In a statement, Comcast CEO Brian Roberts said that the decision was driven by “our sense of optimism for the future prospects of NBCUniversal and our desire to capture future value that we hope to create for our shareholders.” Roberts also said that he believes Comcast is in a “strong and unique position” to build value in the combined company.

The Comcast deal will not have to be approved by federal regulators, who fined the cable company $800,000 last year for failing to meet some of the conditions it placed on the original purchase. Comcast said it expects the deal to close by the end of March.

As part of the acquisition, NBCUniversal will also buy the buildings that it uses at 30 Rockefeller Plaza in New York and CNBC’s headquarters in New Jersey for about $1.4 billion. According to the New York Times, a “clash of cultures” was partly responsible for speeding up Comcast’s decision to buy the remaining part of the company.

Comcast also announced its fourth-quarter financial results ahead of schedule, and said its earnings climbed by 19 percent from the same period a year ago, while revenue rose by 6 percent to $16 billion and operating income grew 13 percent to $3 billion. The company said it will increase its dividend by 20 percent and will repurchase $2 billion worth of stock this year.

This story was corrected Tuesday evening to clarify that the deal is not subject to federal approval, as originally stated.

Image courtesy of Shutterstock / Cedric Weber

The stats come by way of research group TDG which presented the findings in this chart:

While a five percent decline is hardly earth-shaking, TDG describes the end of cable TV’s growth as a tipping point with ”long-term tectonic implications.”

This makes sense. The price of cable bundles is climbing ever higher, at the same time as a bevy of new distribution options is increasing consumer frustration at having to purchase channels they don’t want. Meanwhile, a rising generation of “cord-nevers” thinks buying a cable package to watch one show makes as much sense as buying a CD to hear a single song.

But don’t count out the TV industrial complex just yet. The industry still has the best content goodies, including sports and HBO fare, and will continue forcing consumers to buy bundles to access them. It will also keep dangling cable passwords as a requirement for people to watch content on mobile devices.

Meanwhile, the brave new world of cord-cutting is still not ready for primetime. As my colleague Stacey Higginbotham explained, the online video world still has too many parts and too little accountability – meaning consumers will be stuck with unreliable service for some time to come. The first cable decline is a tipping point, not a revolution.

(Image by lev dolgachov via Shutterstock)

Based on comments from the two, DirecTV was paying about $500 million a year on Viacom when the seven-year-old contract ended at midnight July 12; DirecTV said it is spending $10 billion on programming and Viacom said it was delivering 20 percent of the viewed programming but only getting 5 percent of the money.

Nomura analyst Michael Nathanson estimated in a client note that Viacom is shifting from $2.25 per subscriber to more than $2.80. My understanding is there is a so-called “step-up” increase in the first year with points along the way when the fee would escalate. A source familiar with the situation said the first-year percentage increase is double the offer before Viacom said it would pull the channels and DirecTV dropped them.

Was the blackout worth it? It was for Viacom, which took a PR hit but is getting a significant double-digit increase in fees and is locked in with one of its largest carriers for a long-term deal that I’m told is comparable in length to the one that just ended.

All the channels in the previous agreement are to be restored immediately, ending the 10-day blackout that affected roughly 20 million DirecTV subscribers. Many of the channels are on basic packages and included with every subscription.

The deal comes less than a day after Viacom rejected DirecTV’s claims to customers than a deal was imminent. But that was also the day that DirecTV’s offer changed to one that was more attractive to Viacom.

Here’s the press release from Viacom:

Viacom today announced that the company has reached a long-term agreement to renew carriage with DIRECTV.

All 26 Viacom networks, including Nickelodeon, Comedy Central, MTV, BET, CMT, Logo, Spike, TV Land, MTV2, VH1, VH1 Classic, Palladia, Nick Jr., Nicktoons, TeenNick, Tr3s and Centric, will return to DIRECTV’s channel lineup immediately. As part of the overall carriage agreement, DIRECTV has an option to add the EPIX service to its entertainment offerings.

Viacom is extremely pleased to bring its programming back to DIRECTV subscribers, and thanks everyone affected by the disruption for their patience and understanding during this challenging period.

