At a time when the entertainment industry is losing its grip on the masses, thanks to technology and connectivity, Comcast has made the boldest move in recent entertainment history by putting forward a merger deal with its biggest rival, Time Warner Cable. Here’s a look at what this merger means for entertainment media and the US consumer.
Singapore -- (SBWIRE) -- 03/05/2014 -- As movie ticket costs, music album prices, pay TV service charges and every other payment related to the entertainment industry goes up, customers are starting to grasp new opportunities in the digital entertainment space and are, at least figuratively, cutting their cable cords. At such a time, the merger of two cable giants like Comcast and Time Warner Cable comes as a fairly major surprise to many industry experts. The deal might yet not happen, but if it does get through the commerce regulatory bodies, some say the death of traditional TV viewing will only become more imminent.
This potential merger has captured the attention of the entertainment industry as the merger of the two largest cable companies in America. What does it mean for the entertainment industry and the consumers? The $45.2 billion Comcast and Time Warner Cable merger means, once combined, Comcast will control 34% of the US cable market. This will only come to pass if the US Federal Government allows it, and at this stage there are a significant number of roadblocks to getting the deal approved.
When two of the top companies merge in any industry, it automatically causes red flags for anti-trust regulators who are worried about the damage done to consumers when there is a lack of competition in any given market. As it stands only six corporations namely, Comcast, Time Warner Cable, News Corp, Viacom, Disney and CBS control 90% of American media. The idea of merging the top two creates a very clear risk of convergence of power and a virtual monopoly. Of course, the media industry in general has been, and always will be, about exactly that - power.
The US law protects consumers by stopping corporations from creating monopolies in any industry, thus providing a marketplace of healthy competition. This gives us, as consumers, more options and better deals to choose from. When these two cable giants merge, many industry figures argue that might no longer be the case for cable services.
Comcast has been pursuing this merger for a year and is confident it has taken enough steps to qualm regulator concerns. Comcast has even agreed that it will divest up to three million users with the aim of avoiding a market share monopoly. By giving up three million customers, Comcast will have a little less than a third of the cable market share at thirty million subscribers.
Comcast CEO Brian Roberts wants consumers and regulators to know that this merger is both "pro-consumer and pro-competitive."
Another important factor Comcast is relying on is the fact Comcast and Time Warner Cable do not actually compete directly in any specific state or region. They operate in different territories. This means, on the consumer level there won’t be any usurping or changing of services. However, Comcast will still have to show anti-trust regulators that there will still be marketplace competition on a national scale.
Public Knowledge, a consumer rights group, is calling on anti-trust regulators not let this merger pass. A statement from the group says that, it will give Comcast "unprecedented gatekeeper power in several important markets."
In the weeks and months to come the media and free TV industry will watch with interest to see how this saga unfolds, and whether this merger of epic proportions and thus epic consequences, is successfully achieved. It will take at least till the end of the year for regulators and the US justice Department to make their final decisions. For now let’s speculate what a successful merger will mean for us.
What This Merger Could Mean For You
The first thing that comes to consumers’ minds is whether this merger will affect prices? Most activist groups and unbiased market analysts agree that it will result in a price spike for cable services and Pay TV services across the board. It might not happen instantly but it is almost guaranteed the prices will go up in the long run without a healthy rival to keep them in check.
John Bergmayer, a senior staff attorney for Public Knowledge said in a statement, "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," further adding, “"By raising the costs of its rivals and business partners, an enlarged Comcast would raise costs for consumers, who ultimately pay the bills."
In a recent press interview Comcast Executive David Cohen said that “The impact on customer bills is always hard to quantify,” he added “We’re certainly not promising that customer bills are going to go down or even increase less rapidly.” This rather telling answer was in response to a question about customers getting some charges reduced on their monthly payments due to the merger.
So with that word of warning straight from a Comcast executive, the consumer is left to assess what might happen if and when this merger is successful. Some would say it would appear our monthly bills will definitely keep going up, with or without the merger being confirmed.
