Comcast's failed TWC merger may blow up in its face… again | Business News

Comcast’s failed TWC merger may blow up in its face… again

30 May 2015 | Author: | No comments yet »

Cable merger is nothing to sweat in Dallas viewing area.

The normally rather good David Cay Johnston has a rather puzzling piece about the Charter, Time Warner possible deal going on. Just two years ago, the man who made a fortune building Tele-Communications into a US broadcasting titan was spending much of his time trying to repeat the trick in Europe through London-based Liberty Global.Washington: Time Warner Cable CEO Robert Marcus could get at least $85 million (Dh312 million) if he’s terminated within two years of Charter Communications Inc’s acquisition of his company. It’s puzzling because he’s right that monopolies are not something that we desire to have in our economy but when we talk about monopolies we have to be very careful indeed over what we’re identifying as a monopoly.

Marcus’ compensation package includes $4.5 million in base salary, $15 million in continued bonus payments and stock awards valued at $57.3 million as of December 31, 2014, according to the New York-based company’s May 18 proxy filing. Major cable TV systems again ranked among the worst in overall customer satisfaction for TV service in the latest telcom survey released today from Consumer Reports National Research Center.

Losing out to Comcast was considered a big blow to Malone after he tiptoed back into the US cable waters in 2013 by becoming the biggest shareholder in Charter. Ratings for the value provided in the TV and Internet components were especially awful: 38 out of the 39 Internet services, and 20 out of the 24 TV providers, received the lowest scores possible. Verizon FiOS and satellite TV companies DirecTV and Dish scored higher in customer satisfaction among TV service providers in categories such as picture quality, channel selection, reliability and ease of use.

Today’s bid at $195.71 a share, 14 per cent more than Time Warner Cable’s May 22 close, would catapult Charter from the fourth-largest cable company to the No. 2 slot behind Comcast. All this pressures the industry to consolidate, cut costs and boost investment in broadband service, a segment in which cable operators still enjoy competitive advantages. No surprise, CR also uncovered “behavioral shifts” in the way consumers are accessing TV. 19 percent of those 45 and younger and 31 percent of survey participants ages 26 to 35 now use a paid video streaming service as their main viewing source. 16 percent of those in the 18-25 range cited free online video as their primary connection for content.

Netflix is far and away the favorite paid service, cited by 81 percent of subscribers, trailed by Amazon Prime (46 percent) and Hulu Plus (11 percent.) And we can throw in Brangelina (Brad Pitt and Angelina Jolie) and Kimye (Kim Kardashian and Kanye West), not to mention the political granddaddy of them all, Billary (need I break this one out)?

The proposed Charter-Time Warner Cable merger might well spawn a furious parlor game of its own inside of the media world, even more than the late Comcast-Time Warner Cable proposed pairing. That initial deal always seemed much more about the specific history and future direction of Comcast, and that company’s rare mix of content and pipeline, rather than signaling some more seismic shift in overall media industry size dynamics. Sewage pipes in an area for example: there’s really no point at all in insisting that there should be two such sets of pipes so that we can have market competition. The business model of pay TV-Internet providers is one in which new customers are drawn in with low introductory rates, which escalate higher and higher the longer you’re a subscriber. But looking at a potential post-Charter-TWC world, the potential dance partners seem to be all around us, among both media platforms (including multi-system cable operators) and content providers.

Together, their U-verse and Fios networks have over a third of the pay-TV homes in D-FW, more than double the share in the rest of the nation. “If I had one of those, I’d be really happy,” said Tony Lenoir, media analyst for SNL Kagan, the research firm that provided data on local pay TV. These customer service agents might otherwise be providing, you know, actual customer service, but instead they focus on negotiating with subscribers who call to complain about rising monthly bills. After all, instead of tweaking the structure to eliminate complaints about pricing, the system all but encourages subscribers to complain, haggle, and threaten to drop the service in order to be treated fairly. One routinely complains and, amid lengthy, frustrating phone calls, is rewarded with monthly rates that are lower than they otherwise would have been. The only one I’m really nervous about is a group of National Cable Telecommunications Cooperative (NCTC) small cable operator members banding together.

