Comcast, Time Warner merger: regulators, cable monopolies and cutting the cord
It used to be said, whenever a big story broke, that “much ink will be spilled” writing the news. I suppose one should now substitute “pixels” for ink. Today the big story will be the proposed merger between Comcast and Time Warner Cable, said to be worth $45 billion in an all-stock deal.
(Here is the press release for the merger deal.)
Lots of questions arise because of the deal: will regulators approve it, and if so, what conditions will they put on their approval? what does the deal say about the state of cable television? and will consolidation lead to more cord cutting from consumers, especially if consolidation leads to price increases.
It is early in the morning here in the U.S. and already some rather silly things are being written – mostly on Twitter – about the deal (and this may prove to be, as well). First, it should be understood that in most markets, major cable companies do not compete directly with each other. In my home I can subscribe to Xfinity (Comcast) or U-verse (as well as the satellite providers), but not Time Warner Cable. So the impact to consumers is lessened somewhat by the way the business works now.
Second, the idea that prices would automatically jump higher because of the elimination of a major player in cable is but one way to look at who holds the pricing power. With a major cable provider out of the way there is a logical conclusion to jump to: less choice for consumers means higher prices. But it is also true that the reason prices are set where they are has a lot to do with what the cable companies have to pay the content providers. With a major player out of the market, the power of the new Comcast-TWC company to strong arm content providers to keep costs lower increases.
Because of this, I am a little skeptical about the idea that moves like this will lead to more cord cutting by television viewers. I think that trend is accelerating already, and would continue to accelerate even without this merger.
One of the more interest facets of the deal is apparent when you consider that Comcast owns NBCUniversal. That makes Comcast both a content producer and a content distributor, a trend we are seeing grow in publishing (think Amazon). If, or when, Google and Apple enter the content market as producers and publishers, the real trends in media may become more obvious.
Some publishers may rue the day that Apple or Google become publishers, but I shouldn’t need to remind veterans of the business that “back in the day” companies like RBI, Primedia and others were once giants, and now are gone (or nearly so). One day creatives may be producing programming, magazines or books for companies that, in the past, were only known as hardware makers. Or distributors, like Comcast.