I came home one night recently to find my wife engrossed in an episode of Grey's Anatomy—on her computer. My 22-year-old daughter wonders aloud if we still need a TiVo (TIVO) to record episodes of her latest fave, ABC's (DIS) Notes from the Underbelly, now that it's available at ABC.com. If you have any doubts about whether the age of online TV viewing has arrived, just spend an evening at my place.
Comcast (CMCSA), the country's largest cable operator, seems to know all too well that what is happening under my roof isn't that unusual anymore. Since the beginning of April the company, which generates most of its $25 billion a year in revenues by delivering TV over cable, has signed a flurry of deals designed to allow it to do battle with the likes of Yahoo! (YHOO), MSN (MSFT), and others that intend to stream TV shows to folks' computers. It struck deals with CBS (CBS), Fox (NWS), and NBC to deliver their TV shows through Comcast's soon-to-be-launched Fancast online site. It plunked down tens of millions of dollars to buy Fandango, with a notion to turn the online ticketing site into a guide to TV shows available online.
For Comcast, this sure looks like a change in strategy. Three years ago it was so hungry to add programming muscle that it was willing to pony up $54 billion to buy Disney (DIS). Now it seems desperate to join the Internet party and not be left out of the ad boom surrounding online video. Little wonder: After cable stocks' bullish run last year, investors are more nervous about the industry's prospects these days. Comcast shares are down about $3, to 27, from this year's high.
BECAUSE OF ITS HEFT, COMCAST was imbued with a culture that encouraged executives to be fearsome when striking deals. But that may be changing as well, as the Internet threat seems to have turned Comcast into a pussycat for anyone with content. "We did our deal in 24 hours, I kid you not," says Quincy Smith, president of CBS Interactive. Indeed, it looked like Comcast was ready to make a deal with anyone right after NBC and Fox announced on Mar. 22 that they would license their content to Yahoo, AOL, MSN, and MySpace.com. Gone are the days when Comcast could demand special concessions, like getting free use of TV shows for its video-on-demand service. "Comcast understands that good quality network content is what keeps people sticking around their site," says NBC Digital President George Kliavkoff. "They need us."
What Comcast, with its 12 million broadband subscribers, is hoping to create is the granddaddy of online TV networks, under the name Fancast.com. Comcast President Steve Burke says it "will become a big business for us" in the fast-growing but, for media outfits, largely untapped world of online advertising. Advertising represents just 10% of Comcast's revenues.
Burke has fancy plans to lure Web-surfing TV fans to Fancast when it launches this summer. A search engine powered by Fandango will identify shows consumers like and ship them to a digital videorecorder for TV watching. "We believe people still want the lean-back experience of watching TV on a big screen," says Burke. Comcast had better hurry. A ton of folks are already watching their favorites online, including Xbox Live users who have shows like CSI and South Park delivered online to a tv hooked up to their consoles.
With 24 million TV subscribers, Comcast is still one of the most powerful distributors of entertainment. But its growth of late has been driven largely by selling telephone and Internet services. When those businesses mature, the last thing Comcast wants is to look up and see a world where 20-year-olds skip ESPN to watch sports online or forgo Law and Order in favor of cop shows streamed from Steve Jobs' Apple (AAPL) TV. No, we're not yet near a time when folks desert cable TV in droves to watch Sanjaya on their cell phones. But cable moguls have known for years that couch potatoes simply don't want 80% of what is jammed onto their dials. They want their TV in ways they can manage, on a time schedule that is their own. Just ask my wife.
Jon Fine is on vacation. His blog on media and advertising is at www.businessweek.com/innovate/FineOnMedia
By Ronald Grover