It has minimum Internet speeds of 60 megabits per second and is less expensive than comparable Time Warner tiers, he told analysts in a call last week. “For consumers, this transaction will mean better products at better prices,” Rutledge said, adding that cost savings from the merger would help fund some improvements. It’s no surprise, then, that both of these categories of subscribers would give their providers extremely low satisfaction ratings and say that they are poor values. There are several reasons why a wave of media mergers and acquisitions are now in the offing (beyond the need for more banking industry revenues to offset the string of mortgage crisis-related fines): We’re not as concentrated as you think – Conventional wisdom would suggest that the U.S. media market is heavily concentrated, with media giants like Viacom, Disney, FOX, and Time Warner, and platform heavyweights Comcast and DirecTV and the mobile oligarchy of Verizon and AT&T. Because cable companies have regional monopolies, they don’t have much financial incentive to make things easier for customers, said John Bergmayer, senior staff attorney at Public Knowledge, a consumer advocacy group in Washington. That may be true for broadband, but TV competition is surging, prompting cord shavers and cord cutters to reduce cable bills or drop cable altogether.

In research for a forthcoming book on media concentration, Professor Eli Noam, Head of Columbia Business School’s Institute on Tele-Information, ranks the U.S. at the bottom of a list of 30 industrialized countries in media concentration, including platforms, content and cross-media. Audience fragmentation is accelerating – We are decades into the explosion of viewer choices in television as we moved from three (then four) broadcast networks to hundreds of cable networks, and years into the proliferation of digital video options, from video on demand to YouTube to an increasingly diverse array of over-the-top video providers from Netflix to Amazon Prime to DISH Network’s Sling TV to HBO Now. At some point, unless you control more media properties (or cable or satellite subscribers, in the case of local cable ad sales), you can’t deliver the scale that major national advertisers like P&G and Wal-Mart require.

One good concentration wave deserves (or least drives) another – More deals in the cable sector, which among other things enhances the relative bargaining power of the platform owner vis-à-vis the content providers, will not only encourage more platform consolidation but likely encourage it on the content side as well. As Les Moonves said just yesterday, “the age of the 200 channel universe is slowly dying,” which of course is a lot easier to say from CBS’s place on the channel hierarchy.

Far more important, in fact the only level that is important for our public policy reasons, is that the monopoly largely exists at the local level: Broadband policy discussions usually revolve around the U.S. government’s Federal Communications Commission (FCC ), yet it’s really our local governments and public utilities that impose the most significant barriers to entry. Beyond the celebrity name game, here are some of the names you may be accustomed to seeing on the rumor mill and/or deal front in the not-too-distant future: Cable operators: Cablevision, RCN, MediaCom, Suddenlink, Midcontent Cable, Wide Open West, Cable One, Armstrong, Harron, and a host of small NCTC members. Although the cable and telephone companies spend huge sums of money on advertising trying to lure each others customers, they rarely compete on price.

And to some extent (not entirely, high density areas will support more than one physical network, but the average US suburban area probably won’t) this is because service in a local area is a natural monopoly. The only exceptions to this policy in the whole of the 32-nation Organization for Economic Co-operation and Development are the U.S., Mexico and the Slovak Republic, although the Slovaks have recently begun to open up their lines.

To have competition we want the people in Denver and the people in Detroit to have companies competing for their custom actually in Denver and Detroit. Competition only works if consumers actually have a choice: so choice in each area is what is needed, not a worry about who owns what percentage of the local monopolies.

My latest book is “The No Breakfast Fallacy, why the Club of Rome was wrong about us running out of resources.” Amazon and $6.99 and relevant prices in other currencies.

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