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Comcast Sees More Videos On-Demand In NBC Universal

By Nat Worden Of DOW JONES NEWSWIRES NEW YORK -(Dow Jones)- Part of Comcast Corp.'s (CMCSA) desire to take control of NBC Universal comes from its appetite for film content from Universal Studios to bolster its video on-demand offerings. By gaining control of the film library of a major Hollywood studio, the nation's largest cable services provider hopes to build VOD into a real growth engine for the entertainment business that could ultimately replace the DVD. Still, it's far from clear that the acquisition of Universal Studios would immediately help Comcast boost its VOD business. Just as the music business has suffered from the decline of CD sales and the publishing business has suffered from the decline of newspaper and magazine sales, the movie business is being squeezed in the digital age by a slowdown in its most profitable business: DVD retailing. Hollywood views VOD--movie rentals that cable subscribers can select on their TV without leaving their couch--as one potential savior. But studios have been slow to embrace the business for fear of adding to the decline in DVD sales and running afoul of key retailers, like Wal-Mart Stores Inc. (WMT), which makes up nearly a third of all DVD retail sales in the U.S. and is known to be a demanding partner. As the cable industry's leader in VOD, Comcast sees an opportunity developing now to push studios into its corner. That's part of its motivation in negotiating with General Electric Corp. (GE) about taking a majority stake in NBC Universal, according to people familiar with the matter. A deal is expected in the coming days or weeks. "The margins that movie studios make on a rental from VOD are much better than the margins they make through" Blockbuster Inc. (BBI) or Netflix Inc. (NFLX), "so it has always been a riddle as to why the studios haven't been quicker to embrace it," said Craig Moffett, analyst with Sanford C. Bernstein & Co. "The prospects for making progress on this issue now are much better than they used to be." By controlling Universal, Comcast could use access to its blockbuster film slate to experiment with VOD delivery and inspire other studios to follow suit. Options include moving up the VOD release date on some films ahead of their DVD release, and charging a higher price point to boost profits. Representatives for major film studios, including Universal, declined to comment for this story. However, several industry participants are skeptical that Comcast would make much headway on VOD as a result of the acquisition, pointing to other false starts. The combination of Time Warner Inc. (TWX), owner of Warner Bros. Entertainment, and Time Warner Cable Inc. (TWC) had little impact on the VOD business and was recently abandoned. Likewise, News Corp. (NWS, NWSA), owner of this newswire as well as 20th Century Fox films, owned a majority of satellite TV provider DirecTV (DTV), but wound up divesting the stake. In 2005, Comcast and a group of other firms paid $5 billion to acquire Metro-Goldwyn-Mayer Inc., the film studio that owns the James Bond film franchise. Comcast has since written off its 20% stake in that venture. "The question now becomes why, if building up the VOD business is in everyone's mutual interest, does it take a $30 billion deal from Comcast to make it happen?" asks Moffett. Still, there are signs that studios are embracing the shift away from DVDs. The film industry is increasingly willing to release films on VOD at the same time they release them as a DVD in stores. Historically, studios have held back films on VOD to avoid hurting DVD sales, but that appears to be changing. In 2007, Comcast offered nine films on VOD at the same time they were released on DVD. In 2008, that number climbed to 35. It totaled 68 through the first nine months of this year, and the company expects it to go over 100 by year-end. Meanwhile, Comcast is averaging over 350 million VOD views a month this year, up from 300 million last year and 250 million in 2007. "As they see the DVD business change and decline, the studios are looking to VOD and electronic sell-through and other non-physical ways to distribute movies with a completely different mindset," said Comcast Chief Executive Brian Roberts on a recent conference call. Meanwhile, studios are still wary of sharing revenue with pay-TV providers at a time when online distribution has enabled anyone to reach consumers directly, but the movie download business has so far been dominated by Apple Inc.'s (AAPL) iTunes service. -By Nat Worden, Dow Jones Newswires; 212-416-2472; nat.worden@dowjones.com

Stock News for Blockbuster (BBI)
DateTimeHeadline
06/29/201010:41:36NCR To Put DVD Kiosks At More Than 500 MAPCO, Daily's Stores
05/17/201019:14:32Icahn More Than Doubled Genzyme Stake In 1Q; Buys Chesapeake
04/22/201017:01:09NCR 1Q Loss Widens On Pension Costs, Sees Improved Backlog
04/20/201015:17:21CORRECT: NCR To Offer Digital Downloads At Airport Kiosks
04/20/201013:47:30NCR To Offer Digital Downloads At Airport Kiosks
04/16/201016:55:07CORRECT: NCR Corp To Place DVD Kiosks At Kwik Trip Stores
04/16/201016:38:13NCR Corp To Place DVD Kiosks At Nearly 500 Kwik Trip Stores
04/16/201015:20:30NCR To Rent New, $2-A-Day DVDs From Blockbuster Kiosks -Bloomberg
04/07/201014:52:19NCR Could Expand DVD Footprint As Blockbuster Downsizes
03/22/201023:46:41Blockbuster: Warner Bros Pact Retains New-Release Advantage
03/17/201016:59:08MARKET SNAPSHOT: Dow Win Streak Longest Since August 2009
03/17/201016:52:00TECH STOCKS: Tech Stocks Follow LSI To Close With Gains
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03/14/201020:29:31NCR Rolling Out More Blockbuster Express DVD Kiosks
03/03/201014:00:08Best Buy Nears Launch Of Revamped On-Demand Video Service
01/29/201018:39:11Icahn Resigning From Blockbuster Board, Cites ISS Guidelines
11/24/200915:46:07Comcast Sees More Videos On-Demand In NBC Universal

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