NBC TV Network Could Convert to Cable Under Comcast Ownership

There is more evidence that the NBC TV broadcast network could be divided up into one or more cable entities under Comcast's new ownership, which may be announced this week.

A high-level NBC Universal executive, speaking at the recent Monaco Media Forum, conceded that the idea of the peacock network going the way of cable "has been openly mentioned."

I first reported the concept of redistributing portions of NBC TV network news, entertainment and sports content to NBC Universal's existing cable networks (including USA, MSNBC and CNBC) or to create new cable entities last month here at BNET Media. The fourth place broadcast network has become a drag on corporate earnings due to high program costs and declining ad revenues. NBCU's cable networks generate more than 65 percent of its overall profits on 25 percent of total revenues.

Many recent changes instituted under Jeff Gaspin's new leadership of both the NBC broadcast and cable networks are intended "for us to start looking at the network as one of the cable networks," said Sab Kanaujia, NBCU vice president of digital media strategy and development. His remarks came during a panel discussion about television's digital transformation.

NBC TV is attempting to reduce its costs this season by replacing a weekly hour of prime time drama (that can cost about $20 million) with the Jay Leno talk show, which costs $2 million to produce across five weeknights in the 10 pm time slot leading into late local newscasts.

Comcast's ownership of NBCU also is expected to impact the strained economics of NBC TV content online.

"Much of the video viewed online comes from television, but we are not compensated for it," Kanaujia said. "We cannot sustain that as a business model." Hulu is a top ranked online video web site co-owned by NBCU, News Corp.'s Fox and Walt Disney. Despite more than 40 million unique visitors and 500 million free online streamed videos, Hulu continues to lose about $33 million annually. It shares ad revenues with content owners. Still, Hulu's three broadcast network owners lose an estimated $920 in ad revenues for every 1,000 viewers who substitute the PC for the TV, according to analyst Laura Martin.

"For all the success Hulu has had, the bills are still being paid by the MSOs (cable operators such as Comcast), which deliver our content through their pipes," Kanaujia said. Hulu is more likely to pursue a selective paid content approach being considered for 2010 if Comcast becomes a co-owner.

Also at the Monaco Media Forum, News Corp. Digital Chief Jon Miller said he expects other changes in Hulu's "dynamics" if Comcast takes 51 percent control of NBC Universal. Comcast and Time Warner Cable are preparing to launch TV Everywhere, to better control content access and payments by allowing cable subscribers to transport their programs to any digital outlet under a new authentication system. The paid content efforts of TV Everywhere and Hulu could be integrated.

Comcast's proposed co-ownership of NBCU could undergo a year of regulatory scrutiny before being conditionally approved. Among other things, a stand-alone NBCU-Comcast could be prohibited from pursuing content access restrictions, blackouts and some fee arrangements. It is not known how federal regulators might respond to the potential dismantling of a free broadcast network since the subject has never been broached.