And this is how DirecTV told its subscribers:

RT this: Viacom channels are back on DIRECTV in L-T deal. Thanks to our customers. #DIRECTVHasMyBack

— DIRECTV (@DIRECTV) July 20, 2012

But DirecTV went a little further in its press release, with Derek Chang, EVP of Content Strategy and Development, describing the blackout as “bullying”:

“It’s unfortunate that Viacom took the channels away from customers to try to gain leverage, but in the end, it’s clear our customers recognized that tactic for what it was.”

And trying a call to arms for all TV providers to resist blackouts as a bargaining tool:

“The attention surrounding this unnecessary and ill-advised blackout by Viacom has accomplished one key thing: it serves notice to all media companies that bullying TV providers and their customers with blackouts won’t get them a better deal. It’s high time programmers ended these anti-consumer blackouts once and for all and prove our industry is about enabling people to connect to their favorite programs rather than denying them access.”

DirecTV’s statement also played up the vocal support it had from some competitirs, including the American Cable Association, Cox Communications, Time Warner Cable, and Mediacom.

Bringing a retort from Viacom:

Despite the unnecessary drama, we’re very pleased with our agreement and we’re extremely thankful to have reconnected with our DIRECTV viewers.

Make no mistake, blackouts are a high-pressure tactic. So is threatening to drop channels or actually dropping them if a deal doesn’t match the pay TV provider’s goals.
We said it on day and it’s worth repeating: the subscribers are the ones hurt the most. Unfortunately, all too often negotiations that should be manageable without drama on either side wind up escalating in ways that hurt everyone.

Me, too. If you pride yourself on not paying for cable or satellite, you will be scrambling to watch. But, if you are one of the nearly 100 million households that get ESPN, you still might be scrambling — unless your cable provider or ISP has the right deal.

To be sure, ESPN’s 2012 Wimbledon presentation is a milestone (and people who know me know how much I resist calling anything on the Internet a “milestone”). When ESPN starts its 12-year exclusive run June 25th, U.S. fans will, for the first time, will be able to watch every possible Wimbledon match in real time coast to coast. No tape delays.

NBC, which held the rights for 43 years, also held us in thrall, manipulating a mix of live and tape delay to avoid preempting some of its lucrative Today Show hours and refusing to allow other rightsholders to carry the matches that didn’t fit. Particularly galling in this social media age: the practice of airing matches live in the east and tape delaying them for the west.

But NBC had one aspect in its favor: when matches were live they were broadcast and available to anyone with a signal. The current version of NBC Sports probably would spread matches across NBC and its cable networks, as it did to mixed effect for the Stanley Cup playoffs and will for the Olympics, but the major matches would be broadcast. This year’s finals will be broadcast, too — but they will be taped and aired later on ABC. All the live action is pay-for-play in one way or another.

NBC started to stretch the live streaming boundaries in 2009, streaming all of its broadcast hours plus some concurrent matches.

Now ESPN is pushing it even further. Here’s how Wimbledon 2012 will be shown on U.S. digital platforms — and who will have access:

ESPN3: More than 800 hours covering matches on all available TV courts (up to nine) will be live streamed “first ball to last ball each day” and available on demand. It includes multi-screen viewing.

• Who can get it: The live and on-demand broadband network is available to about 73 million video and ISP subscribers whose providers have deals with ESPN. Another 21 million U.S. college students and U.S.0based military personnel have free access through campus or base networks. But paying for ESPN through cable or satellite is no guarantee; ESPN covers nearly 100 million households and a lot of those will be left out if there is no deal in place.
• Video affiliates: Time Warner Cable, Bright House Networks, Verizon FiOS and Comcast Xfinity TV.
• ISP affiliates: Here’s the full list. You can also check by zip code and provider and follow instructions to complain if you don’t.
• How: WatchESPN.com. Video subscribers and Verizon broadband can access through WatchESPN apps on iPhone, iPod Touch, iPad and Android. Also ESPN on Xbox LIVE for Gold members.

WatchESPN: In addition to ESPN3, video subscribers can watch linear channels ESPN and ESPN2 live on the WatchESPN apps and at WatchESPN.com. Most Wimbledon coverage is on ESPN2.

