TW Cable deal sure to prompt more consolidation among MVPDs, content owners
Comcast is swallowing up its nearest rival among cable operators in order to gain the scale necessary to make a bigger splash with its cutting-edge digital services. Those range from TV Everywhere authenticated programming menus and other mobile broadband initiatives to enhanced VOD offerings with dynamic ad insertion (which translates to programmers getting paid for commercials in time-shifted programming) enabled by its spiffy X1 operating system.
Comcast’s bulk-up is sure to have ripple effects throughout the competitive landscape. Biz analysts say the deal puts immediate pressure on Comcast’s MVPD rivals. Chatter about a combo of satcasters DirecTV and Dish Network has been building for some time, and stepped up significantly on the heels of Thursday’s TW Cable announcement.
Although cable subscribers are at the heart of the acquisition, Comcast’s focus in Thursday’s announcement was far from the old-school business of serving up pay and basic cable channel packages. Execs emphasized the promise of its ability to offer TW Cable’s residential and business customers faster Internet speeds — as Comcast’s broadband offerings are as much as five times faster than TW Cable’s in many markets.
Comcast chief Brian Roberts stressed the long view in evaluating the merger prospects. The heft that comes with serving 30 million subscribers in 19 of the top 20 television markets will allow Comcast — with its riches in distribution and content wealth from NBCUniversal — to develop products and services that they can’t even envision today. At least that’s the hope.
“Our company is at the unique cross section of media and technology,” Roberts enthused on a conference call with reporters Thursday. “The opportunity to innovate with products and services and customer experiences in our residential and business services is clearly the prime motivator.”
Roberts acknowledged that on one level, the TW Cable buy helps shore up what has been a clear trend of declining video subscribers for Comcast and other operators. That was inevitable as cablers faced more competition, starting in the 1990s with the satellite-TV boom, and extending today to AT&T and Verizon’s telco services as well as over-the-top upstarts such as Netflix and Amazon Prime.
Comcast execs were pleasantly surprised in the fourth quarter when the company actually added video subscribers for the first time in more than six years, he added.
“It’s a very competitive business. It’s not the same business it was 10 years ago or five years ago,” Roberts said.
In the face of changing markets and fast-evolving technologies, even the nation’s largest operator needs to grow to survive, he added.
“Making investments and trying to have more scale really is a strategy that has yielded great results,” he said. “In the media business and the technology business, if you can try to be innovative and have a balance sheet that allows you to invest (for the) long-term horizon, good things tend to happen.”
Yet the sheer big-ness of Comcast in the wake of absorbing TW Cable is enough to set nerves on edge among its rivals. The enlarged Comcast will have an enhanced role as a gatekeeper and pace-setting for carriage deals, pricing of broadband services, advertising rates and a host of other areas that will influence the competitive landscape across media.
In a research note issued Thursday, Moffett Nathanson Research summed up the concerns that will undoubtedly be voiced to regulators tasked with approving the transaction.
“It will be argued that a carriage deal with the merged Comcast/TWC will suddenly be an existential requirement for programmers,” the report stated, “and that Comcast would, in effect, have unilateral control over what content could and couldn’t be heard by the American public.”
In a separate post, analyst Michael Nathanson noted the pressure on content companies to bulk up in order to bring more heft to the negotiating table with MVPDs.
“We have long believed (and this deal re-confirms it) that scale is increasingly becoming more important in securing higher affiliates fees from the distribution industry,” he wrote. “By our math, three companies (Disney, 21st Century Fox and NBCU) will garner almost two-thirds of the incremental affiliate fees paid from 2013 to 2015. This deal will force those with more limited scale to reconsider their M&A options.”