Netflix has become extremely successful, first at streaming movies, but now also streaming broadcast television content—although its menu of available shows is somewhat limited. An Internet backbone company that distributes Netflix’s online streams of television content, Level 3 Communications, launched a public battle against Comcast in December, accusing it of requiring Level 3 to pay unfair fees to Comcast to ensure its streams reach its customers. Comcast denies it is competing unfairly, but the battle is sensitive because federal regulators are grappling with how to craft rules to ensure all Internet content is treated fairly. This isn’t the first time Comcast has been accused of disrupting the content of a competitor. (More on that later.)
At least some TV lovers are betting that despite Comcast and the cable industry’s might, these new Internet TV ventures will allow them to cut their cable cords and save some money. Research firm SNL Kagan estimates that the number of households that will substitute online TV for traditional cable and satellite providers will grow from 1.5 million at the end of 2009 to 8.1 million households by 2014. Indeed, Comcast lost 275,000 cable TV subscribers in 2010’s third quarter.
But others are not so sure that many will cut the cord. Susan Whiting, vice chair of Nielsen Company, the television rating service, told Congress in July that “at the present time” viewers appear to be using the Internet to add to rather than replace their usual viewing platforms. If she’s right, that would make the family that runs Comcast very happy.
Keeping It in the Family
While Comcast is the nation’s largest provider of cable TV and broadband services, it is still very much a family operation. It was founded by Ralph J. Roberts, now ninety, who, with two other investors in 1963, purchased a 1,200-subscriber cable television system in Tupelo, Mississippi. Today he carries the title of chairman emeritus.
His son, Brian Roberts, currently serves as chairman and chief executive, having joined the company in 1981, fresh out of the University of Pennsylvania’s Wharton School of Finance. Roberts, fifty-one, has served as chief executive since November 2002 and chairman since May 2004 and is credited with building a mid-tier cable company into the titan it is today. Shares of the Fortune 100 company trade publicly, but Roberts owns a third of the company’s voting stock, giving him by far the most control of any investor.
Roberts runs the Comcast empire from a sleek, glass-sheathed tower in downtown Philadelphia. In published profiles he is described as a polished and low-key dealmaker who is also a relentless, hard-ball negotiator, adept at sidestepping the spotlight. He has said NBC’s The Office is one of his favorite TV shows.
An accomplished squash player, triathlete, and father of three, Roberts is active in Philadelphia philanthropy. He was paid more than $27 million in total compensation in 2009, ranking him forty-seventh on Forbes’s list of executive pay.
If he seals this deal, Roberts will step beyond the cable guys and into the flashier world of media titans.
Too Much Control?
Comcast’s proposed deal unfolds in three stages. First, it calls for General Electric Company to buy the 20 percent of NBC Universal it doesn’t already own. Comcast would then pay GE $6.5 billion for a 51 percent stake in a new joint venture containing NBC Universal and Comcast’s cable networks and online properties. GE has an option to sell its stake in the venture to Comcast within seven years, giving Roberts 100 percent control.
Consumer advocates say the deal is bad because it will make it harder for new competitors to challenge cable and satellite television providers. Mark Cooper, research director at the Consumer Federation of America, told Congress in February that the cable industry is a “cartel” that will be “strengthened and extended to the Internet” if the merger is approved.
The merged company “touches every part of the media landscape,” said Crawford, the former Obama adviser who questions the deal. If the deal is approved, Comcast will own the NBC affiliate and the dominant cable system in cities including Chicago, Philadelphia, Washington, Miami, Hartford, and San Jose. Owning a cable system and broadcast station in the same market was once against the rules, but such restrictions were abolished by a federal court ruling in 2001.
In addition to its broadcast and cable networks, NBC has 234 affiliated television stations that cover the nation. There’s also Universal Pictures, theme parks, and fifteen owned-and-operated Telemundo Spanish-language stations.