Comcast Makes Big Bid for Broad Reach

by Glenn Hower | Feb. 13, 2014

This morning, Comcast Corporation and Time Warner Cable, Inc. announced a deal wherein Comcast would acquire Time Warner Cable for north of $45 billion. Naturally, a few regulatory hurdles remain, but the potential impact of the purchase is palpable. The acquisition would make Comcast by far the largest pay-TV provider in the United States; according to the National Cable and Telecommunications Association the two companies combine to serve approximately 30 million customers, which would account for approximately one-third of all U.S. pay-TV subscriptions.This merger is particularly interesting when one considers the content implications. Vertical integration is nothing new to the television market in the United States. Despite the spin-off of Time Warner Cable from Time Warner and the decline of vertically integrated entertainment companies over the past 20 years, there may be resurgence in the business that we have not seen since the “Golden Age” of Hollywood. At that time, major studios controlled nearly every aspect of the motion picture industry.

A look at 2014 Olympic coverage shows the possibilities that vertical integration can provide. While NBC Universal provided authenticated coverage to all of its operator customers, Comcast customers with the X1 platform are able to get early access to events, prior to the official TV or online broadcast. Thus, Comcast is able to offer exclusive content to consumers in a way that other operators cannot duplicate. As alternative video outlets continue to gain traction, content owners are seeking greater control over their rights. Increasingly, content companies will seek to build their own direct relationships with consumers in order to maintain audiences outside of the control of pay-TV operators. For NBC Universal and a larger Comcast, the benefits of direct relationships between NBC Universal and consumers can ultimately help both parts of the company.

 
Consumers today have more choices of video providers than ever before, including online options. A move toward a greater level of content exclusivity seems possible as OTT players like Netflix commission exclusive original content. Vertical integration potentially provides an easier path for NBC Universal to get its content in the hands of consumers. Catering to one-third of U.S. pay-TV subscribers presents a massive opportunity to touch an extremely diverse set of people. At the end of the day, the consumer will decide what content he or she wants to watch, and 30 million subscribers is a broad target at which to aim.  The competition in this new digital video market will continue to intensify, and entertainment companies must continue to evolve, redefine themselves, and extend their reach to succeed.


Next: Who Wins in the Comcast-Time Warner Cable Merger
Previous: Perspectives from a Reformed Cord-Cutter: Getting OTT to the TV

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