Comcast’s proposed deal to gain control of NBC Universal has brought predictable expressions of concern from public interest groups and federal officials in Washington about its potential to harm the interests of consumers, advertisers and competitors. Comcast itself has been quick to acknowledge that potential — up to a point, at least — and has moved to demonstrate its “good faith” in addressing those concerns with regulators by, among other things, promising to deal fairly with competitors and downplaying plans to raise paywalls around Hulu and other web-video services.
One company not typically included among those that could be harmed by the proposed merger, however, is Apple. Yet if the NBC-Comcast deal goes through as proposed it could present a serious hurdle to Apple’s long-term plans to conquer video.
In November, reports surfaced that Apple was in talks with TV networks about launching a subscription TV service through iTunes that would be priced at $30 or $40 a month, less than half the $85 average monthly cable TV bill. As many analysts noted at the time, such a service would be highly disruptive to the current pay-TV business.
By gaining control of one of the four major broadcast networks, and seven to the top 20 rated cable networks, Comcast will be in a position to deny Apple access to a broad swath of the content it would likely need to make its own subscription service viable. While Comcast may have promised the Federal Communications Commission that it would continue to make NBC Universal content available on reasonable terms to competing MVPD providers (i.e., cable, satellite and telco TV service providers), it has made no such promise regarding potential new, over-the-top distributors.
The timing of the news leaks of Apple’s discussions with the networks, moreover, seemed pretty clearly aimed at blunting the momentum building in the cable industry behind TV Everywhere. The message to programmers? Don’t get any further in bed with cable operators, because we’re working on something that will give you better leverage.
Comcast’s gaining control of NBC Universal, on the other hand, certainly won’t do anything to slow that momentum. As the most aggressive proponent of TV Everywhere among MSOs, in fact, Comcast’s leap into the content business can only accelerate it, leaving Apple with a steeper hill to climb if and when it ever does make a move into the subscription TV business.
Apple’s dilemma is that it will eventually need a more robust video offering than it currently has, now that online music has been commoditized and once it’s first-mover advantage in the mobile apps platform space erodes. Yet nearly it could make in that direction–with subscription streaming or ala carte downloads–will necessarily involve over-the-top delivery (it isn’t about to invest in laying cable or fiber to deliver video to the home, let alone launch a satellite). To be more than a novelty like Apple TV or iTunes movie rentals, however, Apple’s over-the-top play will need reliable, even favorable, access to content. Which means the more video content gets tied up with other distributors, the less room to maneuver Apple will ultimately have.
Somewhat ironically for a company that has faced painful antitrust scrutiny (mostly in Europe) Apple’s best allies in its quest for relevance in the video business could be federal regulators. On Monday, The New York Times weighed in with an editorial calling on the feds to require the Comcast-controlled NBC joint venture to make its content available to over-the-top distributors, echoing what public-interest groups are hoping to make the focus of the regulatory review of the deal.
The FCC is apparently listening. On Monday it issued a call for comments on why more cable set-top boxes don’t integrate IP video. Don’t be surprised to see Apple submit comments.