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Comcast Craves Content

Comcast Corp.'s support of Sony Corp.'s $5 billion offer for MGM
confirms the cable giant's desire for content to supply its video-on-demand
(VOD) service, which it sees as the strongest weapon to stave off attacks from
satellite rivals.

For the nation's largest cable operator, the deal allows unprecedented
access to a trove of screen hits, such as the James Bond series, which Comcast
plans to offer on its VOD service at no additional fee. For Sony, a deal with
the 21-million-subscriber Comcast gives the Japanese company's executives
confidence to top the bid by Time Warner, whose executives thought they had the
auction locked up.

Sony has been wary of the MGM deal since the beginning, teaming with a
group or financial players rather than bidding on its own. (Comcast has the
option to acquire 20% of the venture's equity for $300 million, if Comcast CEO
Brian Roberts decides later that he wants in.)

During Comcast's campaign to take over The Walt Disney Co. last spring,
skeptics expressed confusion over why the cable operator wanted it. In the
middle of the battle, a senior Comcast executive confided that a major motive
was feeding cable's nascent VOD operations. Roberts is convinced that VOD is
cable's most potent weapon against satellite companies. Without controlling a
major programmer, the executive asks, "Where are we going to get content for

The deal is Comcast's latest move to bolster its programming portfolio
in recent months, including the takeover of Tech TV, taking control of the
International Channel and increasing its stake in E! Entertainment Television.
Assuming that Comcast actually buys into the Sony MGM venture, the tab for all
these ventures would run just $750 million. "For not a huge amount of money,
it's a nice laundry list," Alchin says.

For Sony and its financial group, TV is a small part of the deal. The
group is far more interested in the $1.1 billion a year MGM has been generating
by selling its movies on DVD. (TV revenues are much smaller.) The Comcast deal
won't bring in big bucks, with one Wall Street executive saying Sony will get
just $20 million per year. But Comcast has also agreed to partner with Sony on
something the studio has long desired, but never been willing to pay up for: a
general entertainment cable network anchored by its movie library.

The famed library of Metro-Goldwyn-Mayer would certainly upgrade
Comcast's current free-VOD slate, which is dominated by programs off
basic-cable networks plus Japanese anime and
replays of broadcast-network news shows (in a couple of markets). Comcast will
get up to 400 movies per year to cycle through its VOD menu. The free VOD
movies will generally be at least five years old.

Comcast executives believe that, if they can addict their high-end
subscribers to VOD, they'll never defect to DBS. DirecTV and EchoStar don't
have anything close to the capacity to offer the hundreds of programs on-demand
that cable operators can.

What Comcast didn't get was better access to fresh product. For years,
cable operators had sought to sell a movie on pay-per-view on the same
"day-and-date" that the title hits the shelves of Blockbuster Video or
Wal-Mart. But studios are too skittish about cannibalizing the home-video gold
mine and delayed the PPV and VOD window by 45-60 days.

Under the Sony deal, Comcast will get five newer titles in the primary
home-video window as a "test". But generally, the most recent theatrical
products such as Sony's Spiderman 2 will
still be sold for $4-$5 per viewing.

Comcast isn't worried that Sony won't move faster. "To me, the broader
VOD deal is more important than day-and-date," says one Comcast executive. "If
we get day-and-date, satellite will get day-and-date. But this way, satellite
can't offer what we can offer."