Putting Video Online Has Numerous Costs, NBC Universal Says

Putting video online has numerous costs for old and new companies alike, NBC Universal told the FCC in response to the agency’s wide-ranging discovery request for information on the company’s deal with Comcast. NBC Universal, which Comcast plans to buy control of, discussed some of its strategy to gradually put its cable programming online and discussed some of the events leading up to the start of the Hulu site for its broadcast network and others to put shows on the Web.

Large parts of the public version of the response, posted Tuesday in docket 10-56, were blacked out because the company considers them confidential. A Comcast spokeswoman didn’t reply to a message asking when her company’s response, due Friday like NBC Universal’s, will be publicly available.

Being able to distribute high-quality content on the Web “is increasing given advancements in technology that allow more rapid and seamless downloading and streaming of video,” NBC Universal said. New entrants can start websites with little money, and they can become popular and be widely used, it noted. “However, the on-line distributor would face not insubstantial costs to obtain legally or produce professional-grade content as well as to develop the capabilities to host and stream that content to customers.”

The minimum scale needed to start a Web video distributor varies but “generally requires a critical mass of both content and brand awareness,” said the filing, at http://xrl.us/bhowy2. When ABC, NBC and other broadcast networks began making their shows available online about five years ago, the economics of doing so “were not clear,” NBC Universal said. “After the networks’ own vertical websites began making video available, attention eventually turned to unaffiliated video providers.” A related filing, at http://xrl.us/bhowy2, discussed what it called Boxee’s attempts to circumvent Hulu’s terms of use restrictions and a product from another company that loads the Hulu player on a TV set. That product, Kylo, has “attempted to circumvent these restrictions,” NBC Universal said.

Networks that begin online distribution via their own vertical websites “face incremental costs just as any new entrant would, though there are significant efficiencies from” already owning content and having developed “brand awareness,” the company said. “While the network entrant would typically license the content for television distribution, there would typically be incremental costs associated with the content for on-line as well as incremental fees for music rights, and unions, guilds and producers. A network entering into on-line distribution also would have operational costs for streaming and hosting content.”