Am I the only one that thinks Comcast has made a mistake here? Everyone seems to be worried about how Comcast is going to stomp all over both sectors, while reducing choice for consumers. But I think the whole idea of marrying content with the last mile and everything in between is just a bad idea that at best will flounder and at worst will make us all forget about the AOL/Time-Warner debacle. My reasons:
- Loss of focus – the content business and the cable/bandwidth businesses aren’t just slightly different. They are entirely different worlds that require different priorities, management styles, planning, risk taking, and on and on. Vertical integration is like a salad. With the right mix of ingredients, you get something vastly better than you started with. But mix it with the rest of dinner and you’ve just got a mess no matter what dressing you use. Comcast’s proposed salad now has a bit of everything in the network kitchen. If they mix it, they’ll get a mess, but if they don’t mix it, then they don’t get the synergies.
- Unbearable scrutiny – So many of the possible paths Comcast might take to squeeze synergies out of the deal will be instantly challenged as anti-competitive, that even the ones that actually aren’t will still be cast that way. Comcast is painting a giant bulls-eye on its back. Anything they try that leverages their last mile position and makes them money at someone else’s expense will be followed by an instant media attack and regulatory scrutiny.
- What looks good on a spreadsheet… – The guys who put these deals together and work up the financial justifications make assumptions – a lot of assumptions. Many are about the details of the future direction of technology – always a dicey subject. When such assumptions turn out wrong, fancy footwork is required to for a change of direction, but Comcast isn’t exactly light on its feet anymore. If they stumble, getting up will take years let alone changing direction.
There’s a reason Google hasn’t bought XO or Level 3, and the same goes for Apple. Comcast is now bigger, but IMHO actually less dangerous. Well, except perhaps to internet backbones and CDNs due to the precedent they are trying to set with Level 3, but I don’t see that as being made worse by the NBC purchase. Level 3’s linkage there was opportunistic – the situation would be the same if the NBC deal hadn’t been on the table.
Oh, and that picture up there? That’s a ‘Jar Jar Binks Salad’, which also must have seemed like a good idea at the time to someone… in a galaxy far… oh never mind.
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Categories: Cable · Mergers and Acquisitions
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I gotta say that I agree with you here. I think there are inherent difficulties out there when a distribution company also owns some of the content out there. While the distribution part of the company should want to put a ton of content out there so as to make it more attractive to the consumer, the conent side is going to want to just have its own content viewed.
A problem that exists now is that the distribution company has a number of methods of distribution to deal with both the regular cable method of distributing broadcast content and the newer, and I think more efficient, IP method of delivering content on an “on-demand” basis. It will be interesting to see how this resolves itself out.
Rob,
I will respond in two ways: first, my own opinion and second, how I imagine Carlk might react.
The history of most large media mergers has been almost uniformly bad for the acquiring shareholders– AOL and TWX would be the exemplar of a screw-up but many others exist– Viacom and CBS, News Corp and Myspace, Disney and Cap Cities, GE and NBC, T and Tele-Communications and prospectively News Corp and Dow Jones. In the case of Comcast many suspect it is simply an attempt by the Roberts family to diversify their holdings, since selling stock and investing elsewhere would dilute their control. Whether owning more content protects the base franchise is the core question. We will need to revisit that in ten years but history suggests the CMCSA shareholders probably won’t be happy.
Now, as I imagine CarlK might respond:
“Let the baying dogs of Wall street and their minions out of thier crates (IMO). What would Munger think of (T) or Rockefeller (P) and why? Whatever the analysts will chant is born out of living through a Clinton/Winnick criminal conspiracy dreamland supported by cheap Chinese labor. Goodbye, hello ZOMBIE OWNERS. I want the right to videotape you and distribute it around the world for free, if you understand my real meaning. As a wise man once said:
“I believe that my conduct is in accordance with the will of the Almighty Creator”
Certainly Jimbo and (3) will have something to say about this attack on the Constitution and free enterprise. Let the violence begin (IMO).”
“There you go again,” Enron! I believe it was Reagan who referred to the press corp. that way, didn’t he?
Rob, vertical integration by its purest definition strays from the core biz, therefore, makes the salad sloppy, an alien like in your picture, almost always.
Enron, I’ll bet “The Roberts Family” were pressured by the Wall Street scum to do this. For what good is controlling the whole of two weakening enterprises-market and mind share-versus making your best effort to strengthen the one that is your core strength for decades? If my wealth is going to be diminished, it might as well be diminished fighting for what I have been good at up until now. Otherwise, just sell the one company before the walls come tumbling down.
Finally, don’t forget that Rock’s have T’s behind their dynasties, and Mungers only have B’s! There is always somebody with a bigger stick that thinks they can push you around! How big is xoHO making you Enron?
BTW, dege on IV understands what I’m saying about Global Enterprise Corruption. Has Wall St downgraded them yet, or are they waiting for full disclosure by Comcast on how their “open internet” requirements will end up being worked out with (3) and Netflix?
very funny en_ron.
I think the price Comcast paid for those assets was very appealing(the Disney price was much more appealing but dis intelligently balked) and if they would have offered me the deal, I would have taken it. However, I would have liked to put it in a different corporate structure. but maybe that is coming long down the road.
I defn agree with Rob’s point tho that it actually takes some risk off the table for everyone else(twc, dtv, dis, lvlt, twtc) as they comcast will protect their markets just to shield themselves from anti-competitive rhetoric/action. The only group left out of the pie is wireless, maybe CMCSK finally picks up light squared or even T-Mobile, CLWR or S.
I think the Roberts family should actually pay John Malone whatever it costs or even Maffei to clean this up. Maybe sell down control of the combined entity, apply trackers to it, start swapping out assets.
pipe guys are deathly afraid of “dumb pipes” trend/theory/possibility (up to each reader to decide). recall that comcast made a weird attempt to buy disney/ABC/cap-cities a few years ago. GE is throwing a global yard sale to save their massively overleveraged hedge fund lender ge cap (recall that they even tried to sell their bedrock appliances and lighting divisions). but for government bailout, the owner of nbc didn’t survive Q1-09.
back to comcast, they have figured out that “airports” make more money than “airlines”. like music, book and other “distributors” the internet is about to re-value the cost of “distribution”.