The CEO of Discovery Communications said the consolidation won't hurt carriage fees for its channels, which includes Animal Planet, shown. Animal Planet
Backers of consolidation in the U.S. cable industry have had a consistent refrain: bulking up will help pay-TV operators push back against rising costs of programming supplied by TV networks, from sports to cable dramas to broadcast content.
But in the case of Comcast Corp.'s CMCSA -4.12% proposed blockbuster merger withTime Warner Cable Inc., TWC +7.02% it isn't so clear cut. Some analysts say the combined entity, which would control about 30% of the U.S. pay-TV market, would have more clout to demand lower fees for carrying TV channels. But some media industry executives and observers say there won't be a significant impact, in part because of regulatory restrictions Comcast faces stemming from its 2011 acquisition of NBCUniversal.
Comcast's proposed $45 billion deal to buy Time Warner Cable will draw supporters and opponents, covering a range of issues, but it sure to draw the sharp attention of regulators in Washington. Shalini Ramachandran joins MoneyBeat. Photo: AP.
Discovery Communications Inc. DISCA -4.30% Chief Executive David Zaslav said on an earnings conference call on Thursday morning that cable consolidation—including the proposed Comcast-TWC merger—won't hurt the company's ability to wring pay-TV carriage fees for its channels, which include Discovery, TLC and Animal Planet. "I think our scale in the U.S. is very strong—our brands have never been stronger," he said. "We like our position."
Cable Megadeal
- Deal to Test Comcast CEO's Washington Clout
- How Brian Roberts Bested Mentor John Malone
- Cable Company Got Its Price, With Tradeoffs
- TWC Long Viewed Comcast as Preferred Partner
- Upshot: Out of Chaos, More Chaos
- Cable Deal to Spark Regulatory Debate
- Two Decades of Cable-TV Consolidation
- How the Comcast Deal Might Affect Consumers
- Charter Likely to Pursue Other Acquisitions
- Heard on the Street: Comcast's No. 1 Issue With Time Warner Cable
- Deal Brings Back Memories for Merger Law Junkies
- Analysts Watch Cox After Deal
- DOJ Antitrust Chief Uncertain for Review
- Wall Street Skeptical
- Goldman Misses Out
- Comcast Wouldn't Have Unlimited Clout on Program Costs
- Among Banks, It's Barclays 1, Goldman 0
- Big Winners: Bondholders
- Vote: Should Regulators Approve the Deal?
- Comcast Eyes Netflix Territory
- Conference Call | What FCC Might Think
- Digits: A Look by the Numbers
- Tech Firms Push for Greater Wi-Fi Access
Other media executives have echoed those sentiments about the implications of cable consolidation. "We honestly don't see any material consequences to our business" from a big cable merger, 21st Century FoxInc. FOXA -1.01% Chief Operating OfficerChase Carey said last week while discussing earnings. "In fact, there may be some positive ones," he said, noting there could be increased technological innovation. Mr. Carey was speaking before news of Comcast's deal.
A spokesman said Thursday the company had no further comment.
(21st Century Fox and News Corp, owner of The Wall Street Journal, were until late June part of the same company.)
Some TV networks could face a decline in the carriage fees they get in the short term, analysts say, as a result of the fact that Time Warner Cable, as the smaller operator, is believed to generally pay higher TV-carriage fees than Comcast. Depending on how individual programming contracts are structured, Comcast's lower fees could be applied for all of the combined entity's subscribers.
Comcast said the proposed deal would result in $1.5 billion in synergies, but so far hasn't talked up programming costs as an area of major savings. Media executives say the real negotiations would come when they renegotiate long-term carriage renewals for their channels. Typically, TV channel carriage deals last for several years.
One hurdle for Comcast comes from its NBCUniversal acquisition, which added an array of TV networks and a studio to its cable distribution business. In approving the deal, the Federal Communications Commission imposed several conditions that will be in place until 2018, including one that says Comcast can't "discriminate in video programming distribution." That effectively makes it difficult for Comcast to use its size as leverage over other TV networks, some analysts said.
Todd Juenger, an analyst at Bernstein Research, said Comcast would invite legal problems if it tries to pull a channel from its lineup amid tense negotiations with a programmer. "What can they really do?" Mr. Juenger said. If they drop a channel, "the networks will take them to court."
Still, some analysts predicted there could eventually be significant ramifications for programmers. Craig Moffett, an analyst at MoffettNathanson, said in a research note Thursday that a Comcast-TWC deal could "lower the rate of programming cost growth" for the combined company "because of its sheer size." He said that shift could become apparent in coming negotiations with broadcasters like CBS, Fox and ABC. "Leverage would swing decidedly from pro-broadcaster to pro distributor," he said.
Mr. Moffett said TV content owners will likely "complain vehemently" about the deal in Washington. Mr. Moffett and other analysts said the deal could spark entertainment companies to pursue mergers of their own to gain clout.
Some TV networks, especially sports channels like Walt Disney Co. DIS -0.01% 's ESPN and major broadcast networks, have proven to have significant leverage over distributors because of the popularity of their content and the notion that consumers who pay for cable TV service expect to get it.
CBS was widely viewed as the winner of standoff with Time Warner Cable last summer that led to a month-long blackout of the channel for some of the cable provider's subscribers. CBS got higher carriage fees in the end. CBS said Wednesday it expects to quadruple annual carriage fees for its TV stations to $2 billion by 2020. The company says it stands by that forecast, regardless of potential changes in the marketplace, including consolidation.
No comments:
Post a Comment