[opendtv] Media Industry Worries About Comcast-TWC
- From: Craig Birkmaier <craig@xxxxxxxxxxxxx>
- To: OpenDTV Mail List <opendtv@xxxxxxxxxxxxx>
- Date: Wed, 12 Mar 2014 07:07:28 -0400
http://online.wsj.com/news/article_email/SB10001424052702304020104579433571449307430-lMyQjAxMTA0MDEwMTExNDEyWj
Media Industry Worries About Comcast-TWC
Comcast Corp.'s proposed takeover of Time Warner Cable Inc. has sparked fears
across the media industry that the combined giant would have too much influence
over everything from cable industry pricing to the broadband-related services
consumers can access.
TV network owners worry the merger could give Comcast too much control over
TV-viewing data and the broadband market, industry executives say. Small cable
operators, meanwhile, fear they could face higher costs as TV networks try to
make up the difference from discounts that a larger Comcast would win.
Companies with online-video offerings fret that Comcast could charge more
aggressively for broadband use.
Regulators will have to weigh such concerns as they consider the $45 billion
deal, which brings together the Nos. 1 and 2 cable operators. Comcast and TWC
are expected to submit their merger documents to the Justice Department and
Federal Communications Commission in coming weeks. After that, the FCC will
invite comments from the public and competitors.
Industry comments could shape any conditions regulators impose on the deal. The
government approved Comcast's NBCUniversal acquisition in 2011 with conditions.
Already the top executives at satellite-TV providers DirecTV and Dish Network
Corp. have come out strongly against the deal, announced in February, citing
concerns about the power Comcast will have in the broadband market, where it
would have nearly 40% of U.S. subscribers. And nervousness among a number of
other companies is surfacing.
Timeline: Creating Comcast
On Tuesday, 21st Century Fox president Chase Carey told an investment
conference that he expects competition in broadband to be a major factor in the
merger review. "Are you really headed to every home having simply one broadband
provider and what are the implications of that?" he said at an investor
conference. (21st Century Fox and Wall Street Journal-owner News Corp were part
of the same company until last June.)
At the same event, sponsored by Deutsche Bank, Jeff Bewkes, chief executive of
HBO owner Time Warner Inc., said that while the merger won't have much impact
on the media company in the short run, "in the long run there are some
questions on competition." He said he expects the government to "make sure the
appropriate conditions are in place."
The combined company would have about 30 million pay-TV subscribers, after
divestitures, about 30% of that market.
In an interview last week and a subsequent email exchange, Comcast CEO Brian
Roberts said the company faces robust competition, not just from national
satellite TV operators like DirecTV and Dish, but also phone companies such as
Verizon Communications Inc.and tech companies Google Inc., Netflix Inc.,
Amazon.com Inc. and Apple Inc. The cable industry's regional structure "has
limitations that our national competitors don't have," Mr. Roberts said. The
company has said the merger will help bring more advanced services to cable
subscribers.
Among TV programmers' biggest concerns is that Comcast's scale after acquiring
Time Warner Cable would give it access to so much viewing data from set-top
boxes in subscriber homes that it would have an edge in dealings with
advertisers, media executives say.
The combined Comcast-TWC would control 19 of the top 25 pay-TV markets,
according to market researcher SNL Kagan.
Some media executives question whether Comcast might favor its own
Internet-connected set-top box and electronic guide over others. That could
affect the viability of other streaming-media devices such as Roku Inc.'s
set-top box.
There are some worrying signs already, they say. Comcast doesn't allow its
subscribers to access HBO's HBO Go app on the Roku box or on Sony Corp.'s
PlayStation 3. A Sony spokesman noted "their decision has led to significant
frustration among our mutual customers." Time Warner Cable, by contrast, has
been more aggressive about integrating its TV service with third-party devices
like Roku. TWC is also talking with Apple about partnering on an Apple TV
set-top box that would let the cable company's subscribers watch live TV
channels over the Web.
Comcast also has held discussions with Apple but has placed far more emphasis
on its X1 set-top box. People familiar with the matter say Comcast's hesitation
stems partly from its reluctance to give Apple a direct relationship with its
subscribers. Apple has also been vague about the product, one of the people
said.
Comcast has said a lot of technical work goes into integrating with any new
device and that Comcast is prioritizing based on the devices that are most
popular with users.
Some industry executives played down concerns. Joseph NeCastro, chief financial
officer of Scripps Networks Interactive Inc., said the merger would likely be
good for consumers because "Comcast is a great operator." In the long run, it
isn't clear how an operator with that much market share will act in
negotiations, but "by and large we're not overly concerned about it at the
moment," Mr. NeCastro said, speaking at the Deutsche conference on Tuesday.
Smaller cable companies fear Comcast could compete with them by launching a
broadband-based TV service in areas outside its cable-TV footprint. Comcast has
deals with some media companies that would allow it to carry their TV channels
in an online pay-TV service if those rights were granted to other companies,
people familiar with the matter say. Mr. Roberts said Comcast has no current
plans to launch such a national "over the top" Internet TV service, but he
didn't rule out such a move in the future.
For smaller operators, Comcast's acquisition of Time Warner Cable would also
remove an important ally in their fight against rising programming
costs—particularly "retransmission" fees levied by broadcasters. Those costs
are helping fuel higher cable bills and could ultimately lead consumers to drop
their connections, industry executives have said. Time Warner Cable, unlike
Comcast, has been an advocate of creating cheaper bundles of pay TV packages
for cost-conscious consumers. Time Warner Cable has also lobbied in Washington
to overhaul laws governing the way broadcasters and cable operators negotiate.
Comcast, which owns its own TV networks, has bragged about its ability to get
higher rates from distributors. At an investor conference last week, Comcast
Chief Financial Officer Mike Angelakis touted gains that NBCUniversal has made
in winning bigger retransmission fees.
Satellite and cable executives worry that a merged Comcast-TWC would use its
leverage to negotiate lower fees for itself and that would lead programmers to
charge higher fees to smaller pay-TV distributors.
The merger review "gives us an opportunity to bring attention" to the effects
of Comcast's size on other operators' video businesses, said Steve Weed, chief
executive of WaveDivision Holdings LLC, a small West Coast cable operator.
"It's anticompetitive for Comcast to continue to drive programming costs up on
everyone but itself by using its leverage."
Write to Shalini Ramachandran at shalini.ramachandran@xxxxxxx and Amol Sharma
at amol.sharma@xxxxxxx
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