Local stations ‘have reason to sweat’ over Comcast-Time Warner deal

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Comcast announced Tuesday it intends to purchase Time Warner Cable for about $45 billion.

Such a merger “may have little impact on consumers,” David Gelles writes in The New York Times. The two companies “do not compete directly in any markets,” and Comcast “is expected say it is willing to divest three million of Time Warner Cable’s roughly 11 million pay television subscribers,” Gelles writes. The deal is “pro-consumer, procompetitive and strongly in the public interest,” Comcast CEO Brian Roberts said in a conference call.

Increasingly in the TV business, size matters. “The bigger the cable company, the more leverage it has with local station groups when it comes time for retransmission talks,” Poynter’s Al Tompkins wrote in an email. “And retransmission is a new key additive to the financial health of all stations.” A bigger Comcast would have more muscle when it comes to negotiating with Disney, Tompkins said.

But local stations “have reason to sweat,” Tompkins wrote. “Cable retransmission fees have become an increasing important revenue stream for TV station owners. By some estimates, the fees will double from just 2012 to 2015.” Local owners who have to negotiate with a company that “controls almost a third of all cable connections” will “lose a lot of leverage,” Tompkins said.

Tompkins pointed to a chart from Pew’s 2013 State of the News Media report that showed the rise of retransmission fees since 2007:

But when the local owners have to negotiate with a company that controls almost a third of all cable connections, the locals lose a lot of leverage.

Comcast has been on a growth run recently. In 2013, it bought NBC Universal, owner of NBC, MSNBC, CNBC, Telemundo and The Weather Channel. Comcast owns 26 local TV stations in major US markets.  It also owns 14 sports channels including The Golf Channel and a number of cable channels including Oxygen Media, Syfy, USA Network and  it owns Universal Pictures. Like Disney, it also owns a theme park group, Universal Parks and Resorts.  Take a look at Comcast’s surprisingly extensive holdings.

Time Warner Cable runs local 24-hour news channels in New York, North Carolina and Texas.

Bigger content providers may not be as worried: “At the end of the day, if you have the right content you’re always going to have the power,” CBS chairman and CEO Les Moonves told CNBC Thursday.

Another advantage for Comcast, Ken Auletta writes: “The deal allows Comcast to offer the most advanced video-on-demand service, giving its customers an array of program choices, while denying them the ability to skip commercials,” a strategy with which anyone who’s tried to watch the Winter Games on NBC’s Live Extra app is very familiar. It won’t work, Auletta warns:

The problem is that making consumers watch commercials—or charging them a monthly fee to avoid ads—is an exercise of power that is doomed to fail. A generation has grown accustomed to watching ad-free Netflix and HBO, and to recording programs on cable boxes. Already, two-thirds of those who use TiVo to record shows skip the ads.

The deal would be bad for Internet customers, Michael Hiltzik writes in the Los Angeles Times, saying “There’s no way this combination can conceivably be in the public interest.”

As the leading provider of Internet services to American homes, Comcast has already shown that it’s not above using its effective near-monopoly on Internet connectivity in its service area to stifle competitors. The FCC slapped its wrist after it was caught engaging in this illicit behavior in 2007, but then inexplicably waved through Comcast’s acquisition of NBCUniversal in 2011.

The acquisition of Time Warner Cable will simply expand the geographical area subject to its ruthless competitive practices. (Comcast is committed to adhering to standards of net neutrality, which forbid its discriminating among Web services in carrying them to subscribers’ homes, until January 2018. That was a condition of the NBCUniversal deal, but after that date the shackles are off.)

And of course, there’s this:

Time Warner merging with Comcast is like Justin Bieber merging with Nickleback and that’s the only thing you can listen to.

— Jamie Kilstein (@jamiekilstein) February 13, 2014