comcast way, so to speak.” Instead the focus will be on the company’s many brands and sustaining the strength of those brands and the cultures that go with them.

“We didn’t build into this deal and certainly we’re not building into any expectations with investors or employees that we’re going to go and lead the way here and take it to someplace it’s never been,” Roberts said. “Our perspective is that with NBC Universal and Comcast together we have a unique opportunity to take this technological vision and really help build value.”