Sunday, November 27, 2005
FIRST AMENDMENT: Comcast aiming to control the content it delivers?
PUBLISHED: July 10, 2005
Comcast aiming to control the content it delivers
By Tony Gnoffo
The Philadelphia Inquirer
LOS ANGELES -- When former Disney executive Charles Hirschhorn had an idea for a new TV network, he called one of his old Disney associates.
Stephen B. Burke, Comcast Corp.'s chief operating officer and the president of its cable business, was driving home when Hirschhorn reached him on his cell phone and announced that he was coming to Philadelphia to pitch an idea. Burke recalled the conversation like this: "I said, 'Before you waste the airfare, why don't you tell me what you have in mind?' And he says, 'MTV for video gamers.' I pulled the car over to the side of the road and told him to get over here right away." So was born the G4 Video Game Network.
Philadelphia, Hollywood is calling.
Comcast came up short in its bid last year to buy the Walt Disney Co., that icon of American entertainment. But Burke and Comcast chairman Brian L. Roberts nevertheless have become media moguls of considerable influence.
Their power base is Comcast.s huge audience: the 21.6 million households that subscribe to the company.s cable service. They give any channel owned or blessed by Comcast instant traction . a place on Comcast.s vast national stage. That alone gives Comcast a lot of influence. But Comcast wants a piece of the action, too -- the ability to own the programming it once merely delivered. "Comcast wants to leverage its control of the pipes to gain control over the content," said Ben Scott, policy director for Free Press, a media-watchdog group critical of Comcast's increasing power.
But the same statement could be taken as a compliment, had it come from a Wall Street analyst. "Comcast ought to own content," said Michael A. Kupinski, a cable and telecommunications analyst at A.G. Edwards & Sons in St. Louis. "Content drives demand."
Comcast today owns 84 percent of Hirschhorn.s G4 network, which claims to attract a higher concentration of 18- to 34-year-old males -- a group advertisers love -- than even ESPN. It also owns 61 percent of E! Entertainment and its sister network, the Style Channel. It owns 100 percent of the Golf Channel, the Outdoor Life Network and AZN, a network recently refocused on an Asian American audience. Five regional sports networks, including Comcast SportsNet in the Philadelphia area, also are owned or controlled by Comcast.
Together, Comcast's channels generated $787 million in revenue for the company in 2004 -- less than 4 percent of the company's overall revenue.
In addition to networks, Comcast owns movies and TV shows -- thousands of
them -- thanks to a partnership it formed with Sony last year to purchase the MGM film and video library. In June, Comcast named an executive to create new channels to highlight that library. But with all those channels and all those cable subscribers, critics such as Scott see an unfair advantage -- and peril for the marketplace of ideas.
The Federal Communications Commission, which is already reviewing Comcast's deal with Time Warner Inc. to buy the bankrupt Adelphia Communications Corp., has also promised to review its media-ownership laws. Comcast could come under scrutiny in that proceeding, too.
"When Time Warner and Comcast get behind a channel, it has a 100 percent chance of succeeding," said Doron Gorshein, who is trying to launch an independent cable channel. "If Comcast and Time Warner don.t get behind a channel, it has almost zero chance of succeeding." Gorshein said his America Channel, which aims to feature independently produced documentaries about life in the United States, is among those that have been rejected by Comcast and Time Warner.
Together, the two cable operators serve about half of all households that receive cable or satellite TV. And their reach will grow if their proposed purchase of Adelphia is approved. Gorshein has filed a statement with the FCC opposing the deal. "I do not believe that a small group of four or five companies ought to have domain over creativity in America," he said.
The marketplace has more influence over creativity than Comcast, responded David L. Cohen, a Comcast executive vice president who once served as chief of staff to former Mayor Ed Rendell.
"It's about content," Cohen said. "It's about putting on programs that people want to see." He offered a litany of programming -- enabled by cable -- 24/7 news, C-Span, ethnic programming. "Comcast is the largest distributor of cable TV, but but none of the networks in which it is invested are among the 20 highest-rated," Cohen said.
Yet most of those top cable networks are owned by a handful of media companies, including Disney, Time Warner Inc., Viacom Inc., and Vivendi Universal S.A., a French company that owns the NBC network. Critics also worry that Comcast -- and other cable companies that own cable channels -- will try to keep those channels off satellite systems and TV systems promised by phone companies in the coming years.
DirecTV has accused Comcast and several of its cable partners of doing just that. In a complaint to the FCC, DirecTV says fees charged to satellite systems to carry the iN Demand High Definition movie network are higher than those charged to cable firms. iN Demand is owned by Comcast, Time Warner and Charter Communications Inc.
In response to the complaint, iN Demand issued a statement saying that its "pricing policies are in full compliance with FCC rules and regulations" and that it is "confident that the FCC will find in our favor."
Burke said Comcast is interested in delivering the best cable channels to its subscribers, without regard to whether it has a stake in the channel. And, he said, it is to Comcast's advantage to get its networks delivered to as many viewers as it can -- even viewers who subscribe to satellite TV.
Gorshein says he remains unconvinced. "Comcast has a strong disincentive to launch independent channels," he said. "The benefit to a cable operator from owning a channel far outweighs the incremental benefit it may get from simply carrying a channel owned by an independent company."
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