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Comcast-TWC: It's personal

Thu, 02/13/2014 - 1:44pm
Brian Santo

This was personal. It was always personal. From the very beginning, the takeover bid for Time Warner Cable was a vanity project for John Malone. And Comcast’s bid for TWC sent to Malone a very personal message, unprintable in a family paper.

The big question now is whether the FCC will approve the deal. There are serious ramifications, but from a personal standpoint, it doesn’t matter whether it’s approved or not. If yes, then Malone gets skunked out of his deal. If no, then Malone will have to either over-extend himself to match the $159/share bid, or walk away. Either way, Malone gets spanked.

Consolidation among MSOs might – might – be inevitable. Eventually. Malone could have made a play for Wow, or Suddenlink, or Cablevision, or Mediacom, but any deal that doesn’t make John Malone No. 2 at worst is too rinky-dink.

The benefits of combining Charter and TWC were theoretical at best, but with Comcast unavailable, TWC was the only choice Malone would make.

Malone is a tremendously astute executive, who knows full well that Wall Street loves a deal. Furthermore, TWC had been turning in some disappointing quarterly results, and Wall Streeters fervently despise disappointment. All that combined with the retirement of Glenn Britt, and TWC looked like a pretty good opportunity.

With the backing of Wall Street, Malone was thinking he could get away with playing hardball with regard to price on a deal that had no firm business rationale.

For whatever reason, it didn’t work. Bad luck? Bad timing? TWC recalcitrance? Investor greed? Personal animus? A little of all of those things?

It didn’t matter, really. Malone had to find someone that could help him sweeten his $132 bid. But no other MSO wanted this deal, and only Comcast could afford it without thinking about it. Malone had to go to Comcast.

That sound you hear? That’s coming from Philly, and it’s chortling.

So does the Comcast-TWC deal get approved?

The most common response thus far is that a combined Comcast and Time Warner Cable would have about 33 million video subscribers, as if that were anti-competitive on the face of it.

Here’s the thing that everybody who didn’t grow up with the cable industry gets wrong: there is no competition between large MSOs. None. Zero. There is barely any monopoly issue when it comes to MSO consolidation.

That hasn’t stopped Federal agencies (let’s not forget that federal agencies other than the FCC have some jurisdiction here too) from citing anti-monopoly concerns in the past, but in this case, I think FCC Chair Tom Wheeler knows better and isn’t going to entertain that argument unless he’s forced to by other elements of the government.

If there’s a competitive problem, it’s tied in to Comcast’s ownership of NBC Universal. NBCU wants to crank up its retransmission consent fees significantly. Comcast alone can agree to any fee and that’s it, that’s the market rate. Comcast plus TWC? Doesn’t maket much of a difference from a market-rate standpoint.

The thing is, though, that TWC is the single MSO with any market power that has been trying to draw the line on escalating retrans fees. Take them out of the equation, and it’s a big win for broadcasters.

If there’s an objection to a Comcast-TWC merger, that’s the one that will fly.

Personally? I think that ship has already sailed, and it’s too fine a point to put in a headline, so consumer groups are not going to protest on this basis. I’m guessing this merger gets approved.

And if it is, after that, the only issue is whether the Supreme Court rules for or against Aereo.

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