Comcast-NBC: Media Buyers Hope Combo Can Accelerate Targeted TV Ads, Fix Broken Broadcast Model

Madison Avenue

Media buyers are enthused about the implications of a combined *Comcast* and NBC Universal (NYSE: GE), which is a good thing since 23 percent of the revenues of the new entity will come from advertising. The stakes are particularly high for Comcast (NSDQ: CMCSA), which has been frustrated by the lack of real progress with Canoe Ventures, the addressable TV initiative spearheaded by the cable operator’s COO Steve Burke. After a series of delays, Canoe has had to abandon its ad-targeting efforts due to limited technology and lack of coordination among its partners. For now, cable companies are pursuing targeted TV on their own, while Canoe concentrates on lead generation.

But apart from solving the issue of addressable TV, buyers are a bit uncertain about what it means for NBC’s broadcasting side, which has lost its luster over the years. Most expect the broadcast business to continue to erode in general, and it’s doubtful whether having Comcast behind NBC, as opposed to General Electric, will change the network’s fortunes much.

NBCU CEO Jeff Zucker has increasingly referred to his company as primarily being in the cable business the past few years. When he picked up the baton from Burke during a conference call with reporters, Zucker stressed that how the deal would be a boon to its digital holdings, such as its female-focused online ad network: “We’ll be able to create more extensive advertiser solutions around our various digital properties by being part of Comcast. Plus, we’ll be able to avail ourselves of their distribution channels.”

Speeding the future: The merging of Comcast and NBC will be very good for the agency business and the content business industry-wide, said VivaKi’s Rishad Tobaccowala. “The future doesn’t fit in the containers of the past,” he said, and the acquisition of NBC by Comcast would accelerate the shifts in how media is currently bought, sold and packaged. “The line between distribution and content becomes drawn closer together,” Tobaccowala told paidContent. “The broadband pipe that Comcast has matters. If you want to do rich media, it’s hard to do that without having an ISP behind you. That’s why there’s such an uproar over net neutrality. The big question is how will this affect Canoe? Nobody knows. But addressable TV can only come from cable, either through a consortium like Canoe, or individually through the operators of set top boxes. This vertical integration now allows content to go straight from set-top box to through the broadband pipe. They will also use that pipe to collect data. And since the internet is a global medium, having NBC’s digital content could also help Comcast expand internationally.”

Forget multi-platform sales: While a number of advertisers and agencies have been pondering the meaning of greater multi-platform ad sales across both companies’ various digital and traditional holdings, Steve Farella, president and CEO of media planning consultant TargetCast, says such thinking is mostly a waste of time. “Don’t talk to me about integrated sales efforts,” he said. “The plan to sell inventory across different platforms always sounds nice, but as a practical matter, they never really work.” For advertisers, the combo offers one main benefit: spurring wider acceptance of initiatives like Canoe Ventures. “Primarily, bringing Comcast and NBC together is about taking a traditional linear medium, broadcast TV, and finally raising it into a modern, on-demand medium. One way this deal moves the process forward is being able to add NBC’s cable holdings directly in an addressable package. It gives Comcast’s technology side more content to offer to advertisers. That, in turn, will inspire other MSOs to get on board with addressable TV as well.”

Broadcast picture fades?: One of the big questions that has come up is whether Comcast can help improve the value of NBC’s traditional broadcast operations. It’s a bit more doubtful than possible, said Horizon Media research director Brad Adgate. However, there are a few definite advantages for Comcast to be found in NBC’s broadcast programming. “Thanks to its regional sports network, Comcast SportsNet, the cable operator has a lot of strength in sports,” he said. “One of NBC’s highest rated programs is Sunday Night Football. Comcast also owns The Golf Channel, so there are definitely ways that NBC can support those franchises.”

In terms of salvaging the broadcast business, Adgate wonders if the company will try to change the over-the-air business model to be more like cable. “Cable doesn’t have dayparts, which is becoming very antiquated as viewers adopt more on-demand, time-shifting behavior. NBC has been very successful with original programming for the USA Network. The broadcast model is broken and audience erosion has been happening for the past 20-, 30 years. This is an industry-wide problem, not just NBC’s. But the cable industry has been doing a lot better in terms of ad revenues. As viewers increasingly make little distinction between watching cable or broadcast, a streamlining of the model might happen first with this merger.”

Cable vs. the internet: The internet has not been kind to cable, says Greg Smith, COO of WPP Group’s Neo@Ogilvy. The marriage with NBC allows Comcast to rein in content and build models that will justify the paid subscription model of cable, as opposed to the free-streaming, solely ad-supported online model broadcast nets have pursued. “TV Everywhere is the perfect example of what cable companies’ response to the internet needs to be,” Smith said. “TV companies understand the inevitability of delivering content across multiple screens. Loading up online sites with commercials won’t work, because no one’s going to do that on the web. So the question for both NBC and Comcast is how to make money across all these screens. An initial answer is to control the distribution of your content.”

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