D8: Comcast COO Steve Burke Live!

The first session of the morning at the D: All Things Digital conference in Rancho Palos Verdes, Califorornia this morning feature Comcast (CMCSA) COO Steve Burke. He’s being interviewed by Kara Swisher. Here are some of the highlights of the discussions.

• 8:16 Kara asked about the Comcast decision to buy NBC Universal. Burke says News Corp. is another company that believes content and distribution goes together. He says think of distribution and� technology; the ability to get the content ultimately allows you do more. They can put 70,000 hours of video programming on demand – sits on big servers, and serve them up. But they don’t have all the content they want – only half of movies on the day of DVD release. Could have all prime time programming on a VOD infrastructure. That is slowed down when you don’t own the content. Ability to marry content with distribution is exciting.
• 8:18 Burke says if you look at the movie business, the challenge is what is going on with DVD sales, and the decline of that revenue stream. The answer is to substitute electronic distribution – on the Internet in secure and convenient way, or over VOD. We’re in a unique position to craft that evolution.
• 8:19 Does Comcast really believe in content anywhere? We have been talking for years about any time, anywhere, he says. For cable in the U.S., one thing that has always worked is more choice. Any time, or anywhere, the ability to consumer video in any place, when you want. You need to make sure business models don’t get destroyed, but that is the world we are all crashing into. When people consume video on the Internet through our high-speed connection that is good for us.
• 8:21 Kara is asking about his view of Hulu. Burke notes that people want their shows on the Internet, whether through Hulu or Cocmast’s own Fancast site. He notes that Fancast gets millions of video sessions, and now is 100% ad supported. He says they are big supporters of allowing people to consumer what they want, where they want, when they want. TV Anywhere allows cable subscribers to get all the content they have on any device, wherever they want. Ultimately, if we don’t create that model, either programs will not put programs on Internet, or people will steal it.
• 8:23 Burke says Jeff Zucker will run NBC, and report to him. He says hell be trying to do new things with the content; content and distribution work together if you make them work together, he says. They need to do things that may not be immediately advantageous for both sides.
• 8:25 Financially, he says, the majority of cash from from NBC Universal comes from the cable channels. They are fantastic businesses. NBC and Universal Studios are not the majority of what we are actually buying. Cable channels are best part of the media landscape right now. That’s a business we have been in for a long time and understand well. There is upside marrying Universal Studios and NBC network with some of the other Comcast assets.
• 8:26 How is the television network business? What did you think about the Conan thing? Burke says they can spend time planning and talking about the future,� but not doing anything in the day to day. There is clearly a separation now that exists. If you look at the network TV business, it has been in challenging times for a long time. Reason for more optimism, with better ad environment, and retransmission consent will be positive thing. NBC is really an engine for all of those cable channels. If you have a hit show, it is part of an ecosystem. If you include cable channels as well, the overall TV businesses are making as much money as they have ever.
• 8:29 For big events, he says, there is still nothing like broadcast television, with audience that is unsurpassed. We’re not naive, we look at it as a very challenged business; but in context of NBC Universal, there is real upside. He says you have to invest in the business; if you are in network TV� business you have to spend to create pilots, and be a place where creative people want to bring their work. If you look at NBC;s pilot season this year, they stepped up, and made a bigger investment. He notes that it is tough 9 of 10 shows fail; but you can’t cut your way to success in broadcast TV.
• 8:30 On running a movie studio, he says they are not inclined to sell it off. “Our modus operandi is not to sell things,” he says. Universal has 4,000 movies; you can move them to different platforms, help the evolution from reliance on DVD to electronic sell through; Universal Studios is very important to the cable channels. You want them to make great movies.
• 8:32 Kara is asking about cutting costs at Universal, and Burke says acquisitions often are about cutting costs. In this instance, he says there is very little overlap, the businesses do not have too much headcount, it is more a case of putting everything together, having an environment that is appropriately funded, and attracts great talent. Unique opportunity was to get wonderful, profitable cable channels; and NBC; and a movie studio. All businesses that belong in a well-rounded media company.
• 8:34 On Google TV, he says the real competitors are the telcos and satellite companies. Most customers have 200 channels. You need to be facilities based. Can be a satellite, or a pipe – to deliver the tonnage of programming. Internet can deliver video, but not the same way. A lot of companies want to get to the TV set, to bring Internet or search to TV set; they can be complimentary; but people want ESPN, USA, CNBC.
• 8:36 Why not blow up the set-top box? Why bundle? Burke says programmers make it clear they want full distribution; they want to be in every single home. Ecosystem has evolved to pay $50-$60 and get 200 channels. Ask this audience their top five channels, and there would likely be a list of at least 100 channels. Over half of the business today comes from things outside of video – high speed data, telephony. Could offer a less expensive bundle with a la carte programming. But lots of contracts in place for full distribution.
• 8:38 Burke says there is little evidence people are giving up subscription television; other things are complimentary,; there will be more things on more devices; but still advantageous for channels to be paid affiliate fees by cable and satellite companies. We pay ESPN over $1 billion a year. On unbundling, he says it would be like buying just the first section of the Wall Street Journal, and not the other sections.
• 8:40 Burke says Comcast thinks the iPad is pretty important; he notes that one of the most challenging things is that the guide is not very good on set-top boxes. He notes that it would be great to do navigation to your shows on the iPad. (The company did a demo of such a device recently at The Cable Show.)
• 8:43: On 3D TV, he says it is definitely coming. He says it has a different dynamic than high def; technology to enable 3D is fairly inexpensive, maybe $500 more a set, and that will come down to essentially nothing. He says it will quickly be the case that nice TVs will have 3D functionality. Does not enhance all experiences. Football games not likely to work well in 3D. He says it remains to be seen what percent of viewing will be in 3D, but there is no question it is coming.
• 8:45 On video windowing, he says the best place to bring movies to general public is a movie theater; 10-20-50 years from now, people will still want a big screen, and have that experience. At a certain point, I think that movie ought to go to other platforms. People still want that experience. But there is a difference between opening weekend and 90 days out. We have 24 million homes – a 24 million seat movie theater, in effect. An asset that could be used in a very consumer friendly way.
• 8:47 On the most important devices right now: He says that the iPad is just extraordinary. Burke says he brings it everywhere he goes. The pace of change will bring us so many ways to consume all this content. That is the bet with NBC Universal: that professionally produced content will be more valuable 20-30 years from now that it is today.

