Brian Roberts, CEO of Comcast, said his company’s future hinges on the success of video-on-demand. That, he said, is why Comcast made its (unsuccessful) $56 billion bid last February in an attempt to acquire the Walt Disney Company.
Speaking last week at the Wharton School at the University of Pennsylvania, where he earned his undergraduate degree in 1981, Roberts told students that on-demand technology allows his customers to choose not only what they want to watch, but also when they want to watch it. He said that satellite TV, cable’s biggest competitor, offers abundant programming, but not two-way communication.
Roberts noted the need for Comcast to combine on-demand technology with content was underscored when Rupert Murdoch’s News Corp. purchased a controlling stake in DIRECTV, the satellite-to-home company. News Corp. already owns FOXBroadcasting.
For VOD to beat satellite, it has to provide lots of programming, whether it’s Disney cartoons or, as Comcast has begun offering lately, programming packages such as the NFL Network. The NFL channel provides 10- to 15-minute replays of the highlights of all the prior weekend’s football games. Comcast also recently announced a partnership with Sony and MGM to offer their libraries of movies and TV shows via VOD.
Comcast sees its new digital infrastructure, necessary to on-demand services, as vitally important — especially since cable happens to have a platform for that, while its competitor, satellite TV, doesn’t. Making the service a success depends on convincing content creators such as Disney to share their programming, Roberts said.
In some cases, that’s proving to be a challenge. Despite aggressive lobbying, Roberts said many content owners have been unwilling to let Comcast deliver their programs via on-demand video.
“We go to movie companies and say, ‘We’ve got this great on-demand (service) in five million homes, and it will be in 10 million homes by the end of this year.’ And you know what they say? ‘The problem is DVD sales are so good right now that we can’t tick off Wal-Mart.’ The single largest revenue source for Hollywood is Wal-Mart. How did they get themselves in that situation? And they say, ‘I know, I know. We have got to stop giving it to Wal-Mart. They squeezed us on the price last quarter, but we have got to make budget.’ That’s what’s happened with the music business. They were making all of this money on CDs, and one day Napster just took it away.”
For now, Roberts said, the cable industry is teetering on a razor’s edge between the old economy and the new. It has, for example, steadily eroded the ratings of broadcasters such as ABC, CBS and NBC. Today, he said, more people watch cable than broadcast television. This is the first year that’s been the case. But the broadcasters’ advertising revenue still exceeds cable operators’. In fact, broadcast advertising dollars are still double or triple the cable networks.
Roberts conceded that the broadcasters do still have strengths. On Thursday night, even though NBC’s ratings are down, it is still the number one destination for viewers. Twenty years ago, broadcasters had 90 percent of the viewing. Today, they have 20 or 30 percent, and they get more dollars for selling less. “How long can you get away with that? I don’t know,” he said.
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