Comcast has long been a formidable entity for TV networks who need its connections to viewers’ homes to keep their ratings sound. Now that sparring partner is about to bulk up.
By proposing to buy Time Warner Cable in an all-stock deal valued at $45.2 billion, Comcast is set to control about a third of the nation’s cable subscribers, making it a daunting gatekeeper to millions of couch potatoes. Comcast has in recent years largely stayed out of the contentious frays that erupt whenever a programmer and a video distributor fail to come to terms – consider last year’s set-to between CBS and Time Warner Cable or a 2010 fracas between Cablevision Corp. and Walt Disney – but it may find itself in more pressing circumstances as it takes control over access to 30 million TV viewers.
“If your content isn’t strong enough, then consolidation in Europe, consolidation around the world can be a challenge,” said David Zaslav, president and chief executive of Discovery Communications during a call with investors Thursday in response to a question about Comcast’s proposed deal.
Large programmers like Discovery, 21st Century Fox and Viacom’s MTV Networks have long used their size to carve out favorable terms in carriage negotiations. But a tightened Comcast grip on the nation’s TV viewers could give the Philadelphia company, which already controls the many networks of NBCUniversal, more power in such talks.
Comcast is “already the nation’s largest ISP, the nation’s largest video provider, and the nation’s largest home phone provider. It also controls a movie studio, broadcast network, and many popular cable channels,” said John Bergmayer, senior staff attorney with Public Knowledge, an advoacy group focused on consumer rights. “An enlarged Comcast would be the bully in the schoolyard, able to dictate terms to content creators, Internet companies, other communications networks that must interconnect with it, and distributors who must access its content.”
Large programmers contacted Thursday opted for the most part to keep mum. The bigger outlets may have less cause for concern, because popular networks like Time Warner’s TNT or Fox Cable’s FX carry signature programs or sporting events to which a large part of U.S. viewers crave access. Walt Disney, for instance, has long used favor accorded sports juggernaut ESPN to eke out terms in such talks. Media companies that operate a broadcast network or own the bulk of their content could also maintain leverage in distribution discussions.
But smaller or stand-alone programmers may have more reason to worry. In the last few years, these companies have had more trouble in negotiations with carriers.
Ovation, an independent arts network, found itself booted off of Time Warner Cable for ten months after the New York cable operator suggested the small outlet did not carry enough original programming (and after its executives suggested the company needed to be mindful of the cost to consumers of delivering channels that were not heavily watched). More recently, The Weather Channel, owned by a consortium that includes NBCUniversal, has had a parting of the ways with DirecTV, which has stated it feels subscribers can get weather information from other sources and have little need for docu-series that have become mainstay on the network. In 2010, both the Hallmark Channel and the Hallmark Movie Channel were booted off of AT&T U-verse over carriage talks.
These smaller companies have less bargaining power with a large distributor – and sometimes even small ones – because they don’t control a passel of networks. And they are less able to push back against demands from distributors they may find unfavorable.
The chief executive of Ovation, in a post on Twitter made after this article was posted, indicated the merger did not, in his view, raise any issues:
— Charles Segars (@CharlesSegars) February 13, 2014
Comcast is making the argument to regulators and advocates that the landscape will be just as competitive after a merger with Time Warner Cable as it was before one. Because the subscriber bases of the companies do not overlap, Comcast said, rivals will not face a reduction in the number of competitors in a single market. And the company cited competition from a growing number of entities, including satellite broadcasters like Dish and DirecTV or telecommunications concerns like AT&T U-verse or Verizon FIOS.
What’s more, with companies like Hulu, Apple. Netflix, Google and Amazon entering the video-delivery business,the company said in a statement, “previous antitrust concerns about further cable consolidation are truly antiquated in light of today’s marketplace realities.”
Updated 9:30 AM PT