Comcast Corp. may have lost the fight to acquire a giant programming company when it withdrew its offer for the Walt Disney Co., but it has apparently not lost its appetite for entertainment programming.
Comcast, the nation's largest cable operator, is in talks with potential partners to create a digital cable channel for children, according to people close to the discussions.
Those potential partners include the Public Broadcasting Service, Sesame Workshop and HIT Entertainment of Britain, according to one of the people, who added that any deal was a month to six weeks away.
The 24-hour channel would not carry advertising and would give Comcast yet another niche cable network. It also owns the Golf Channel, the E! Entertainment channel, Outdoor Life and TV One, a channel aimed at black viewers.
With 22 million cable subscribers, Comcast has a huge distribution system that can easily give a new channel great exposure to consumers. That was one of the reasons Comcast wanted to acquire Disney. That merger would have joined Comcast's system with content from Disney's movie and television studios and its broadcast and cable networks.
Wall Street never supported that deal, contending that Comcast would be taking on a troubled creative business with which it had little management experience.
But Wall Street did not have the same negative reaction to the talks on the new channel, despite the competition for children's attention from channels like Nickelodeon, the Cartoon Network and the Disney Channel. The talks were reported yesterday in The Wall Street Journal.
Craig Moffett, an analyst at Sanford C. Bernstein & Co. who had been negative on the merger of Comcast and Disney, said:
"Comcast's newest effort, taken together with the recent launch of their African-American channel, TV One, points to a sort of an organic growth strategy at Comcast for programming and suggests that there may be more ways to integrate programming and Comcast's distribution capabilities even without having to make a major acquisition.
"Wall Street is likely to greet this approach more favorably because it is much less asset intensive, but reaches the same goal and does not potentially dilute cash flow."
Although Comcast declined to comment yesterday, people close to the negotiations said that Comcast and its partners would each own stakes in the channel with No. 1 cable firm being the largest equity owner. Comcast would make money from subscriber fees both from individual subscribers and other cable operators.
Comcast would also hope to get the video-on-demand rights to the most popular children's shows from HIT, which include Bob the Builder, Barney and Friends and Angelina Ballerina.
Cable operators have found that the rate at which people cancel their service, known as the churn rate, is lower when companies offer video on demand. It is also a weapon in the competition with satellite companies because they cannot offer video on demand.