In Comcast-NBC deal, we're all the biggest losers
If the proposed $30 billion deal between General Electric (GE) and Comcast (CMCSA) for NBC Universal is approved, Comcast would lead the market with control of access to 25% of U.S. households. Moreover, Comcast-NBC would own prized content, including The Tonight Show, The Biggest Loser and Bravo's Real Housewives series, according to The Washington Post.
In all, Comcast-NBC would control 20% of Americans' television viewing hours -- which might give it the market power to charge higher prices to competing networks seeking its content -- particularly online -- and to consumers. In short, Comcast's enhanced market power could cost all of us plenty. (Meanwhile, as I posted in reference to Oprah's move to cable, many of those network shows are so unprofitable relative to those on cable -- 5% cash flow margins for NBC vs. 23% for ESPN -- that Comcast might prune them back.)
How will GE and Comcast overcome potential government opposition to this deal? GE's CEO Jeff Immelt is a frequent White House visitor -- he serves on President Obama's Economic Recovery Advisory Board. But, indirectly, he has been a source of some embarrassment for the White House: NBC Universal has been using its Today Show to promote the Salahis, who were being filmed by NBC's Bravo as they crashed a state dinner a few weeks ago.
Then there's my pugnacious college classmate, David Cohen, who as Comcast's executive vice president of regulatory and federal affairs will be on the hot seat as the Federal Trade Commission, the Justice Department and the Federal Communications Commission spend the next year completing their reviews of the deal.
Comcast is trying to head their concerns off at the pass. How so? Cohen told The Washington Post, "We recognize that competitive concerns will be raised about the combination of such significant multiplatform assets in a single company. Therefore, we intend to make a number of affirmative voluntary commitments in our applications for approval that we believe will effectively address any such concerns."
As an annoyed Comcast customer, I don't like this deal at all. That's because I am confident I will end up paying more in my monthly bill when it's all over. Comcast has recently squeezed me into paying more after "updating" its service to permit high-definition signals. (And that doesn't even take into account my unpleasant experiences trying to get customer service from Comcast.)
I have little doubt that this merger will end up costing consumers more. And that in turn will give Comcast a bigger war chest with which to make more acquisitions, allowing it to further cement its choke hold on my access to entertainment and information.
But my guess is that the government will let the deal go through -- possibly with some divestitures to mollify those who oppose it. And we'll all end up paying the price.
Peter Cohan is a management consultant, Babson professor and author of nine books, includingCapital Rising (due in June 2010). Follow him on Twitter. He owns GE shares, but has no financial interest in the other securities mentioned.