Comcast/NBCU Won't Create ESPN Rival

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Comcast executives said they won't try to turn their Versus cable channel into a rival to ESPN after their joint venture with NBC Universal clears.

Several published reports have speculated that Comcast could offload some NBC Sports content onto Versus, which currently offers sports programming like the Tour de France, National Hockey League Games and bull riding. The idea would be that with NBC sports programming like the Olympic Games and National Football League contests, the cable giant could turn Versus into a rival for ESPN.

On a conference call with reporters, Comcast chief operating officer Steve Burke said that while NBC Sports could provide some help to current Comcast networks like Versus and the Golf Channel, there is no intention to go head-to-head against ESPN.

Steve Burke

"The idea we would take on ESPN is overly simplistic," Burke said on the call. "We have a great set of sports businesses. A tremendous advantage here is that NBC Sports and [NBC Sports and Olympics chairman] Dick Ebersol have such a wonderful track record of creating great programming that they could only add to what Versus and Golf and Comcast Sports Nets are doing. We now have the ability to take all of these assets and take them to a different level."

INTERACTIVE ADS

Burke said the opportunities are not limited to sports programming: Comcast's own interactive advertising initiatives with the Canoe consortium could be spread across NBCU properties.

"Sports is only one area," Burke said. "This company's ability to reach target markets like women, or people interested in entertainment or news is really unparalleled. We've got lots of ideas and sports is one of them, and we have lots of time before the deal gets approved to think about those ideas and then lots of time to execute in the future."

That lag time -- many analysts expect it to take at least one year for the deal to pass regulatory muster -- could be the main reason Comcast has been reluctant to reveal its ultimate plans for NBCU.

In the interim between the deal's announcement and official regulator approval, Comcast has to leave management of the business to NBCU.

On the conference call, NBCU CEO Jeff Zucker, who will become CEO of the joint venture, said that while integration teams will be created to ease the transition, the official handoff won't be until next year.

While Comcast has come under some criticism for the deal -- many observers pointed to Time Warner's failed vertical integration strategy as a prime example -- Burke and chairman and CEO Brian Roberts defended the deal.
Roberts dismissed the comparisons to Time Warner, adding that the spin off of Time Warner Cable in March, is "not relevant to what we are doing here today."

"We have a cable programming business that was subscale," Roberts said. By combining it with NBC Universal, we achieve scale."

Burke said that time will tell whether the strategy is successful.

"You prove it as you go and you have to manage it," Burke said, pointing to several successfully vertically integrated companies like Disney, News Corp. and even NBCU. "NBCU is a great case study as to how to make different parts of a company work together. ...There are as many examples of it [vertical integration] working beautifully as there are companies deciding they want to concentrate on one or two businesses."

Perhaps because Comcast has to maintain a safe distance from NBCU operationally during the approval process, cable company executives were reluctant to offer specifics on more controversial issues like online programming availability and retransmission consent.

HULU PROSPECTS

NBCU is a one-third owner of online content purveyor Hulu, and several reports over the past several months have said the partnership is making moves toward a subscription model. Analysts also have speculated that Hulu could even merge with the cable industry's TV Everywhere concept -- making cable content available online only to cable customers.

Burke said on the call with reporters that, so far, NBCU has managed Hulu exactly as the cable company would have, offering mostly broadcast content on Hulu and sparingly offering cable content on their own channels' web sites. That could change after the deal is sealed, however.

"Once the deal is approved, we are going to want NBC Universal to continue to do what needs to be done to maximize its value of its content on the Internet," Burke said, adding that any decision to make Hulu a premium service is not Comcast's decision to make.

"We are not coming into this with any preconceived notions," Burke added. "NBCU is a minority partner of Hulu. We hope they will continue to run Hulu successfully because it is an important asset. For the next year those are their decisions. I actually think TV Everywhere and Hulu are very complementary. I would anticipate for the foreseeable future there would be a place for both."

Zucker also balked at offering specifics, adding that whether or not the subscription model makes sense for Hulu is something that will be looked at in the months ahead.

SIDESTEPS RETRANS TOPIC

Roberts sidestepped the controversial issue of retransmission consent.

As part of the deal, the JV will control about 26 owned and operated television stations. Television stations, and recently even broadcast networks like NBC and ABC, have been extracting cash fees from multichannel video operators for retransmission consent. Roberts was vague on whether that practice will continue.

"The broadcast business has been talking about retransmission consent fees for awhile, value has been getting conveyed for awhile," Roberts said. "Historically that has been creating cable channels for a number of the broadcast companies, [and] NBC is very much included in that. It continues to evolve and will be part of the business as it goes forward and probably a more meaningful part of the business. I think we have an opportunity by being in both businesses to help find constructive solutions to allow the broadcast business to thrive and to grow and to continue to invest in the highest class of programming that it does. And we are still a cable operator that is trying to manage its costs. I think the two are going to work well together."

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