I testified this morning in the House Energy and Commerce Committee’s Subcommittee on Communications, Technology, and the Internet at a hearing titled, “An Examination of the Proposed Combination of Comcast and NBC Universal.” Among those testifying were Comcast Chairman and CEO Brian L. Roberts, and NBC Universal President and CEO Jeff Zucker. Down below I have attached my brief remarks (we only had 5 minutes), but see the Scribd doc at the very bottom to also see the embedded charts. I also wrote a paper about the proposed deal back in December entitled, “A Brief History of Media Merger Hysteria: From AOL-Time Warner to Comcast-NBC” as well as this editorial for Forbes.
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Mr. Chairman and members of the Committee, thank you for inviting me here today. My name is Adam Thierer and I am the President of The Progress & Freedom Foundation (PFF).
Although we are still early in this process, there has already been a great deal of hand-wringing and even some dire predictions about the pending merger of Comcast and NBC Universal. I hope to put this proposed marriage in some historical context and explain why the deal certainly won’t have the detrimental impact some critics fear, and also explain why it might even be one potential model for how to sustain traditional media going forward.
Beware Media Merger Hysteria
First, let’s remember that we’ve been here before. Paranoid predictions of a media apocalypse have accompanied the announcements of many previous media mergers, from AOL-Time Warner to News Corp.-DirecTV to XM-Sirius.[i] In these cases and almost all others, however, the “sky is falling” claims proved to be greatly overstated.[ii] The only “harm” that one could reasonably claim came from those mergers was not to consumers or content providers, but to the merging firms themselves and their shareholders. That’s because many mergers simply fail to create the sort of synergies and benefits originally hoped for and consequently die of natural causes over time.
Other firms, however, have found ways to make deals work and deliver important new services that previously were unimaginable or simply too expensive to offer alone.[iii] Regardless, the point here is that we’ll never know what works unless we permit marketplace experimentation with new and innovative business models. Continue reading →
The WSJ reports on the intensifying economic pressure on local TV stations: declining viewership, ad revenue and the threat that national networks might go straight to cable.
Many stations are looking to the Internet for salvation:
Stations are scrambling to find new revenue streams. Some are testing out technology that will send their signals to cellphones and mobile devices, and beefing up their Web sites to boost online advertising. Others say rather than shrinking local news coverage, they’re expanding it, since it’s the only original content they still have…. Nexstar Broadcasting Group Inc., a Texas-based company that owns or manages 51 stations around the country, launched highly local “community” Web sites. Stations owned by NBC Universal are piping content and ads to TV screens in supermarkets, taxi cabs and their own Web sites.
“These tough times really force you to look at everything,” says John Wallace, president of NBC Local Media, the cadre of stations owned by NBC. “It remains to be seen how this is going to evolve, but I do believe there will be a market for local television well into the future.”
Wow, I am really blown away by CancelCable.com. Earlier today, I mentioned how I discovered it thanks to Mike Musgrove’s Washington Post story about how more and more people are canceling their cable and satellite subscriptions altogether and using alternative video platforms — Hulu, iTunes, Netflix, XBox, etc. — to watch their favorite shows. Anyway, if you go to CancelCable.com’s “Show Finder” site, you will find a complete inventory of all the major television programs you can find online right now. Go to the site to see the complete list, but down below I cut just the first 15 shows listed to give you a feel for how it works. And that list just continues to grow and grow in both directions — in terms of the number of shows and the number of platforms where you can get them.
OK, so why again do we need to mandate a la carte regulation for cable and satellite?
Back in the mid- and even late 1990s, I was engaged in a lot of dreadfully boring telecom policy debates in which the proponents of regulation flatly refused to accept the argument that the hegemony of wireline communications systems would ever be seriously challenged by wireless networks. Well, we all know how that story is playing out today. People are increasingly “cutting the cord” and opting to live a wireless-only existence. For example, this recent Nielsen Mobile study on wireless substitution reports that, although only 4.2% of homes were wireless-only at the end of 2003…
At the end of 2007, 16.4 percent of U.S. households had abandoned their landline phone for their wireless phone, but by the end of June 2008, just 6 months later, that number had increased to 17.1 percent. Overall, this percentage has grown by 3-4 percentage points per year, and the trend doesn’t seem to be slowing. In fact, a Q4 2007 study by Nielsen Mobile showed that an additional 5 percent of households indicated that they were “likely” to disconnect their landline service in the next 12 months, potentially increasing the overall percentage of wireless-only households to nearly 1 in 5 by year’s end.
And one wonders about how many homes are like mine — we just keep the landline for emergency purposes or to redirect phone spam to that number instead of giving out our mobile numbers. Beyond that, my wife and I are pretty much wireless-only people and I’m sure there’s a lot of others like us out there.
Anyway, I’ve been having a strange feeling of deva vu lately as I’ve been engaging in policy debates about the future of the video marketplace. Like those old telecom debates of the last decade, we are now witnessing a similar debate — and set of denials — playing out in the video arena. Many lawmakers and regulatory advocates (and even some industry folks) are acting as if the old ways of doing business are the only ways that still count. In reality, things are changing rapidly as video content continues to migrate online.
I was reminded of that again this weekend when I was reading Nick Wingfield’s brilliant piece in the
Wall Street Journal entitled “Turn On, Tune Out, Click Here.” It is must-reading for anyone following development in this field. As Wingfield notes:
Continue reading →
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