Yesterday's Wall Street Journal announced the pending deal between Comcast and Disney, in which the former would distribute the latter's video content.
In this prior post, I've opined that Comcast is aiming for a very narrow window with this online content distribution strategy. Overall, I think it's a mistake.
Now, with my recent posts about Yahoo, management buyouts and pension plans recently echoed and supported by major media pundits, and my year-old warnings about GM and Ford now routinely substantiated, perhaps Comcast is my one forecasting mistake. It's too early to tell yet.
In discussing this with my partner, I asked, what would have to happen for Comcast's move to be correct, profitable, and lead to consistently superior total returns over the next few years.
Blogger is not cooperating with my attempt to paste a stock price chart for the past 5 years for Comcast and the S&P500. It would show that Comcast has been up and down, with a net performance that is essentially flat, and below the S&P.
My guess is that viewers would not look directly to content producers on the web, and content producers, or the various existing 'channels' on cable, would not open up shop with URLS on the web to sell programming directly to viewers.
Comcast does seem to have scored a coup in getting Disney content for its on demand services. But isn't some of that already available, 'on demand,' on Disney's own site, or iTunes? Note that no part of this deal with Disney is "exclusive." And it is purported to be worth $1B to Disney.
For just a moment, let's stop and give Bob Iger yet more credit for being a very astute CEO. I think I am hoping Disney enters my portfolio selections soon. Iger just got a cable company to pay him for content that, when it appears on a cable channel, he has to pay them to take. And he didn't even have to agree to anything exclusive.
OK, back to Comcast. With iTV scheduled to arrive in the late Spring, it should be technically feasible for viewers and content producers to use the internet as it is best used- a direct, totally-disintermediating approach that allows the viewer and content producer to do business with each other. There will probably also be software vendors offering easy-to-use, web-based products which coordinate the viewer's preference, online availability of content, and the programming of iTV and whatever competitor products meet it in the marketplace.
The question is, how many people will be very late adopters, even with such tools available, and look to Comcast for their total viewing needs? And, moreover, switch to Comcast digital on-demand to get these programs?
Would it not seem reasonable to assume that most people for whom this would be attractive either already have digital on-demand, or buy premium channels from Comcast? Doesn't this new supply of Disney content in some sense constitute free new offerings for existing digital customers? How many people will actually buy Comcast digital just for these new Disney offerings?
If this were an exclusive distribution deal, I'd be a whole lot more inclined to believe it will make a huge difference for Comcast. As it is, I believe there are enough other distribution outlets from which to view much of this content, as to make this Comcast deal far less than one which will materially contribute to its ability to earn consistently superior returns for its shareholders.
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