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Anybody who bought a general, daily newspaper at any time in the last fifteen years made a financial mistake. Anybody who bought undeveloped land in the past three years made a financial mistake. Now comes word from CNBC via CNet News that the giant communications company, Comcast, is about to make a financial mistake.

According to this article, Comcast is deep in negotiations with GE to buy all of NBC Universal. In a deal valued at 30 billion dollars, but only involving about six billion in actual cash, Comcast will acquire controlling interest in the combination of itself and NBC Universal. GE would retain a large, minority interest in the combined companies. Under the reported terms of the deal GE’s retained interest could be bought out by Comcast in the future.

All this this depends on the news reports being accurate and the various government hurtles, in the fullness of time, being overcome.

To make this deal work GE reportedly has paid five point eight (5.8) billion to Vivendi, the French company that owned twenty percent of NBC Universal. To my mind, assuming the structure of the deal is correct and GE is staying in for some time, the only real winner is Vivendi. GE retains forty-nine percent of the new company and gets its money back from the Vivendi deal. Comcast is out six billion. The new entity takes on another nine billion in debt.

NBC Universal owns a number of companies spanning various information and entertainment industries. It owns theme parks, movie studios, cable and broadcast television channels and various production properties among many other assets. The major assets, the biggest “cash cows,” are the broadcast and cable channels in its portfolio.

Both the broadcast and cable franchises are subject to attack from unknown forms of entertainment and information distribution that will emerge from the rapid expansion of the broadband internet. In fact, the rapid expansion of 3G, 4G and other broadband wireless systems around the country and world will pose a huge financial challenge to the Comcast cable system as well.

Comcast is buying, at the top of the market, a bundle of assets and merging them in with another bundle of assets that, whether separate or combined, are vulnerable to the changes to be wrought by internet and, particularly, wireless internet services. The combined company of Comcast and NBC Universal, while having many assets that will retain their viability into the future, have the two major features you do not want in future commerce.

I. Both the broadcast and cable systems are primarily valuable because they play a “gatekeeper” role. Both stand between the producers of content and the consumers of that content. As such, they are particularly vulnerable to a future where distribution of content is going to experience the most change.

Comcast makes the point that the merger is, in fact, all about gaining content assets. Comcast claims that such assets are a good fit with the distribution systems already in place and will assure that the combined company will have proprietary content available only though one of its distribution channels.

When the “computer revolution” first began its assault upon commercial interests beyond the government and military there were a number of companies that built what was termed “proprietary data bases.” Many, if not most, of these were composed of such things as mailing lists, lists of person having specific purchasing tendencies based upon other discoverable factors like their income, residential address and so forth. People needing mass mailing for advertising, politics and other such uses bought the lists from the proprietary data base companies. Early in the “cable revolution” that hit television distribution in the late seventies and into the eighties, cable operators, like Ted Turner, saw they needed proprietary content in order to have something to show and something to attract national advertisers. Hence, Turner’s acquisition of the Atlanta Braves baseball team, the MGM movie inventory and other content assets. Later in the cable wars, companies like HBO began to develop their own episodic television that consumers had to pay to watch.

The leaders of Comcast believe, I suppose, that their deal is simply more of the same. NBC universal will feed the combined company an endless stream of content, from movies on down to web series, and the distribution arms of the company will have products consumers will have to pay to receive and, in some cases, advertisers will pay to be seen upon.

There is only one problem with that line of analysis. In order to keep the audience captive, the content producers, here I mean the actual people, not the companies Comcast has and is buying, have to remain captives. I am no longer certain that last thing is possible. Just as authors no longer need publishers to produce and market their books, just as journalists no longer need newspapers and magazines to produce and distribute their work, video and film producers no longer need movie studios and television networks, broadcast or cable, to create and distribute their work. The entire business model for the merger of these two companies depends upon two things: one, no one can get the content the company owns “for free” and, two, the actual people who produce the content will stay in the “yard.” If the company experiences any significant “fence jumping” there will trouble.

II. Another primary problem with Comcast’s future business model is the embedded capital cost the company has to carry. Not so much the additional nine billion, though that is not insignificant, but other capital intense facilities, such as the enormous cable assets, all that wire in the ground and hanging on poles all over the continent. Even if the content providers do stay in the yard and the updated proprietary “data base” model works, those components of the larger company will find themselves saddled with expensive hard assets that add nothing to their bottom line. I am not sure what the word for this is but it is the opposite of synergy.

Comcast would, I suppose, argue that as the production side of the equation is a “hit or miss” business, profits for each year dependent upon whether the creative people created something a large enough market liked and paid money to consume. This is the “blockbuster,” mass-market business model the movie studios pursue.

And, that is another problem going forward. The beauty, and the danger, of the net is that persons with similar tastes, biases and perversions, come to that, can find one another and communicate. This feature means films that once were produced but lost money can now be produced and distributed over the net and make a profit. Assuming the market for the video is accurately identified. Producing and reaching smaller, better defined audiences through net distribution is easier in smaller, more nimble organizations.

I have no idea what the “green light” process is or will become inside a behemoth like the proposed new Comcast. Maybe it will be a nimble and simple process. However, even assuming it begins that way, it is unlikely the internal, corporate bureaucracy will allow it to continue. Somewhere along the line, someone will make a mistake. Maybe it will be a big production mistake. Maybe it will be a series of smaller ones. It doesn’t matter. The universal (no pun intended) reaction to such mistakes by any bureaucracy is to develop a “process” that will “solve” the problem by making sure it cannot happen again. Of course, any such process will impact the creative process and will do so negatively.

The merger will eventually fail. It will fail for the same reason all the newspaper mergers have or are failing. It will fail for the same reasons Time Warner and AOL did not work out.

One caveat. It may be the leaders of the new Comcast have figured out some way to become a gatekeeper in the Google model. That is, grab and hold the gate open for the consumer and make the sellers/producers pay. If Comcast can somehow seize the “video gate,” keep it open to consumers and charge the producers for letting the consumer in, that is a good model. I don’t think they can pull off that trick. In the first place, they are late to the game. In the second place, I am not sure how much longer Google and other such gatekeeper want-a-bes can maintain their hold on the portal. In the short history of the internet we have seen portal keepers, NetScape, AOL, etc. come and go. As powerful as Google is today, being the portal keeper does not seem to be the most stable position one could occupy.

In any event, the NBC Universal Comcast merger is a big money bet made in troubled times. However, it is a bet made by bright men and women who, hopefully, know something I don’t. We will have to wait and see.