The NBC Olympic Broadcast: A Case Study of a Media Conglomerate

Every four years, athletes from around the world gather in one city to compete in what some consider the greatest sporting event in the world.  According to Nielsen Company (2008), nearly 70% of the world’s population tuned in to watch the 2008 Olympics in Beijing, or more the 4.7 billion sets of eyeballs.  The staggering figures suggest that the Olympics may be more of a media event than a sporting event.  Moreover, without media funding, it is unlikely the Olympics would exist, given that television rights fees make up most of the International Olympic Committee’s revenue (Associated Press, 2008).  In fact, NBC paid more than $2.2 billion, a staggering sum, for the television rights to the 2012 London Olympics (Associated Press, 2008).  Only a large and well-funded media organization can afford to bid on the rights, much less be able to successfully monetize such an event.  While a large media organization is needed to enable events like the Olympics, what is the make up and character of such organizations, how are they successful, and most importantly, what are the implications for the public?  Through the examination of NBC as a case study, this author has noted that greater media concentration has potential negative implications for both audience content and the U.S. political and regulatory processes.

NBC Corporate Background

            The National Broadcasting Company, or NBC, was born from the early days of radio as an offshoot of an AT&T-GE-Westinghouse-RCA collaboration (Benkler, 2006).  In 1986, to avoid the threat of hostile takeover, RCA, the parent company of NBC, was purchased by manufacturing giant, General Electric (Richter, 1985).  In 2011, Comcast Inc. cleared FCC regulatory hurdles and won approval to purchase a 51% controlling interest in NBC Universal from General Electric, despite media watchdog concerns over one corporation’s power to both create and deliver content, an industry first (Reardon, 2011).  With the acquisition of NBC Universal, Comcast has become “a leading provider of entertainment, information and communications products and services” (Comcast Corporation, 2012, p. 1).

The Post-NBC Acquisition Comcast Media Business

   Comcast Corporation is a $55 billion vertically integrated media conglomerate with a market capitalization of more than $92 billion comprised of five operating segments, cable communication, cable television, broadcast television, filmed entertainment, and theme parks (Comcast Corporation, 2012).   The cable communication segment is responsible for 67% of their revenue, being wired directly to more than 50 million homes and “serving 22.3 million video customers, 18.1 million high-speed Internet customers and 9.3 million voice customers” (Comcast Corporation, 2012, p. 3).  Moreover, with the acquisition of NBC Universal, Comcast increased its content assets to more that $14 billion worth of annual revenue spanning cable and broadcast television stations, the Telemundo and NBC broadcast networks, film production, and digital properties like Television Without Pity, iVillage, Daily Candy, Fandango, and perhaps most importantly, online video service Hulu (Comcast Corporation, 2012).  While some have been skeptical of vertical integration strategies following the AOL/Time Warner debacle, Comcast executives have emphasized that the NBC Universal acquisition is not aimed at creating synergy between segments, suggesting rather it simply makes financial and strategic sense for Comcast shareholders (Knowledge@Wharton, 2009).  Given the lack of focus on synergy, what does Comcast hope to gain through becoming a content provider?

Why A Vertical Media Business?

In an era shaped by media convergence, it is no surprise Comcast might wish to be more diversified.  New technologies have reshaped the media industry and forever separated content from delivery, as consumers now expect content anywhere, anytime, on any device (Jenkins, 2004).  In describing what is at stake in the converging media market, Jenkins (2004) suggests that “the way in which those various transitions play themselves out will determine the balance of power within this new media era” (p. 34).   Some have suggested that Comcast’s acquisition of NBC Universal is a hedge against the risk of media convergence, allowing Comcast to avoid being commoditized into a ‘dumb pipe’, or said otherwise, simply a channel among many (Knowledge@Wharton, 2009).

Furthermore, the ownership of digital properties may position Comcast to be successful in converged future.  For example, in addition to the typically lucrative prime time coverage of the 2012 Olympics, NBC also offered live streams of Olympic events, where a only 10 events drew more than a million live streams (Hiestand, 2012).  While the digital advertising revenue was a fraction of the more than $1 billion in prime time advertising, the digital presence help draw viewers to the prime time coverage (Hiestand, 2012).  In addition, given Comcast’s nearly 23% share of broadband (Taylor, 2011), the much of the bandwidth intensive streaming occurred through Comcast’s ‘dumb pipes’, conceivably driving demand for increased bandwidth.  Finally, given the recent and very public Viacom and DirecTv programming spat over content costs, it is clear that Comcast may be insulated from the impact of rising content prices for a significant portion of their distributed content, given their ownership stake in NBC.  While there appear to be clear benefits to Comcast, critics worry over the implications of media concentration for society.

