Six Unknowns About the NBC Universal-Comcast Merger

Regulators and lawmakers are asking the right questions as they deliberate Comcast's proposed 51 percent controlling stake in NBC Universal, and media company executives are providing predictable answers. But the uncertainty of an evolving digital future means they are in no position to make guarantees.

The$30 billion tie-up between Comcast and NBCU is the biggest gamble yet on a convergence of traditional and nascent interactive media that will take years to materialize.

During congressional testimony Thursday, Comcast CEO Brian Roberts and NBCU CEO Jeff Zucker continued to offer promises and assurances. Roberts promised the merger would "accelerate a truly amazing digital future for consumers" and create a "more creative and innovative company that will meet customer demands."

Zucker said the companies will be careful to protect consumers while they figure out new business models. Comcast promised to take a "constructive role" in retransmission consent negotiations - at the heart of providing affordable access to competitors.

In a Federal Communications Commission filing, Comcast pledged to protect broadcast stations and local news independence, as well as its Spanish-language, children's and independent programming.

"You'll have to excuse me if I don't trust these promises, and that is from experience in this business," Sen. Al Franken (D-Minn.) said at a hearing earlier this month. The one-time NBC "Saturday Night Live" regular is now a member of the Senate Subcommittee on Antitrust, Competition Policy and Consumer Rights.

Franken's insider skepticism notwithstanding, the overwhelming uncertainty about how digital media will shake out is why NBCU and Comcast executives (or anyone in media, for that matter) cannot make long-term guarantees. Here are just a few of the unknowns:

1. The lucrative cable program networks driving the union appear to have topped out, which would eventually prompt Comcast and NBCU to find other ways to generate revenue growth. Bernstein Research analyst Craig Moffett says a continued slowdown in cable network ratings gains "could have an impact on industry growth rates and multiples." It is one reason why consumer advocates and content providers such as Netflix fear the combined Comcast-NBCU will unfairly use its clout to development its own interests in the online video market.
2. The traditional broadcast television business is under pressure to change as its viewers and advertising dollars continue to fragment to cable, the Internet and other activities on mobile connected devices. The once mighty broadcast networks generally lose money or break even, at best, according to Bernstein Research analyst Michael Nathanson. Network owned and affiliated TV station fortunes are vulnerable even as retransmission fees offset some lost revenues. No one knows what dramatic change will be required to reinvent the broadcast TV business.
3. The continued decline and shift of advertiser spending is spurred by the economy, the lure of new social and interactive media, and the realization by marketers they can accomplish more by spending less somewhere other than broadcast and cable TV-two of Comcast-NBCU's core businesses.
4. Consumers increasingly seek out alternative online sources for entertainment and news, according to Pew Research. What content they will pay for, and how much, will take years to shake out and dramatically skew media company balance sheets in the process. All media companies including Comcast-NBCU will need to become creative about making money.
5. Platform proliferation continues. Comcast and all distribution service providers will increasingly be challenged by consumer and advertiser use of the Internet bypass on a myriad of independently connected devices and platforms. Cable operators continue to experience a decline in video subscribers and stuggle to extend their services out of the home. They are more vulnerable than they seem.
6. Future revenue streams are uncertain. Not knowing the future economics of digital interactivity means not being sure what new revenue streams will be developed fast enough to offset historical revenue losses. That means the merged company (like its media peers) may have to resort to new revenue-generating options and business strategies it doesn't now foresee in order to protect the bottom line. One of the biggest problems with the AOL Time Warner merger a decade ago was trying to understand the new Internet dynamics and forecast online advertising and paid content economics, none of which is much clearer today.