Suddenly, while he has been obsessing about the internet and free content, Rupert Murdoch may be about to be out-flanked by the looming deal between General Electric and Comcast over NBC.

It all depends if France’s Vivendi wants to sell its 80% of NBC Universal, but assuming it does, Comcast could end up owning 51% of a very integrated media empire, without the deadweight of newspapers that Murdoch has.

In fact, you can now argue that instead of spending $US5.8 billion ($A6.2 billion) on the Wall Street Journal at the top of the market in 2007, Murdoch should have been looking to expand into the Telco space and the high-speed internet business now occupied by Comcast, because that is where the future lies.

GE will retain a 49% stake in NBC Universal, but will sell that to Comcast over the next seven years. Comcast will pay $US4 billion-$US6 billion in cash to GE. It’s not the first time Comcast has tried to buy a big content group: it made a pass at Disney in 2004.

News and Murdoch looked, but didn’t want to play because NBC Universal has everything news has: cable channels, a free-to-air TV business, and a film studio (plus  theme parks).

But what Comcast brings to the table: its huge cable business (and some small networks) and a growing online and Telco operation. Comcast is America’s largest cable TV and residential high-speed internet company. News Corp is not a player in this area, which is emerging as the critical point of difference for these giant companies.

Comcast is also the third largest phone company in America and is now offering Clearwire wireless broadband service in some markets (It invested the Clearwire business several years ago).

News should have tried to inject itself into the deal, because those cable and internet networks are going to be the big definer for future success in the US media sector.

Comcast and GE could do their deal within the next few days, according to reports in the US.

Starting Sunday, Vivendi has an option to sell its 20% in NBC Universal. Majority owner General Electric Co is expected to buy it and then sell a 51% stake of the entire NBC Universal unit to Comcast, which deliveries pay-TV to about 23% of all American homes).

NBC has cable channels, USA, SyFy, CNBC and The Weather Channel; Comcast has The Golf Channel, Style and E!.

Comcast is betting that audiences will turn to video on the internet and mobile phones. NBC is also a founding partner in Hulu, (with News) an ad-supported site that lets viewers watch shows for free. It is marrying content from NBC and Universal to its cable business and online operation and can then distribute to its customers on high-speed internet services running down its optic fibre cable networks.

To meet (and anticipate) consumer viewing patterns, Comcast has expanded its on-demand content library, boosting the number of films released on Video On Demand (VOD) the same day as DVD and getting more cable shows and other content online. It has done so via initiatives with such names as Project Infinity, launched last year, and TV Everywhere, launched this year.

According to one report in the Hollywood Reporter.

“Comcast has grown its on-demand library to more than 17,000 pieces of content watched by 23.8 million video subscribers, including 18 million digital video customers. The 13 billion views of on-demand content since the cable giant launched its service in 2003 is well ahead of the six billion song downloads Apple’s iTunes reported at the start of the year.”

That’s the future, not arguing over paid content on news websites. Murdoch has already lost the bigger battle. Comcast is there before him, now watch Disney or CBS merge with another big Telco, leaving News unwanted on a shelf arguing about paywalls on newspaper websites.

And if you think about what Comcast is doing, it’s trying to replicate some of the structure of the NBN Australia is planning, but from a more limited base, one where it is protecting its networks by adding content in ever-increasing quantities and delivering it to consumers at higher speeds and in richer variety.

Compare that thinking to the constant sniping from News Ltd papers in Australia (and Malcolm Turnbull) at the NBN. Comcast is moving towards creating an NBN of its own, by adding more content to the production end, thereby giving consumers more reason to stay hooked to its high-speed cable networks, rather than go elsewhere.

If you also think carefully, its the future for Foxtel in Australia as it confronts the NBN.

As well News Corp CEO Chase Carey and others have said they think regulators would be interested in the Comcast NBC link-up. You can bet that if its was News Corp doing the deal, it would think US regulators wouldn’t get involved. It’s all about whether you are in the deal and its importance to the company.

This telco, cable business side of Comcast/NBC would be far more powerful that what Murdoch and News has to offer, without the aggravation of the free content argument and beating up on Google.

An Australian analogy would be if Telstra-owned Foxtel (not just 25%), plus the Ten Network, plus a film studio, and a whole swag of pay-TV channels, including the most popular in the country (which NBC’s USA is).

Disney is another powerful studio, but without the cable and internet delivery potential that Comcast has built.

All that is missing from Comcast’s line-up is a satellite TV business such as Direct TV, which is now controlled by John Malone’s Liberty group (but which used to be owned by News Corp). But that’s getting to be a marginal business as cable and network speeds get faster.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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