I've always thought of Comcast as the company I loved to hate. They were the guys who in ten years managed to double the cost of cable service without adding any value; the company whose customer service was so awful it inspired violence by some consumers; the service provider that we ran from the moment an alternative was available.
Now they want to buy NBC . There's a lot of potential opposition to the deal from Congress, the government, and consumer groups, based on concerns about vertical integration, monopoly, and the prospect that NBC's programming might become proprietary, or that access to it might be restricted. (There's that "access" word again.)
Initially I tended to agree; this agglomeration ought to be blocked. But I've rethought. In the hurly-burly market of creating and distributing electronic "content" these days, it seems unlikely that any company - let along one as incompetent as Comcast - could create and hold a monopoly for long; or that it would be in Comcast's interest to do so. Keeping NBC programming out of the hands of competitors would simply weaken NBC's profitability. On the other hand, NBC's relatively insipid programming might be improved under new management. Anyway, would it really make any difference if NBC disappeared entirely from the market? Once upon a time, virtually all television was one of the three major networks (just as nearly all cars in the U.S. came from a handful of American makers). But today, I don't see any reason for the government to be involved in protecting the basic three-network model that has already been overtaken. The void (if one existed) would quickly be filled.
The Washington Post's Steven Pearlstein also makes some cogent arguments against stopping the purchase, suggesting that regulators instead use the deal as a springboard to open the television business to greater competition and real consumer choice. I agree with his reasoning but not his choice of model -- the demonopolization of the telephone companies. That was a flawed process in my view, because it took thirty years, during which a lot of consumers were bilked collectively out of many millions of dollars. But the concept is good if it regulations can be written better. The feature that needs to be added by regulators is an opening for consumers to select the channels (content providers) they want one-by-one, rather than as part of overblown "packages" that offer no choice at all.
I'm all for fostering competition, but I say let the deal go through. GE is transforming itself into an Energy Technology and Information Technology company and they are getting a good price for NBC. I think Comcast is likely the loser here. As Steve Pearlstein pointed out, these mega-mergers rarely succeed. I worked for a company that could pull it off - HP which has absorbed Compaq, DEC, and now EDS over the last 12 years. Yet, the successful big mergers are the minority with failures like AOL-Time Warner and Daimler-Chrysler being much more common.
One of my friends in the consulting business likes to point out that really big companies (which he obtusely defined as more than $28B in revenue) have incredible difficulty in sustaining high growth without resorting to mergers. The problem is that a bigger tribe requires bigger buffalo herds. In addition, most large companies have so many competing interests along with such a mishmash of internal processes and systems that they are too large to manage. It takes more than a compelling vision and some business case spread sheets to succeed. I believe the ones that do succeed have a focus on operational excellence (as opposed to customer intimacy or product superiority). The one thing I can say about Comcast as a customer of many years is that they have a long way to go in achieving operational excellence. Right now, I'm hoping the Internet connection stays up till I finish typing these so I won't lose them.
Posted by: Joseph Lott | December 06, 2009 at 11:06 AM