Apart from the impact on consumers’ wallets, this deal could affect the customer service offered by these cable giants, which many claim is already lacklustre to say the least. In recent years, other than banks, these two cable companies have been cited as the top two most incompetent companies in client service, based on customer surveys.
With a merger as big as this, it is quite possible customer service will suffer further. As with any merger of this scale and consequential combining of huge consumer databases, there’s the potential for more than a few hiccups. And the sufferers of these hiccups are usually the end users of the service. Comcast maintains it will provide more efficient and better service to its users, but it could be said talk is cheap at this stage of the proposed merger.
The most important aspect which may also come to pass, is the impact on the breadth and quality of entertainment subscribers can expect. With Comcast’s huge stake in the entertainment world, it will offer Time Warner Cable customers more Pay TV options and bundles to choose from. But that could mean this new market bohemoth will start controlling a lot of content and distribution.
Tim Hanlon, the founder of the Vertere Group had to say this about the merger, "This isn't about TV anymore -- it's about controlling a fatter, more intelligent pipe for multiple services that emanate from it, including broadband Internet, phone and home security monitoring”.
Comcast wants to directly compete with content streaming companies like Netflix, Hulu, Amazon Go, Apple TV, OutFox.tv, Aereo, and others. These services are gaining millions of subscribers while cable companies such as Comcast are losing out. This deal if it goes through will be a blow to these smaller companies. But should Comcast be allowed to control such a huge chunk of the entertainment industry?
A range of tweets indicated what consumers and industry think about the possibility of this merger as they took to Twitter :
Walter biscardi @walterbiscardi Feb 13
#Comcast deal a blow to @AppleTV and Netflix usat.ly/1ewCDBL via @USATODAY
Keith M. @ksecus . Feb 13
I remember when government gave cable to private sector. Promised competition would lead 2 lower prices more choices. LOL #Comcast
OutfoxTV @OutfoxTV . Feb 13
If #Comcast deal goes thru we’ll be trying harder than ever to bring you even more #freetv channels and original content #outfoxtv
Chumworth @chumworth . Feb 13
#Comcast is buying #TimeWarner for $45 billion. To close the deal, Comcast told TW they’d be there between 8am and 4 pm a week from Friday,
Social media is literally ablaze with consumers calling the merger a foul deal. This is a boardroom deal most believe should not be allowed to proceed if the US wants to protect its fair trade and commerce laws. Comcast has hired the same legal team it used to get the NBC Universal deal approved via the anti-trust regulators last year. Though it might seem far-fetched to many, this deal could easily be formalized before the end of 2014.
At a time when consumers are moving towards “cord-cutting”, all these factors combined will most likely only accelerate the process. Many Pay TV consumers are forced to pay unaffordable bundle prices in the current environment. Most households in the US are already paying higher cable charges than all their other utilities (electricity, heat etc.). With the emergence of groundbreaking free online streaming services like Outfox.tv and innovative over-the-air services like Aereo, this merger could later become a very costly mistake for Comcast, particularly if the merger does not result in increased care for consumers, rather than focusing solely on shareholders.
About Time Warner Cable
Time Warner Cable was spun out of its parent company Time Warner in 2009. Time Warner Cable today operates in 29 US States and after only Comcast it is the second largest US cable company. The company is headquartered in the heart of New York City and boasts approximated 11 million cable subscribers.
Though Time Warner Cable owns a few local sports and news channels it is not affiliated with any of the Time Warner assets such as CNN, HBO, TBS, Warner Bros., The C.W, D.C. Comics and many others that are owned and operated by Time Warner.
A combination of the words “communication” and “broadcast”, Comcast was a small cable company founded in Mississippi with only 15,000 subscribers in 1963. Sixty years later, by revenue Comcast Corporation better known, as Comcast is the largest mass media company. With almost 20 million subscribers across America, making it the largest cable service provider in the US.
Comcast, energized by CEO Brian Roberts, took over NBC Universal broadcast network in March 2013 and owns Universal Film Studio in California. If their proposed merger of Time Warner Cable goes through they will surely become the largest media controllers, providers and distributors across the US.
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