Earlier this week, cable provider turned conglomerate Comcast announced an agreement to purchase Time Warner Cable for $45.2 billion via stock transaction. Not surprisingly, the agreement immediately sent shockwaves through the business community and led to more than a few consumers angrily shouting, “Really??!!??” in their best Seth Meyers and Amy Poehler voices. After all, how could less competition possibly be a good thing? The truth is it’s not, but in some ways, it’s actually not such a bad thing for consumers.
The first thing you need to know is Time Warner Cable and Comcast actually are not competitors right now, at least not directly, according to The New York Times. There is not a single zip code in the United States in which they overlap. Consequently, consumers aren’t really losing any direct cable options. Instead, all they’re losing is the potential for the cable companies to compete against each other, but since entering a new market is an expensive and time-consuming ordeal, the chances of that happening weren’t exactly high.
The second thing you need to know is even together, these two giants make up less than thirty-percent of the cable provider business in the United States. AT&T, Cox and several others are huge players in the market, and without one more significant purchase down the line, this new multi-headed monster won’t have nearly as much firepower as you would have guessed. Moving forward, Comcast will have an even louder voice at the table, but it won’t be able to drown everyone else out.
The third thing you need to know is this changes the game a little bit in terms of producers negotiating with providers. You know how random providers will go through stages in which they don’t carry certain channels? That’s because each channel negotiates with each provider individually. The contracts run for different lengths of time, and they’re worth different amounts of money. With Comcast now taking up a way higher percentage of the market, it should encourage everyone to be sensible at the negotiating table and not let these disputes carry on. Ideally, it will eventually help to push the entire industry toward set prices every single carrier pays for specific content.
This merger reduces the number of major cable providers by one. It reduces the chance of a potential price war between major companies and dramatically increases the negotiating power Comcast has with content creators. Altogether, however, it’s not nearly as worrisome as you would initially think. It won’t cut any single individual’s options down, and it won’t create a single company that has a monopoly over the industry. It’s the equivalent of McDonald’s buying White Castle, and given Comcast is widely thought of as a more customer-friendly and progressive company than Time Warner, many folks will probably see some unexpected benefits, as well.
Without approval from the federal government, however, there's still the possibility this deal won't go through. We'll keep you updated.
