Brian Roberts
Chairman and CEO of Comcast

3/17 Interview with What’s Up CEO Richard Warner
to be broadcast Friday night, 3/18/05 on GPTV’s “Georgia Business Report”

 

Richard Warner: [I’m sitting across from] the man who rescued TiVo this week. What does that announcement mean for customers of Comcast?

 

Brian Roberts: Well, TiVo is like a religion to some people. It is a fabulous brand and a fabulous product, I think a little bit like Apple and Windows.  We have a digital video recorder that we can’t keep in stock.  It allows you to pause and rewind live television. It allows you to record shows real easily…but it’s not TiVo.  So we made a deal with TiVo that’s going to allow us to offer it as a premium product for a couple of extra dollars a month. We have about a year's worth of work before we hit the ground and have it integrated.  You won’t need a new box.

 

Oh, so this deal doesn’t involve TiVo hardware. It doesn’t mean I’m going to have to put a TiVo in my house if I don’t own one already.

 

No, you’re not. One box, one remote and it’s going to be fabulous for those people who love TiVo and are used to that interface and all the features that TiVo becomes the next five to ten years.  So, we are we’re thrilled to have helped them. They’ve clearly have had an impact on 21^st century television and TiVo deserves the chance to make it one seamless integration with their cable company and we’re delighted to be the first people to do that.

 

You already owe offer something akin to TiVo in (Comcast’s) Video On Demand.  But I get the sense that most people don’t know about it or use it.

 

Yea, actually a lot of people do know about it. About 40% of our customers who have a set top box can get On Demand…and of that 80% have used it in the last ninety days. They use it an average of 27 times a month.  It is totally changing the way the people who are involved in the personalization of television get the shows they want to get.

 

You’re at 80% utilization of Video On Demand?

 

Of the homes that have a digital box. Comcast’s strategy is to take the On Demand service and make it available to a 100% of our customers…not just the people with a digital box.  And we’ve been working on another announcement the next couple of weeks with Motorola (who makes a lot of our boxes) to open up the system that enables On Demand to other consumer electronic companies so we can get more and more box manufacturers and TV manufacturers. Our vision as an all-digital company is to have a 100% of our customers be able to get On Demand and hopefully have 80% usage of the full base not just of the self selected 40% digital base.

 

This is a juggernaut that will change the fabric of television.  It is going to kill the broadcast model that forces you to sit there and watch commercials.  It puts the power in the arms and the hands of the consumer. But who’s going to pay for that if you don’t watch the commercial.

 

Well, first of all, first of all I don’t know. People said that same thing when they were in the radio business and television came along. They said it’s going to kill radio…and of course television hasn’t done that. These things are gradual. But we’re not out to hurt advertising.  In fact, I spoke at an advertising conference this week and said it may get tougher for advertisers for a little while…and then it’s going to get better.  Because just as the Internet lets you target the ads to people that are really interested in your product because they’ve come to your website and they’ve clicked on to something about you. You’re going to get more bang for your buck as an advertisers by having interactive, if you watch five On Demand shows about palates, then we ought to be able to sell you work out equipment that relates to palates.

 

If I watch “24,” I should be able to buy the DVD set right then and there…which is going to be a bigger profit center for Fox, anyway.

 

It’s going to be more targeted, more intelligent advertising; it’s just going to require work.  And that’s why some people are going to dislike it in the beginning. But I think in the long run, it’s going to be great for advertising.

 

You know, Brian, it’s also going to take more money.  I think the big change that you’re seeing is away from three free television channels that you had in 1968…to a future where you pay Comcast a hundred bucks or more now for the right and the ability to watch these shows.

 

Well, there’s been a change.  First of all, our average customer pays around $45 to $50, but you’re absolutely right: there’s selection of different packages.  So if you want all of HBO and Showtime and Starz Encore and high-speed data and many of the products that we offer, we have customers who spend more than that.  It’s the same as cell phones, where the more you use it the more you pay. But that’s giving people choice.  The quality of television with two hundred channels today: not all of it’s perfect, but it’s a lot different than when my dad started Comcast in 1962 and we had three channels.  And today there’s all this choice for sports fans, news fans…and it’s just going to get better and better by personalizing it using these new computer type boxes like TiVo or On Demand.

 

The head of the National Cable Television Association predicts that there will be more individual networks charging for their services in the years ahead; instead of getting a universe of 40 cable channels as part of your monthly bill now, in the future going to wind up paying for the ESPN’s of the world.  So do agree with that?

 

I don’t know.  I think it remains to be seen whether selling it channel by channel is actually better for consumers.  I personally believe you never would have a Weather Channel or a Discovery Channel or a CNN cause nobody would necessarily know what it is to buy it.  So by bundling it, we’ve been able to create these niche audiences.  They’re not so dependent on advertising or any one revenue source. It’s a different business model and it gets to the passionate interest of consumers.  And I think some channels need to be optional for sure.  But I think there’s going to be a core for a very long time that’s funded the diversity of voices.  We just started a channel called “TV One” that’s for African American viewers.  There’s no way that channel can make it if it’s only optional. It needs to be packaged. People need to surf, come upon it and say, “Wow, I really like that channel.”  That’s what happened with the Golf Channel.  Golf Cannel started out as an optional [pay] service, became a basic channel and today it’s one of the most successful channels out there, but it still appeals mostly to a core audience of golfers.

