Microsoft invests $1bn in leading US cable operator
Tuesday 10 June 1997
The deal provides Microsoft's Bill Gates with an additional avenue to penetrate the front rooms of the American consumer, not just through software on their personal computer but also via television screens.
The move comes on the heels of the launch last year of Microsoft's joint venture 24-hour television and online news service with NBC, called MSNBC, as well as its agreement earlier this year to acquire WebTV, which makes the set-top hardware to bring the Internet on to ordinary televisions.
On a more technical level, the stake in Comcast gives Microsoft access to its highly advanced broadband distribution network. Compared with the low bandwith of traditional telephone lines, the coaxial television lines allow for the transmission of huge quantities of data and interactivity with the consumer.
"Our vision connecting the world of PCs and TVs has long included advanced broadband capabilities to deliver video, data and interactivity to the home," Mr Gates said yesterday. "Comcast's integrated approach to cable distribution, programming and telecommunications complements that vision."
Among the immediate potential benefits for Microsoft is the additional scope offered by Comcast to distribute its own online information service, the Microsoft Network, which competes with CompuServe and America Online.
Meanwhile, the partnership with Comcast should give Microsoft new influence in the development of high-speed data transmission to television viewers. Comcast is a partner in the @Home Network, an online service aiming to use cable modems to send data on cable systems.
Based in Philadelphia, Comcast is a fiercely independent, family-owned corporation that also owns the QVC shopping network and wireless telecommunications operations along the eastern seaboard. By embracing Mr Gates, the company gains a substantial infusion of capital and the ability to offer new, Microsoft-generated services to its customers.
Offering his own reaction, Brian Roberts, the Comcast President, said the deal would "help us facilitate the deployment of high bandwidth applications and lead to more sophisticated services". While fourth in size beneath its rivals Cablevision, TCI and Time Warner, Comcast is a huge cable operator with 4.3 million subscribers country-wide.
With successive forays first into WebTV and now Comcast, Mr Gates is spreading his bets by ensuring he has the means to control not only the distribution pipeline for high-speed data transmission but also the technology to translate into pictures and sound on traditional televisions.
News of the Microsoft deal, boosted Comcast shares. In early Nasdaq exchange trading, Comcast jumped $3 to $21.25. Microsoft slipped by $1.0625 to $123.
Separately yesterday, Cablevision Systems announced it was acquiring 10 key cable distribution systems in the New York area form TCI. The deal gives Cablevision a large footing in the New York market and helps TCI simplify its complex web of cable holdings.
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