ESPN Mobile: If you don’t have WatchESPN, the mobile experience will be all about info — point-by-point coverage on mobile browsers and the ESPN ScoreCenter app (iPhone, Android, Windows) plus some video highlights. Unless you pay for ESPN MobileTV through AT&T ($10/month), Alltel, Sprint TV (free with certain data packages and devices) or Verizon ($3/day, #10/month). Then you get 105 hours of live ESPN/ESPN2.

More details here about all the coverage, including the second year of ESPN 3D, multi-screen access on DirecTV.

ESPN is working closely with the BBC, which also outlined its plans. That includes two full matches on the iPlayer every day, the BBC Sport app for connected TV, and up to six live matches streams on the BBC Sport site.

Not a cord-cutter’s Wimbledon

Intrepid fans who don’t pay for video and don’t have access to ESPN3 through ISPs will find ways to watch matches but there is no easy, legit solution other than the limited amount of mobile TV video. No other standalone subscriptions. ESPN needs to provide value for its high-end fees and does so, in part, by protecting how its programming is distributed online and across devices. Offer Wimbledon outside that ecosystem and the value starts to dissipate.

Live sports continues to be one of the top reasons people will pay for video and ESPN is doing everything it can to protect that, including airing everything it can. Tennis Everywhere, as long as someone pays.

The top 10 publicly traded operators of cable, satellite and telecommunications-based pay TV services added 494,000 video subscribers in the first quarter, according to data compiled by paidContent from Q1 earnings reports.

That represents just 54 percent of the quarter-to-quarter growth reported by these companies in Q1 2009, when the U.S. was mired in recession.

Earlier in the week, Sanford Bernstein senior analyst Craig Moffett released data indicating the total subscriber gain to be only around 422,000 — in addition to the hard data released by public companies, Moffett also surveyed private multi-channel operators like Cox Communications, as well as numerous smaller cable systems. (Apparently, these smaller companies are reporting continued subscriber losses.)

As we’ve stated in the past, the slowing doesn’t seem to be connected so much to a rampant cord-cutting, but rather a slowing of the telecommunications-based component of the business. For example, telecom operators Verizon and AT&T, which collectively added 583 video subscribers to their respective FiOS and U-Verse services in the first quarter of 2009, only added 380,000 this last Q1 period.

In fact, belying several earlier research studies, which said growth of U.S. multi-channel services has slowed significantly but not stopped, Nielsen’s latest “Cross-Platform Report” says the number of U.S. homes paying a multichannel provider for TV services last year actually declined by 1.5 million, or about 1.5 percent.

Subscription gains made by telco providers AT&T and Verizon (about 1.1 million) and satellite service companies DirecTV and Dish (added 280,000 subscribers) could not offset the over 2.9 million subscriptions lost by cable providers, Nielsen reports (see chart).

Other nuggets from Nielsen’s quarterly “Cross-Platform” report:

– After years of growth, the average amount of time per month the typical viewer spent watching traditional TV in the fourth quarter declined by about 46 minutes, or one half of one percent. Nielsen says most of that shift is caused by DVR usage, which was up 12.3 percent year over year, but viewing of internet video (up 4.2 per) is also beginning to factor in.

– Amount of time spent on game consoles in the U.S. was up 30 percent year over year in the fourth quarter. These consoles can now be found in 45 percent of American homes, Nielsen says.

– Among kids 2-11, time-shifted viewing grew about 20 percent over the fourth quarter of 2010, with young audiences embracing DVR usage and on-demand viewing on game consoles.

Now that Time Warner Cable, AT&T and Verizon have kicked off  the latest round of quarterly earnings reports by multi-channel operators late last month — a series that continues Wednesday when Comcast releases its first-quarter numbers — a case can be made that the cable industry has a better future in providing broadband services rather than TV/video bundles. And they have Netflix and YouTube to thank for that.

This notion has picked up stream recently, with research company Sandvine releasing data last week showing that streaming on Netflix accounts for 29 percent of broadband usage over fixed networks during peak hours (8:15 p.m. – 10:45 p.m.), up 4 percent from last year. YouTube is second in line, accounting for 12.2 percent, up nearly 2.5 percent.

Overall, Sandvine found that “real-time entertainment” accounts for 58 percent of peak  fixed-network traffic, up from 49.2 percent a year ago (see chart). Overall, median U.S. broadband usage has more than doubled over the last year to more than 10 gigabytes per month per household.