 

You made a run at Disney last year. This week there was news that Viacom is considering splitting into two entities…one focused on broadcast and one on its cable properties. What was your reaction when you heard that they were considering that move?

 

Well, I think Sumner Redstone is still probably going to control both companies, so in some respects, I’m not quite sure what the news is yet. They’re just going to create two two corporations.  But probably this is his way of saying, “I’m not so sure I want to be in broadcast television long term and maybe that is holding back MTV and some of my cable content companies.”  But, I need to learn more about it.

 

The future: will Comcast grow aggressively by acquisition?

 

For forty years we’ve grown through acquisition.  At the same time, we’re at an innovation time were now. We’ve got 22 million customers nationally.  We’re in a lot of great markets, like right here in Georgia.  And so one of the questions is, how do we innovate?  The deal with TiVo is going to be innovation…not an acquisition.  We purchased 20% of MGM with Sony, so Sony said, “well you can have some of our old movies and some of our old television shows and you can have some of the old MGM movies.”  Between the two of them they have half the color movies ever made.  And you can make them available to your customers using On Demand for free.  So, we now have a couple hundred movies a month…changing every 90 days…as well as tens of hours of television shows hopefully going to hundreds of hours of television shows, like The Three Stooges for free to our customers.  So I think partnering, not just buying, but trying to innovate and differentiate our product from anything happening in television is what our strategy is all about.

 

Look forward ten years, what is television going to look like?

 

Well, I think it if you look at the Internet today, you’re seeing television tomorrow. Somebody told me yesterday that there are like, nine billion websites.  I’m not sure if that’s exactly right or not but some number that’s impossible.  Where there’s just almost anything out there and you can access it instantaneously.  And I think it’s quite clear that a computer, coupled with a digital network to a box in your home that can communicate with that computer, is no different than what’s happening on the Internet.  So I think what happens down the road will be a variety of devices, a variety of providers, but all allowing the consumer to have much more access to the content they want.  Some of it’s free…some of it they’ll pay for. We’ll have to see how the business model goes.  If there’s nine billion websites, there’s millions, if not billions of hours of television. 

 

Comcast has the high-speed pipe into homes. Meantime, there’s an Atlanta company called Dave TV that will pipe broadband television shows directly to the consumer…effectively by passing the Comcast billing system because it’s over the web.  Do you run the risk of losing control?

 

I think that there absolutely is going to be technological change.  And it challenges companies like ours to innovate and try to differentiate.  We don’t want to just be a pipe; we want to be an experience.  So, yes there is going to be more competition, no question about it.  Today, we have Direct TV and the Dish Network, DSL and many other forms of competition.  So our company has reinvented itself.  We now are open 24 hours a day, seven days a week. We have innovative people who are doing things like the TiVo arrangement we announced…the partnership with Motorola to get more money from electronic companies to make equipment that works with our cable.  And I think we’re just scratching the surface. But is it going to be an exciting, intellectually stimulating, scary time changing period?  Yes, absolutely.

 

What’s the future for uh Blockbuster, speaking of scary, changing periods?

 

They have to evolve their business model and they know it.  And they’re doing it.  But they renting movies in a world where you can purchase them instantaneously has got to be a scary proposition.  Of course, you see services coming along that are challenging at their heart and I think that’s one of the reasons they were spun off [by Viacom] into a separate company.

 

Comcast has been a friend of PBS.  What’s the future of PBS as it relates to cable and digital?

 

Very exciting deal we’ve announced.  One of our strategies is to work with incumbent rich-content companies…both the distributors and the creators…to evolve this technological world.  So, we did two things with PBS.  One: we said we’re going to carry all the high definition versions of PBS nationally. Secondly, we’re starting a kids’ channel. We’re very excited to be partnered with the Children’s Television Workshop and the creators of Sesame Street and Barney and all the wonderful characters that are on PBS shows.  We’re are going to give people access to that On Demand, so parents will know there’s a safe place to go, watch some of their favorite brands, no commercials and do so for no cost.  It’s very much a partnership with PBS that we’re proud of. We’re going to have some more announcements about that new channel that’s a cable channel as well as an On Demand experience that involves all the great PBS brands.

 

So, Brian, are we at the end of the free television era?

 

No. There will always be a place for broadcasting.  They’re just going to have to evolve the business to a different model.  But advertisers will still pay for the aggregation of eyeballs. We all predicted ten years ago that something would happen [to free TV], but guess what. Broadcasting is thriving today more than anytime in its history, just as radio is.  Yeah, maybe it’s not growing as fast as they would all like, but there is more money being made in those mediums today than anytime in the last fifty years.  And there is all this stimulating competition.  I don’t believe in the theory that one replaces the other. They just have to evolve and figure out new business models for their companies. 

 

Broadcasting and Cable Magazine calls him “the most powerful man in media,” Brian Roberts, Chairman CEO of Comcast, thanks.

 

Thank you.