Matches Made in Media Heaven: Cable Companies Invest in Digital Distribution


Article ImageIn June, cable giant Comcast paid a reported $80 million for thePlatform, an online media publishing system. Then in July, EchoStar, owner of the nation's second largest satellite TV service (the DISH Network), made a sizable investment in CinemaNow, the popular movies-on-demand portal. Add to these big high-profile investment deals the smaller content-sharing deals recently struck between NBC and YouTube and between Viacom and Google, and the picture of a trend comes into focus.

"The distribution of content over IP networks is a growing trend, and these investments offer traditional media companies like Comcast and EchoStar an opportunity to protect their existing businesses by being able to augment and expand their services," says Stephen Condon, VP of Entriq. "With traditional media companies like Comcast, the current audience is defined by geography, but new media platforms aren't defined by geography. So partnering with new media companies gives them an opportunity to both protect their existing base and expand their market." Condon calls the Comcast and EchoStar deals "very foresightful moves." 

Not surprisingly, Comcast and EchoStar have been reluctant to divulge the strategies behind their deals. Both companies released prepared PR statements with lots of positive spin but little substance. EchoStar's president, Mike Jackson, praised investment partner CinemaNow as "leading the way in digital distribution" and said he was "looking forward to working with CinemaNow directly on ways to deliver their robust content offering to EchoStar's more than 12 million subscribers." 

Similarly, Sam Schwartz, EVP of strategy and development for Comcast Interactive Media, praised his new acquisition, thePlatform, for having "developed a great market position in enabling the management and distribution of digital media." He said, "We have worked with thePlatform for a number of years to power our online video capabilities on We look forward to continuing to leverage their technology to enhance our online video experience." 

Condon thinks that of the two highest-profile deals (Comcast/thePlatform and EchoStar/CinemaNow), the Comcast deal was the smarter one. "CinemaNow has built a very impressive user-friendly site that is designed to maximize revenue from the people who are visiting there," he says. "I think they have probably generated some tremendous insights on behavior of consumers, but I'm not sure if it's much more than that. I'm not sure this deal takes EchoStar much beyond where they already are." 

Ultimately, Condon believes that CinemaNow is merely a portal for delivering movies. In contrast, he says, "thePlatform is the underlying technology upon which you could build a business. That investment in infrastructure, I think, is more synergistic with Comcast's business. thePlatform is a platform for distributing and monetizing content across new media platforms. So that technology is extremely leverageable into wherever Comcast decides to take their business." 

John Blossom, senior analyst with Shore Communications, concurs with Condon's assessment of the EchoStar/CinemaNow deal, seeing it as a sort of "incremental" advance for EchoStar rather than any sort of home run. This deal at least gives EchoStar a "toehold" in online distribution. "It's interesting and it puts them in the mix, but it's far from clear that it gives them a real edge," he says. This investment doesn't involve any "unique new ideas or any innovation," he adds.

Blossom is almost equally underwhelmed by the Comcast/thePlatform deal, though he concedes that it increases Comcast's flexibility. "I'm not sure there are any clear winners in these deals. They are moving towards where the audiences are gravitating. That's necessary, good, and the next natural step in a rapid revolution of this market." 

While the latest investments may not be earthshaking to the analysts, they raise a question: Why all of these old media/new media deals now? Well, the new media market is finally "entering the reality stage," says Condon. "I think these companies are acutely aware that there is finally a real audience out there who are viewing content on new media platforms." He sees 2006 as a watershed. "This is really the year when the business models are being established and proven, and I think that these will be expanded and benefits will be reaped from them in the years to come." 

Condon clearly sees these traditional media/new media investment deals as a growing trend, and he regards the growth of IP content distribution as an unstoppable juggernaut. "So if you are in the business of distributing content," says Condon, "you had better understand and embrace IP distribution. If you don't, you'll get left behind."