Love can be unconditional but buying NBC is not
On Jan. 18, the government cleared the way for Comcast to take over NBC Universal in a deal certain to transform the landscape of the entertainment industry.
The combination of a leading cable company, a major broadcast network and a movie studio is unprecedented, and it remains unclear what advantages the combined entity can wring out of its constituent elements.
Comcast is buying a 51 percent stake in NBC Universal from General Electric for $13.8 billion in cash and assets.
The Justice Department and Federal Communications Commission approved the transaction with a few conditions that both foes and supporters of the deal agree are mild.
Indeed, Comcast executive vice president David Cohen stressed that none of the conditions “will disadvantage the competitive positioning of the Comcast Cable or NBC Universal businesses.”
Among other things, the government is requiring Comcast to make NBC programming available to competitors such as satellite and phone companies, as well as new Internet video services that could also be competitive with the company’s core cable business. Officials want to guarantee that online video services from companies such as Netflix, Amazon and Apple can get the movies and TV shows they need to grow – and potentially offer a cheaper alternative to monthly cable subscriptions.
An FCC condition requires Comcast to continue offering an affordable, standalone broadband option for customers who want Internet access but not cable TV service. Comcast said it would offer $9.99 broadband – at adequate rates for Internet TV (at least 2 Mbps?) – for lower-income subscribers.
Another condition being imposed by both agencies bars Comcast from discriminating against Internet video traveling over its broadband network. Although the FCC recently adopted industry-wide “network neutrality” rules barring broadband providers from interfering with Internet traffic on their systems, those regulations are likely to be challenged in court. The condition would ensure that Comcast, which has come under fire for discriminating against Internet traffic in the past, would still have to abide by the rules.
The government’s conditions will help ensure that the transaction cannot “chill the nascent competition posed by online competitors,” said Christine Varney, head of the Justice Department’s antitrust division. Most of the government conditions outlined will remain in effect for seven years.
Speaking of online competitors, along with picking up a controlling interest in NBC Universal, Comcast ended up with a financial stake in over-the-top party crasher Hulu.
There’s a common perception that Hulu and Comcast are by their very natures competitors, and that Comcast would either divest itself of its interest in Hulu or keep it only to undermine it.
But that’s not necessarily the case. Even before the deal went through, Hulu introduced Hulu Plus, a service in which it charges customers for access to premium content. The cable industry has been firmly behind charging for access to premium content; that’s the whole premise behind
In fact, right after the acquisition was approved, Cohen said, “We continue to have an interest in the growth and advancement of Hulu.” Cohen went on to say that Comcast would continue to provide TV shows and movies to Hulu the same way that Hulu’s other stakeholders had. For now, anyway, Comcast is not selling its interest in Hulu – though it did agree to relinquish any management role in the company.
Still, the conditions imposed on Comcast for the NBC deal did not go far enough for Michael Copps, one of the three Democrats on the FCC and a vocal critic of media consolidation. Copps voted against the takeover, warning that it “confers too much power in one company’s hands.” Several public interest groups and at least a few members of Congress also decried the combination.
Taking over NBC will transform the nation’s largest cable operator into a media powerhouse. NBC Universal owns the NBC and Telemundo broadcast networks; 26 local TV stations; cable channels including CNBC, Bravo and Oxygen; the Universal Pictures movie studio and theme parks; and a roughly 30 percent stake in Hulu.
IPTV grows, but DSL remains king worldwide
Year-over-year growth rates of 6.7 percent have taken broadband subscription to 508.8 million worldwide in the third quarter of 2010, according to figures by Point Topic. More than 14.3 million lines were added in the third quarter alone, representing 2.88 percent growth over the previous quarter.
The first three quarters of the year had uneven growth patterns, but some countries stand out with exceptional growth – with China and India both reporting their secondbest quarters ever in Q3. Vigorous growth was generally concentrated in developing broadband markets, with India, Russia, Vietnam, Ukraine and the Philippines all growing by more than 20 percent in the last 12 months.
China and the U.S. continue to add more lines than any other single market. Russia and Brazil, however, are the most rapidly growing in percentage terms, with 22 percent and 14 percent respectively.
In Asia, more and more of the developing markets are starting to report significant growth in broadband, with China, India, the Philippines, Vietnam, and even continued growth in South Korea all pointing to increased dominance in the global market. In Europe, the biggest gains are in Eastern Europe, although the region as a whole has performed better in 2010 than in 2009 on a quarter-by-quarter basis, with most of the big markets showing improvement.