Q&A:

• Burke On whether cable becomes a commodity; he says they will run the cable business separately from the rest of the company; he says the existing business model for video distribution will continue.
• On the concept that giant media deals tend to be disasters, Burke says they have done 20 deals in last 10 years, and every time, Wall Street asks why we were doing that, and not just buying back stock. We have a view, he says, that content and distribution work well together if properly managed. But it is all how you manage it. We are very glad we did what we did to get bigger in the cable business; my best is we are getting a fairly priced deal, at a time when advertising business is rebounding, and time will tell, but we are very optimistic that it all will work out.
• On creating a retail market for set-top boxes: Burke says it is a complicated question; every cable company is a conglomeration of different head ends. They would save hundreds of millions in capital if people bought their own set-top boxes, but it is difficult to make that work.
• On wireless spectrum: They are rolling out WiMax via investor in Clearwire; he thinks people will consumer a lot of content in a mobile fashion. They are big believers in WiFi. Traditional cell phone business is difficult to enter, but as a fourth product we don’t think is necessary for us to compete; the wired products are a natural bundle. (Video, data, wired voice.) Anything that gives mobility to high speed data is important.
• On combating malware, and security: Burke says the real growth driver for Comcast and other cable companies has been Internet service. Cable companies have become Internet providers first, with video companies that are not growing. Very important to us provide really reliable, fast Internet service, on an open Internet. But that said, you need to make sure the network is run efficiently and well; we invest a lot of money in trying to do all of that. It is very complicated; trying to make sure the highway is not jammed with cars; tried to take a leadership role in the industry to set standards.
• In response to the comment that “many of your customers hate you,” due to bad customer service, Burke says they have invested hundreds of millions of dollars to improve physical plant and customer service; we spend a lot of time on it, he says. The networks are getting more sophisticated; people want the services to work 100% of the time; we were an industry that is cobbled together, and catching up with the complexity of the networks.
• On opening up a platform, or APIs, for developers to build TV apps on the Comcast platform: Brian and I have been to seen Steve Jobs five times in the last 10 years; he says they have 40 million set-top boxes out there, it is harder than we wish it was. It would be wonderful to have an open application environment that you seen on an iPad for television. The software platform, though, is balkanized. Easier to do on an iPad and the Internet.

And that’s it.