nbc_logo.jpgWASHINGTON – Any day now, if published reports are accurate, cable giant Comcast will celebrate Thanksgiving not by dining on turkey but by feasting on peacock: Comcast is set to acquire NBC from General Electric. However, reports in the past few weeks touching on the financial performance and prospects of NBC Television raise an interesting question: Why does anyone really want to buy NBC?

And why does Comcast, in particular, really want to buy NBC?

To start, NBC is in decline: Business Week reports that NBC’s longtime position as the leader in network TV ad sales has ended, with CBS now the leader.

That is remarkable, given CBS begins with two enormous handicaps, starting first thing in the morning: NBC’s dominance all morning with “Today.” CBS is well behind second-place “Good Morning America” on ABC, running a weak third (or even fourth in many major markets) with the CBS News “Early Show,” which is both markedly less popular and much shorter than “Today,” so it has a fraction of the number of ads and they sell at bargain prices. CBS finally becomes competitive toward midday, with “The Price Is Right,” which was one of my grandmother’s favorite shows in the 1950’s.

The second handicap is the evening news. Just as CBS News lags far behind in the morning, it is dragging down the network’s fortunes in early evening. Again it is NBC narrowly in the lead, ABC close behind, and the CBS Evening News with Katie Couric lagging far behind. Those evening news broadcasts may have a smaller audience than they once had, but the commercial revenue is still quite valuable – if you are in the lead.

So CBS comes from a poor third place in the morning and evening news audiences and revenues, meaning it must be clobbering NBC in audiences and ad revenue in the high-audience prime time hours of 8-11 p.m., 7-10 p.m. in the middle of the U.S.

One big reason is that NBC has stopped competing and is in full retreat. Their in-house code phrase is that they are programming prime time “for the margins” – i.e., cut costs severely and produce programs so cheap that they can turn a profit even as NBC prime time drops to fourth place – and sometimes fifth, behind Spanish-language Univision.

Here is how it plays out: The first hour of prime time is devoted to inexpensive “reality” shows, games and “Dateline NBC.” The last hour of prime time is Jay Leno on weeknights and reruns and sports on weekends, all much, much less expensive than CBS’ dramas. The result: according to the Business Week story, CBS now has 12 of the 20 most popular programs on television, with ABC’s “Grey’s Anatomy,” “Desperate Housewives” and “Dancing with the Stars” dominating the rest of the list.

In two months it gets worse for NBC: Just as the network loses its only big audience program, NFL Sunday Night Football, Fox will begin the next season of its dominant “American Idol” series, drawing still more viewers from NBC. To get out of the basement and build its audience and ad revenue, NBC will have to spend dearly to develop new programs to find the one or two hits to start the long climb back up. Think “Cosby” and “Fresh Prince.”

So, to return to the question of the moment, why does anyone really want to buy NBC?

And why does Comcast, in particular, really want to buy NBC?

Thumbnail image for comcast_20logo.jpgOne answer has been swirling about some financial blogs and was presented clearly in a Wall Street Journal analysis. It turns out Comcast’s cable business is devolving into a generic commodity, courtesy of video on the Internet. As the Journal analysis put it, “their worst fears lurk just around the corner.”

The fear: U.S. television fans, especially younger ones, are watching more “television” over the Internet. Comcast’s business, built on those lucrative monthly cable bills of $100 and more, could erode just surely as the newspaper, music, movie and, perhaps most analogous, wireline telephone businesses are being hollowed out by free web sites, by free or cheap downloads and by cell phones. When “television” is on the Internet, why pay that big cable bill?

So Comcast is hoping to cash in on all of those new cable channels that come with NBC — and that is where the real money is, in USA and CNBC and the others, not in the legacy NBC network. Surely, for Comcast, the biggest cable guys in the country, owning the biggest family of cable networks seems a great fit. Or maybe not: The Wall Street Journal notes that some of that same thinking led to the AOL-Time Warner merger.

Too gloomy? Look again to those young TV fans for predictors of things to come. They don’t read newspapers (other than online). They never listen to AM radio (unless it is streamed online). And now they are abandoning television: Business Week quotes one analyst who says viewers aged 18 to 49 watch 90 minutes less television per night than viewers just a few years older, age 25 to 54. 90 minutes less television viewing per night. Another signpost up ahead: the most successful title of the week in all of entertainment this week was not a television show, not a movie and not a record. It was a video game, “Call of Duty: Modern Warfare 2,” which made $550 million in the first five days it was released, ten times more than it cost to produce, according to published reports. It was the most successful entertainment product of the week – by far.

And this: Not that long ago, stores began selling television sets that were “cable ready.”  Take it home, plug it into a cable line and start enjoying cable TV. Now go to an electronics store and look at the new “television” sets and “DVD players.” Now they come Internet ready, with little Netflix logos. Take it home, plug it into a broadband line and start enjoying “television” and movies — and games and YouTube and Facebook – without an antenna or cable TV.

All of this will surely affect CBS, Fox and ABC as well. But those networks, still profitable, can coast slowly down as this demographic shift deflates the television audience. But NBC is leading the way down.

The result: Comcast could be paying top dollar for a legacy network at is nadir and a bouquet of cable channels that are profitable, for now, just as the entire television business, broadcast and cable, is at a tipping point – pointing down.

It is not difficult to imagine “television” going the way of newspapers and AM radio: it won’t entirely disappear. It will just be a dwindling, increasingly marginal medium for a dwindling, aging audience.