In the Americas, there is renewed pickup, although it’s too early to say if this is the start of a full-blown recovery. In Canada, especially, there is little headroom for further growth as household penetration nears 90 percent. In South America, Brazil and Mexico continue to offer robust numbers, while growth is slow for some of their South and Central American neighbors.
The Middle East and Africa region also shows steady growth rather than spectacular numbers. While growth is strong in Egypt, Turkey and South Africa, there are still impediments to adoption (mostly availability and cost) in much of Africa.
DSL remains the dominant broadband technology worldwide. DSL is growing most rapidly in Asia, driven by the relatively low upfront costs and availability compared with other technologies.
Fiber continues to grow its strong market share, and for the first time there is notable growth in fixed wireless technologies.
The total number of IPTV subscribers worldwide now stands at 41.9 million, representing a growth of 7.3 percent (2.85 million net adds in the quarter) in the three months to end September, and 36.7 percent growth in the last 12 months (11.26 million net adds).
“IPTV has grown solidly in the last 12 months. Perhaps more importantly, the number of markets and operators offering IPTV is increasing as high-speed broadband spreads around the world,” said John Bosnell, senior analyst at Point Topic. “With TV being increasingly routed over IP networks, the broadband connection is becoming an increasingly significant channel for video delivery. As a tool for customer retention, as a prime mechanism for increasing ARPU and as a means of providing a distinctive offering to the competition, the bundling of IPTV with a broadband subscription and voice is very attractive to ISPs.”
With 46 percent market share, Europe continues as the leading IPTV region. But China is fast catching up to France, the current world leader in terms of IPTV subscribers, and at current growth rates, China will overtake France sometime during 2011.
Cisco: Market for hybrid service offerings promising
Cisco recently commissioned a market study to learn more about the potential for increased diversity in U.S. pay-TV customer needs and wants.
While some challenges remain, there are significant opportunities, according to the study, for service providers to evolve the traditional pay-TV landscape – by adapting to the expanding demand for video entertainment offering differentiation and meaningful user experience innovation.
Given the study findings, Cisco sees the potential to cater to the differing needs of the younger demographic as an upside opportunity. According to Doug Webster, Cisco’s director of strategic communications, the market potential for hybrid service offerings (the combination of broadcast and online video) is very promising indeed.
|The key takeaways from the market study include:
• 56 percent of survey respondents believe it’s important to be able to watch content on multiple devices (this figure increases to 72 percent for those under age 25 and 67 percent for those ages 25-35).
• 65 percent would be more likely to watch videos online if they could do it directly through their TV (especially those that live with friends – 77 percent).
• 50 percent would pay for an online video service (and it increases to 57 percent of people ages 25-35) if available through their service provider – especially if it was offered at a low price point and was easy to set up.
• Some consumers are willing to pay between $10 and $16 a month extra for a service provider TV package that includes watching online video content.
• 54 percent would like to be able to access general Internet content on their television.
• 58 percent would be less worried about their children’s social networking activities if it was carried out via TV so they could see what was happening.
In-Stat: Residential gateway shipments increase in Q3
Residential gateways continued their assault on the broadband CPE market in Q3, rising 4.9 percent from the previous quarter and 43.2 percent from a year ago.
Residential gateways represented nearly 40 percent of all broadband CPE shipments in the third quarter, according to In-Stat.
“The overall broadband CPE market grew for the second consecutive quarter in Q3 2010, and, as in last quarter, the growth is primarily a result of increases in residential gateway shipments,” said Brad Shaffer, an industry analyst. “This trend is likely to continue for the next several cycles.”
|Recent In-Stat research found the following:
• In Q3 2010, 30.3 million broadband CPE units were shipped, a 1.7 percent increase from the previous quarter and a 5.1 percent increase from the same quarter last year.
• Cable modem unit shipments were up 10.7 percent from the previous quarter, largely due to a 15.5 percent jump in EMTA modem shipments.
• xDSL modem shipments continued to decline, falling 12.5 percent from the previous quarter and 42.7 percent from the same quarter last year.
• D-Link continues to dominate the broadband CPE market with a shipment-based market share of more than 14 percent, in line with their market share in the same period a year ago.