“The faster bandwidth consumption escalates, the better the cable industry is positioned,” wrote BTIG Research’s noted media technology analyst, Richard Greenfield, on his blog Tuesday. “With an increasing number of IP-enabled devices ‘on net’ in the home all the time, consumers will demand increasingly robust bandwidth and be willing to pay for it.”

For the last several years, cable companies have been losing multi-channel video subscribers to telco-based service providers. But as Greenfield also pointed out, with 214,000 net subscriber additions for high-speed data services in the first quarter, Time Warner Cable had more broadband growth than Verizon and AT&T combined.

The latter two companies are experiencing subscriber losses in the increasingly uncompetitive DSL sector. And their wireless broadband products don’t offer enough bandwidth to keep up with demand, Greenfield added. Neither AT&T or Verizon offers a cap as big as 10 GB a month, for example.

“While the broadband speeds delivered by wireless companies have notably improved, bandwidth caps mitigate the risk of wireless devices replacing in-home fixed broadband connections,” he wrote.

With escalating programming costs and stagnant revenue growth limiting the margins of video services, the performance of Comcast’s broadband services will undoubtedly gather close scrutiny by investors Wednesday.

Time Warner Cable’s revenue for residential video services rose only 2 percent to $2.7 billion, for instance, while revenue for residential broadband was up nearly 10 percent to $1.2 billion.

It’s sort of like Slingbox and a DVR without the need for boxes. Users would pay their regular subscription fees to the TV providers that are working with NimbleTV. NimbleTV would tack on another charge, perhaps $20 a month, to stream that content using its online software. Users would also get unlimited DVR storage as well as a social recommendation tools through NimbleTV.

It’s unclear which TV providers are signed up for the service, which is starting out in New York first. During the current test-phase, NimbleTV will offer more than two dozen channels that the company will pay for. This summer, NimbleTV will start allowing customer to sign up for satellite service using its software, according to the New York Times. Exact pricing will be announced at the time as the public launch this summer.

NimbleTV is trying to steer clear of lawsuits that have plagued fellow New York TV start-up Aereo, which launched in February in New York with a somewhat similar offer of bringing broadcast TV to online and mobile users. Aereo is now facing a host of lawsuits from broadcasters, who are claiming copyright infringement. NimbleTV is hoping that by keeping the pay relationship intact between a user and a cable or satellite company (and by extension broadcasters) they will be able to avoid getting sued.

Cable providers have talked up the promise of TV Everywhere, but have only limited results to show so far. Cablevision and Time Warner let users access their TV packages on various devices but you have to be at home to watch it. Comcast in February introduced a new streaming on-demand service called Xfinity Streampix, which will bring more library content to subscribers that pay for its high-end double- and triple-play packages. HBO’s Go app let users access HBO content on mobile devices. But the true promise of getting an entire pay TV package on any device is still not a reality for users.

I imagine that a lawsuit from distributors is probably in NimbleTV’s future. That’s what some of the investors are also expecting, said the New York Times. Even though TV Everywhere hasn’t quite fulfilled its vision, it’s hard to believe that big cable providers will take kindly to an upstart looking to do what they haven’t been able to accomplish. But if NimbleTV can strike a deal with a satellite TV provider, that might be an opening to bring the service to consumers.

But the push by start-ups like NimbleTV suggest we might see more progress on TV Everywhere at some point. NimbleTV, Aereo and Skitter, a new service that brings live TV to Roku boxes, are showing people they can deliver TV Everywhere if given a chance.

The NPD Group put out a survey on Tuesday suggesting that pay-TV rates could hit $200 by 2020 from an average rate of $86 per month now. The analysts at NPD credit rising content-licensing fees and the average 6 percent rate increase that cable companies jam down users’ throats each year. Check out the expected rise in this graph.

