Telepocalypse

Not news

There’s been a lot of comment passed today about the proposed take-over of Disney by Comcast. Some people claim it’s a good thing, others a stupidity to exceed even that of AOL/Time Warner.

I just wanted to pick up on this because at first sight there is a telco angle to this: Comcast are in the pipe business, and Disney are in ye olde worlde media content. Aren’t pipe providers trying to climb up the value chain here again? Are there lessons for wireless network operators and landline voice services? Well, not really.

The thing is, Disney have three great creative media assets (the others being the theme parks and valuable harvesting brands like Winnie the Pooh): movies (Miramax), Sports (ESPN) and vanilla TV (ABC). Good movies cost tens to hundreds of millions of dollars to make; exceptions only go to prove the rule. A well-timed deal can corner a significant chunk of the supply to the market. Consumers can’t easily bypass the system by rolling their own movies, unlike telephony. Likewise with sports, there is a finite supply of major events, and some good exclusive deals can keep you going for ages. Comcast want to focus on video on demand, using Disney content to kick-start the service. The TV channel is probably a useful avenue for a Google cum TiVo service in future with personalized advertising content — which again fits in with the DVR/broadband/VoD approach.

So you have to remember that telecom is fundamentally a peer-to-peer communications business with a bit of content bolted on the side (ringtones, mobile news clips etc.). Comcast see themselves in the content delivery business, with a bit of communications tacked on to sweeten the deal. To state this another way, telecom is about creating a unique distribution system for user-generated content, and a cable/media service is about creating a unique distribution system for professional media content. Similar, but not necessarily propelled by the same strategic imperatives.

Don’t read too much into this merger yet, beyond the usual secondary effects such as strengthening Microsoft in their fight to tithe every moving data bit in the universe.