Comcast And The Myth Of 'Bigger Is Better'

Since the beginnings of recorded history, mergers between large companies have been championed by executives who argue that a bigger company can bring "scale" to their business and allow them to "streamline" and "remove inefficiencies."

The reality - especially for media companies - is that bigger rarely means better. Bigger is usually used as a bludgeon to stop innovation and protect the core business of the big conglomerate. It's no coincidence that the subscription video on demand (SVOD) giants like Netflix weren't created by the studios who owned the content. Any business that even hints at endangering the current revenue stream is a non-starter at the big media companies.

That certainly seems to be the case at Comcast, which is simultaneously attempting to swallow Time Warner Cable while trying to protect its core cable television business. It's an effort that is ultimately doomed to failure, although the company's massive size is going to make the changes to its business long and painful.

The cable television and broadband part of Comcast is still considered to be most important part of the company. Which means that the future is tied to the cable business and to trying to convince customers to use their XFinity TV Everywhere streaming platform for their mobile, tablet and streaming box needs.

Now the latest iteration of the XFinity service is a slick, well thought-out piece of software that is loaded with plenty of video on demand choices. If you're a current Comcast customer, using it makes a lot of sense.

The problem for Comcast is that even with planned mergers, most Americans still won't be Comcast customers. Which is a problem for a company that also owns a lot of television channels:

* NBC

* 10 owned-and-operated local TV stations

* 2 digital networks (Cozi TV and LXTV)

* NBCUNiversal Cable (Bravo, Chiller, CNBC, CNBC World, MSNBC, mun2, Syfy, Sleuth, USA, E! and Universal HD)

* NBC Sports Group (Universal Sports, Comcast SportsNet, NBCSN, Golf Channel)

* Weather Channel (where its a co-owner)

And there's Telemundo's cable channel and its ten affiliate local TV station group, Universal Studios, tens of thousands of hours of classic programming and enough other assets to fill five more paragraphs.

In any other situation, a company with this scale and range of assets would be building entire new business models and dominating the media landscape. It's easy to imagine launching a Netflix-like service with just Comcast-owned assets. There are ways to use Comcast's desirable broadcast and television channels as a way to extract additional revenue from everyone from Apple TV and Sling to any media start-up looking for content.

And yet, Comcast still wants to protect its core business. So while its other major broadcast TV competitors are reportedly signing onto Apple TV's upcoming TV service, NBC and its cable network sisters won't be part of the deal. To see the Comcast networks, you'll have to use an NBC app that requires cable authentication. Which means if you aren't a Comcast customer (or a customer of one that has a deal with Comcast), you won't be able to watch NBC, USA, Syfy or Bravo. It's the same thinking that is keeping Comcast's channels off of Dish's Sling TV.

All of this is a great move if you're trying to convince customers to keep their cable television service. But is that really the smartest move for Comcast in the long run? Their broadband business is much more lucrative than the cable television part and yet those triple-play packages they push discounts broadband in a way that makes it a loss-leader for cable. Comcast uses financial incentives to pushes customers into a multi-year contract because it's trying to protect its cable TV business. It doesn't need a multi-year contract for broadband-most of its customer have few broadband options. But the cable TV business is even more competitive today than last year and it's trying to protect what it sees as a "core" business.

Comcast has a robust broadband network and that will only become more dominant if its acquisition of Time Warner Cable is approved by the government. Focusing on broadband revenue growth and expanding the reach of is television and cable channels is the rational move for Comcast. But it is going to keep fighting internally over that future because executives can't quite accept that it's the best future for the company.

Bigger isn't better.

If NBCUniversal was still an independent media company, it would have a very different future than it does now. The needs of the TV channels don't always track with the needs of the cable TV provider. And in this case, that means that a lot of money is being left on the table to protect a business which has seen its best days.