[opendtv] News: Comcast And Time Warner Go Out And In
- From: Craig Birkmaier <craig@xxxxxxxxx>
- To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
- Date: Thu, 30 Sep 2004 07:30:17 -0400
http://www.forbes.com/2004/09/28/cx_da_0928topnews.html?partner=technology_newsletter
Comcast And Time Warner Go Out And In
Dan Ackman, 09.28.04, 9:40 AM ET
NEW YORK - Comcast says it wants to divorce itself from Time Warner,
and it may do so by getting in bed with Time Warner so together they
can buy Adelphia. That's the upshot of an official announcement made
by the two companies and off-the-record statements made by their
executives.
The result--still well down the road--would be the two cable giants
controlling more cable systems and perhaps more programming companies
as well. How these transactions will play out between the companies
and with regulators is still anyone's guess, but it's a tangled web
right from the start.
The official news is that Time Warner (nyse: TWX - news - people
), which owns the second largest cable system in the U.S., and
Comcast (nasdaq: CMCSA - news - people ), which owns the
largest, have agreed that Comcast will reduce its effective overall
interest in Time Warner Cable from approximately 21% to 17% in
exchange for stock of another that will hold cable systems and cash.
Comcast wound up owning a piece of Time Warner's cable business when
it bought AT&T Broadband. AT&T Broadband had owned 27.6% of Time
Warner Entertainment, which then included cable systems as well as
Warner Brothers, HBO, the WB Network and Comedy Central.
The idea was that Comcast would gradually divest itself from the
entertainment-producing companies. To that end, last year Comcast
swapped its stake in Time Warner Entertainment for 21% of Time Warner
Cable, plus cash and stock in Time Warner, the parent company. The
agreement announced yesterday continues in that direction as Comcast
will reduce its stake in Time Warner Cable. In return, Comcast will
get shares in another company that also owns cable systems, plus $750
million in cash. Apparently, there are tax advantages for Comcast.
The unofficial news is that Comcast and Time Warner are exploring a
joint bid for Adelphia Communications (otc: ADELQ - news - people
), the bankrupt and scandal-plagued cable company that is fifth
largest in the U.S. So while Comcast and Time Warner are moving apart
on one hand, they are, on the other hand, moving back together. If
they buy Adelphia, the cable industry would be consolidated among
even fewer owners.
All or nearly all cable systems have monopolies at the local
level--despite the fact that there is some competition in theory from
satellite TV providers. But the fear is that as cable companies grow,
they will gain increased power over programming at the national or
international level.
Comcast itself has made several recent moves in that direction. It
tried to buy Walt Disney Company (nyse: DIS - news - people ).
That deal looks abandoned, but with Disney's Michael Eisner on the
way out, that company is in the throes of succession issues, and who
is to say it will not revive. Meanwhile, Comcast joined a consortium
led by Sony (nyse: SNE - news - people ), which owns Columbia
Pictures and its library of programs, to buy Metro Goldwyn Mayer
(nyse: MGM - news - people ), a smaller movie studio that is
barren of new ideas, but which also controls a massive library of old
movies (see: "MGM, Sqeaking Lion").
The second-place bidder in that deal was Time Warner, but apparently
there are no hard feelings among media moguls.
The scuttlebutt is that Time Warner and Comcast would each be
interested in those Adelphia cable systems that are near systems that
each one owns already. Comcast may, for instance, want to join the
systems it owns in Los Angeles with systems now owned by Adelphia in
other parts of town. But the result could be that the two giants own
even more of the distribution systems, giving them more control over
programmers, whose content they purchase. Time Warner, of course,
already owns a lot of content. Comcast owns less, but with the
Sony-MGM deal, it is beefing up on that end as well.
The irony is that old media-ownership regulations were said,
rightly, to be out of date partly because broadcast networks were
already facing competition from cable networks. Those regulations
have been thrown into disarray by court rulings and Congressional
action (see: "Everybody Hates The FCC").
But now, Comcast is in an apparent partnership with Sony, a major
entertainment programmer, and with Time Warner, a programmer and
cable operator. While one shouldn't overestimate the extent to which
Comcast cares what people watch, so long as they watch it through
Comcast, the situation should at least give pause.
Announcing the Comcast partial divestiture deal, Time Warner CEO
Richard Parsons issued a statement: "Today's announcement is another
example of our working closely with Comcast to reach a mutually
beneficial outcome to the business matters facing our companies."
Well, isn't that special.
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