Implications of Vertical Media Concentration

            For instance, McQuail (2010) suggests policy issues arising from media concentration include the affect on pricing and content.  While there does not appear to be evidence of rising prices for Comcast cable or broadband, there does appear to be a conflict of interest between Comcast’s television and film production and their digital properties.  For example, both Fandango and Television Without Pity are digital properties that influence audiences by providing reviews, criticism, and content for film and television content respectively.  A cursory analysis of content by this author of content presented on the Television Without Pity web site, found that content regarding the television shows American Idol, a Fox property, and The Voice, a competing Comcast property, were invariably favorable towards The Voice.  Perhaps The Voice is simply a better show, or perhaps there is ownership influence over the content.  McQuail (2010) warns that independence from owners or outside political or economic interests is a structural condition for effective media freedom.  While the fate of the free world may not hang in the balance because of a review of American Idol, there are additional implications of Comcast’s growing concentration of media power.

Indeed, because media freedom requires independence from political and economic interests, limits to media concentration are important (McQuail, 2010).  With Comcast’s acquisition of NBC Universal, and $55 billion in annual revenue, Comcast has become one of the largest media companies in the world with important political and economic interests and the influence to affect their interests.  For example, Comcast spent more than $20 million in 2011, and another $8.5 million in the first half of 2012 on lobbying, putting them among the top ten largest spenders, where they lobbied ‘net neutrality’ legislation, FCC programming issues, and their acquisition of NBC Universal (OpenSecrets.org, 2012).  In addition, Comcast is a member of the American Legislative Exchange Council, a Republican-backed bill mill that favors free markets and limited government (sourcewatch.org, 2012).  Comcast sits on ALEC’s Communication and Technology Task Force, helping Republican legislatures draft model bills on issues like a.l.a. carte cable pricing, cable video franchising, and municipal broadband (ALEC, 2012).  Of course, much of the draft legislation is favorable to Comcast’s business interests.  For example, ALEC’s position on efforts by municipalities to offer broadband is to put safeguards into place to protect private providers, and they are drafting model bills in support of their position to be available to legislator members of ALEC, should they be needed (ALEC, 2012).  It is clear that Comcast is using their market dominance and profits to affect the regulatory landscape and promote their continued growth.  The implication is fairly straightforward; massive media conglomerates are able to use their considerable economic and market power to exert influence on both the political and regulatory process, with the potential for negative consequences for consumers.

Conclusion

            As media events typified by the Olympic continue to grow in size, complexity, and audience share, only the world’s largest media conglomerates are positioned to effectively fund and deliver these events to a global audience.  However, as the Comcast example shows, there are significant societal implications of continued media concentration.  Specifically, greater media concentration appears to have potentially negative implications for society that include greater influence over both content, and national political and regulatory processes.

 References

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Associated Press. (2008, November 18, 2008). EBU urges IOC to stick with European broadcasters  Retrieved August 12,, 2012, from http://sports.espn.go.com/espn/wire?section=oly&id=3710990

Benkler, Y. (2006). The wealth of networks : how social production transforms markets and freedom. New Haven Conn.: Yale University Press.

Comcast Corporation. (2012). Comcast Corporation 2011 Annual Report on Form 10-K  Retrieved August 12,, 2012, from http://files.shareholder.com/downloads/CMCSA/2014360697x0x561695/79426950-eb48-4e46-a761-f999d155a226/BookmarkedComcast10K.pdf

Hiestand, M. (2012, August 12, 2012). NBC exec: Live streaming Olympic events helped prime time  Retrieved August 12,, 2012, from http://www.usatoday.com/sports/columnist/hiestand-tv/story/2012-08-12/NBC-London-Olympics/57015258/1

Jenkins, H. (2004). The cultural logic of media convergence. International Journal of Cultural Studies, 7(1), 33-43.

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Thousand Oaks, CA: Sage Publications.

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