Can Comcast Be As Mighty As Google?

BY 1998, STEVE BURKE was president of ABC Broadcasting and thought to be the heir to Disney CEO Michael Eisner. Then he got a call gauging his interest in joining a cable outfit from Philadelphia. “I knew he would take that job,” recalls Michael Lynton, CEO of Sony and a former colleague of Burke’s at Disney. “It just fit with Steve and his history and where he wanted to go.”

Here in Philadelphia, the story of Ralph Roberts and the founding of Comcast is well-known—even tired. But for Steve Burke, the story of Comcast holds a kind of talismanic power, reminding him of the executive culture his dad cultivated at Cap Cities: low on office politics, high on loyalty, entrepreneurship and family. Make a lot of money, the saying might go, then make it home in time for dinner.

Burke was not particularly happy at Disney. Eisner, a notorious micromanager, wanted to move broadcast operations closer at hand, near Los Angeles. By now, Burke had five kids he wanted to drive to school, an ambition for which Philadelphia seemed a better fit than gridlocked L.A. But he needed to believe in Comcast as a business. What won him over was CEO Brian Roberts’s long-term vision: grow the cable operation, then branch into content. There were no guarantees. But Burke, the marathoner, gambled on the opportunity to run from broadcasting to cable and back again.

Burke served as the Inside Man at Comcast, overseeing operations in the cable division while Roberts ventured out, pushing the stock, making deals. In practical terms, this meant that when Roberts acquired AT&T Broadband, Burke assessed the internal logistics of how Comcast would integrate 12.8 million new subscribers and 44,000 new employees. They forged a strong partnership and became friends, much like Burke’s dad and Tom Murphy at Cap Cities. When Brian Roberts’s perfectionist tendencies prevented him from releasing the company’s first digital set-top box, for instance, Burke intervened, pointing out that perfection is an unreasonable goal in technology and that improved iterations could be released later. But the company’s attempts to branch into content moved slowly.

Burke helped oversee the development of a series of regional sports networks, plus Versus and the Golf Channel. Comcast also became sole owner of E! Entertainment Television. And more famously, in 2004, Comcast issued a $66 billion unsolicited bid to acquire Disney, Burke’s old company. Whatever back channels Burke might have been working, the attempt at a hostile takeover was rebuffed. Five more years passed, ultimately, before the acquisition of NBCUni.

“I think Brian Roberts’s genius is really showing here,” says Reif Cohen, the Merrill Lynch analyst. “Because 12 years ago, when he hired Steve Burke, this is what he had in mind: to make a play for an entertainment company and put him in charge.”

Comcast had plenty of good reasons to maintain this long pursuit. Number one, the “pole climber” stigma has always had a real and financially dangerous ­corollary—known in industry parlance as the “dumb pipe” problem. Pay-TV providers don’t actually sell what people want—video news, sports and entertainment. They just sell the pipes that deliver such content. As a result, they’re perpetually vulnerable to new technologies. And in recent years, that weakness started to show. Anyone with a laptop can now watch TV, surf the Web, and talk via Skype. For the first time, the number of pay-television subscribers has dropped, two years running. Over the last two quarters, ending this past October, Comcast has lost more than 400,000 relatively high-paying video subscribers, while picking up an equal number of less lucrative high-speed Internet­ subscribers. From this perspective, acquiring NBCUni is a defensive measure aimed at long-term survival—the development of a new revenue stream to make up for a shifting customer base.

But Comcast’s new offensive capacities are what capture the imagination. The acquisition of NBCUni gives Comcast, America’s largest cable provider, control of 20 percent of all U.S. viewing hours. How much this new monolith can influence the development of the video entertainment industry remains an open question. But the immediate advantages guarantee increased revenue.

For years, Comcast, like other pay-TV providers, has annually doled out billions in carriage and retransmission fees—the money that goes to cable and broadcast networks in exchange for their signals or stations. Now, the money Comcast circulates to its own properties will stay in the family, and Comcast collects billions—not just from subscribers, but from rivals like DirecTV and Time Warner Cable. There are other, massive financial advantages in the offing. But the opportunity and the threat before Comcast transcend simple economics. Through acquiring NBCUni, Steve Burke can live out the career he was born to, and Comcast enjoys the chance and challenge to reinvent itself entirely.