Comcast/NBCU: Are Those Dimes Really Digital?

Commenting on internet TV in 2008, Jeff Zucker famously remarked "We can't afford to turn analog dollars into digital pennies." By March 2009, he'd relented a bit, saying "I think we're at digital dimes now." 

In The Myth of Digital Dimes (Part 1 of 3), we began looking at today's digital economics and asserted that the "dimes" problem is:

• exaggerated: it’s about dollars to somewhat fewer dollars
• varies depending on the kind of TV, essentially the ratings tier, we're talking about
• is less of a “problem” and more of a medium-term, smallish, profitable, and complementary-to-linear TV business with big picture future still to be determined.

In December 2009, Comcast and NBCU management held the obligatory joint press conference and investor presentation celebrating their proposed deal. Included in their charts was another reminder of the economics of televisions' winners and losers. Very roughly: broadcast a bit more than a third, and cable a bit less than a third of the pie, but cable provides eight times the cash flow. 

It's a handy chart because it provides a straightforward  snapshot of two extremes - a last-place broadcast network and a rich mix of cable channels - with some presumed scale/cost advantage by being under one roof. If you combined NBCU's declining performance over the last several years with Jeff Z.'s grumbling about "digital" badness, it's almost understandable that you might accidentally attribute NBCU's declining fortunes to things much more internety and complicated-sounding than a losing broadcast network.

So once again we're reminded that broad generalizations about today's television business (it's "dying", or digital "dimes") need some calm deconstruction and inspection. As we enter 2010, it remains the case that:

• television is the most popular and still growing mass reach medium
• internet video is growing extremely rapidly, yet remains an economically (vs. strategically) negligible factor in the business so far
• winning broadcast networks are highly profitable
• a good mix of even mid-tier cable channels is highly profitable
• mid-tier cable channels in particular have attractive near-term opportunities to enhance audience retention and program profitability by exploiting internet TV