The big threat to cable is broadband

But the idea of paying $200 in eight years, or even $123 in three years, seems like insanity for most consumers. It also seems like insanity for the cable companies to attempt, given how rising cable costs amid grim economic times have led folks to cut the cord. But is demand for cable inelastic? The NPD report notes that 16 percent of U.S. households don’t have pay-TV service. This means 84 percent do — a huge success for the industry. But can it last? From the NPD report:

“As pay-TV costs rise and consumers’ spending power stays flat, the traditional affiliate-fee business model for pay-TV companies appears to be unsustainable in the long term,” said Keith Nissen, research director for The NPD Group. “Much-needed structural changes to the pay-TV industry will not happen quickly or easily; however, the emerging competition between S-VOD and premium-TV suppliers might be the spark that ignites the necessary business-model transformation of the pay-TV industry.”

That business-model transformation is already occurring, but the end result isn’t likely to be exactly the à la carte, pay-for-channels-you-want and watch-it-when-you-want model that many of us in the Web world are hoping for. Instead, we are witnessing the first steps toward the creation of a combined pay-TV and broadband bundle that gives consumers most of the TV they want on demand and encourages them to avoid going to the outside Web.

Cable sees the threat, but consumers are missing the opportunity

Those days of watching hours of Netflix together may soon end.

If done quickly, consumers, who are just discovering how pleasant (and economical) it can be to watch TV via broadband using over-the-top services such as Netflix or Hulu, will be lulled back into complacency and will still view their pay-TV and broadband subscriptions as necessary. So far, research this week from the Leichtman Research Group notes that 79 percent of Netflix Watch Instantly consumers use it to watch movies and television shows on a TV set, but in the past six months only .1 percent of survey respondents dropped cable because they found all the content they wanted online.

Today a big reason why people don’t cut the cord is the lack of content, such as live sports programming, as well as some people experiencing problems in getting broadcast content that should be free. This can be an issue with not being able to get the over-the-air signal clearly inside a home, or it can also be a result of the cable companies’ interfering with technology that can make it easier. And finally, consumers still want the convenience of one place to go for all of their television. According to NPD, 59 percent of pay-TV subscribers preferred having one single provider for their pay-TV services, compared with 21 percent who desired multiple providers and 21 percent who expressed no preference.

And only 20 percent told NPD they would consider going over the top if they could access their favorite shows online. This may be the case today, but if pay-TV subs reach $200 or even $123, those sentiments may change. The lure of convenience may not be enough if the content is available and people can access it without going over some set broadband cap. And it appears that cable companies, especially Comcast, are preparing for that future today.

Creating the TV walled garden

TiVo, the original TV disrupter, said yesterday it would offer Comcast’s Xfinity video-on-demand service via its boxes for users in San Francisco. A Comcast spokesman called the plan a pilot and confirmed that the Xfinity content watched via TiVo wouldn’t count against a user’s broadband cap. Comcast is offering the same arguments that it made in deciding to exempt content streamed over the Xbox, namely that this content never leaves its private network to travel over the public Internet.

The FCC left that loophole open in its network neutrality ruling, as I explained in a previous post, but as media watchdog Dwayne Winseck notes, public-interest groups and the FCC may have a chance to stop the practice using the merger conditions associated with the Comcast NBC-U deal. But the political will to enforce those conditions and recognize the potential for creating a shadow Internet has to be in place at the FCC and in the government (or courts) in general.

So by offering the cap as a stick to prevent over-the-top streaming from disrupting pay TV and the carrot of exempt television content from the Xfinity service, Comcast is well on its way to creating a safe haven inside its network to keep subscribers complacent and making the idea of leaving to grab content elsewhere a risky proposition: If you go over the cap too often, you get cut off. And if the fears of a cap don’t stop people, the cable industry is also tied pretty closely with content providers via ownership, as Comcast owns NBC-U, or via the relationships forged by access to their subscribers (see this awesome post from the Economist on why HBO isn’t going to abandon the cable guys and go over the top).

So the question for TV consumers is, Do you keep paying $86 today for access to a walled garden of really good content that will likely continue to rise in cost? Or do you go outside the walled garden and scramble to get your regular shows while fighting the caps and agreements that will eventually make the world outside the walled garden inhospitable for a TV lover? And the bigger question is whether or not the FCC or anyone in Washington is watching this play out and plans to help the consumers by taking action. Otherwise $200 cable doesn’t make the cable guys stupid. It makes them brilliant.

Walled Garden image courtesy of Flickr user sportsilliterate

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