No Stars, Only Talent

Capsule: Can a new Comcast shine by turning a merger with NBC Universal into a celebration of profit-making innovation and efficiency?  After the merger transaction and before the spin-offs, new strategic moves towards greater media profitability will be required. Comcast is a capable chess player on competitive strategy in distribution.  Heavy with rich content possibilities, can it maintain focus without becoming star-struck? 


Movies Unlimited
Comcast
NBCU


In Robert Altman's 1991 film, "The Player," studio executive Griffin Mill green-lights a loser of a high-concept film named "Habeas Corpus" to toy with his studio bosses as they attempt to cut costs in non-traditional ways.  "No Stars, Only Talent" is the film's earnest and prideful slogan, used by the high-minded director pitching Mill a movie whose realism is intended to shine brightest for its lack of luminous celebrity.  Predictably, because change is hard, "The Player" ends with "Habeas Corpus" produced, filled with stars and fantasy by a talented studio team that eats its young in the process.

Should Comcast secure NBC Universal and its stable of stars, the object shining brightest is likely to be the stop-watch counting the seconds until the first CNBC-reported profit increase. Profit is king, particularly in a broken economy, and corporate synergy for its own sake is a dysfunctional concept on the American media scene. Most merged companies demand that each individual business continue to maximize its own profits.  The axe will fall where duplicated efforts and sluggish growth prospects become clear.

Comcast's bottom-line orientation presages a media combination that will look for equanimity and painless cost-savings early.  Comcast's talent for absorbing cable system acquisitions, including the original TCI/AT&T cable properties, is legendary. It should give both management teams confidence that individual business unit performance in a federated corporate system--albeit one smaller than General Electric--will be a priority.

But the strongest influence Comcast can bring to NBC Universal is its sense of strategy as a take-no-prisoners game of competitive dominance.  Comcast gets the concept of building barriers to competitive entry in every pore of its law-abiding body and soul. This should make for a good combination with NBC Universal--or at least those parts of NBCU that are, first and foremost, a federation of the NBC broadcast network and its over 200 broadcast stations, as well as Telemundo and its 45 broadcast affiliates and 800 cable outlets.  
 
Broadcast and cable distribution understand the advantages of competitive barriers and government support. And it's likely just in time for some new technology-based barriers, given that both the broadcast and cable models of compounded growth are breaking down. An opt-in audience measurement system that translates viewership data into value-rich navigation and advertising relevancy might be just the ticket.

How will Comcast play with the rest of NBCU? The portfolio of cable TV channels included with the broadcasters in the $15 billion NBCU revenue business--Bravo, CNBC, MSNBC, mun2, SciFi, USA Network and more--should merge companionably with Comcast's E!, The Style Network, G4, TV One, PBS Kids Sprout, VERSUS and the Comcast Sports Group. A culture shift is likely as highly rated news-oriented and general entertainment TV merges with a cable stable that accounts for well under 10% of the MSO's current revenue.  New products might help. News Corp. may sell off more of its Dow Jones assets, paving the way for an even stronger CNBC office and consumer product suite a la Bloomberg, should the merged company be inclined to dabble more aggressively in real-time data. 
 
Comcast's sports properties have the most potency potential in combination with NBC and its substantial sports rights. Sports business journalists are already warning Disney/ABC/ESPN to "look out for the Comcast NBC Sports Juggernaut," (per BusinessWeek) including NBC's Sunday Night Football (tied up through 2013 for $600 million each year) and Comcast's 11 regional sports channels. 

Reaching equivalency with an award-winning institution like ESPN/ESPN.com won't just happen by virtue of the two media companies' complementary sports rights. What virtue exists in sports stands in front of the cameras; behind them, everything gets squeezed on the way to the sports media business. The executives in charge of the combination need to keep their multiple layers of sports fans as much in mind as all of the possible harvested opportunities. Unfortunately, it's the rare remarried group of attractive entertainment assets that finds new Brady Bunch harmony as a whole bigger than the sum of its parts. 

The ingredients of merged success are somewhere in the strategy of competitive barrier building beyond content rights and its execution. Look at the brilliance of Google, who, while not being evil, has managed to erect competitive barriers around their new profitability higher than the Rockies. When looking at their combination of networks, Comcast and NBCU should move like a tic-tac-toe virtuoso: vertically, collapsing content types into one another for habit-forming customer captivity, and horizontally, linking separate brands into a new collection of revenue-yielding customer experiences. They've got scale; so, they've got game. But they've also got a lot to prove, including their ability to strengthen the money-making links between Comcast's cable distribution and its Comcast NBCU content.  
   
Past is prologue. In the Time Warner AOL merger, every business unit seemed intent on maintaining internal barriers to one another. Rather than leveraging Time Warner Cable's extraordinary distribution business to build broadband subscription muscle into AOL, the merged company seemed to make all of the external walls once separating its tenants into new internal ones. Many unsuccessful attempts at negotiating or even breaking down those walls were made, but without a centralized view on how each unit could increase the value of its fellow business, nothing changed. Oddly, AOL may have stood a better chance of profitable negotiation with Time Warner's cable properties when it was its own fully individuated company. Forced into merged isolation, AOL foundered, taking its incredible customer assets into temporary suspended animation with it.
  
The speed of integration on this merger of very different companies--really a company and a conglomerate--must be faster and more unified than Comcast's past operational absorption of cable systems.  Comcast will be well-served by creating a common cultural atmosphere with real benefits amongst its new federated properties--inside and out. Content and distribution play together well when both sides do more than complement one another and do less than battle. Real business arrangements that increase competitiveness and profit will be required between exemplary pieces of the new combined company. 
  
Full carriage with improved in-house multiple-screen promotion of Comcast NBCU content on cable systems is an obvious step one. Step two might start with a new self-image manifest in a new internet-based news, entertainment and sports content presence that expands Comcast's franchise from virtually half of America to the entire United States and selected international markets. Comcast gets the internet, especially since much of the audience advertisers want to reach is reaching the internet through broadband. Now, Comcast the ISP will have real content beyond rights-restricted sports to push out through its broadband doors onto a much larger stage.
  
Comcast NBCU could ultimately compete with all other internet based entertainment--including NBCU's own beautifully conceived Hulu partnership with News Corp, Disney, et al. Where a la carte short TV segments become the new TV, they should be promotion for a larger business, linked for value and protection to the purchase of a larger network. Slicing content into tinier pieces than today's networks will mean less ARPU and may mean, a la the music business, a serious lack of distribution control. While building out new distribution opportunities, Comcast NBCU might keep an equally important goal--one often forgotten by big distribution--in mind. The very best customer experience with Comcast NBCU, on TV and online everywhere, should begin with a Comcast connection.  
 
To complete its transformation, the new Comcast NBCU should also be a destination for potential employees. If they are to succeed where others have failed, the combined company must put as many financial, IT and internal marketing resources as prudent into attracting the best talent away from its global competitors. For benchmarking purposes, Comcast NBCU will be stepping out with a competitive field that includes Google, Microsoft, Apple, Amazon and the rest of the global media A-list. New management muscles will be required with the kind of discipline this field represents. Anything less and it doesn't make sense to show up.
 
In the end, spin-offs are likely. Between now--when a merger may occur--and then, Comcast and NBCU will have the opportunity to rewrite media history by living their beliefs about value-creation in marriage.  With this hope and few ready alternatives for expansion or safety, both companies are likely to continue their flight into each other's arms before sailing headlong down the isle.  And while some will be plotting their break-up, most content and distribution companies and virtually all of Wall Street will be throwing rice and eating cake.