Will merging Comcast and Time Warner Cable open Pandora's Box?
I was starting to write a column last night about some predictions that former Tele-Communications Inc. chief Leo Hindery had in 1999 about the impact of cable consolidation when news broke about the Comcast-Time Warner Cable deal.
Those statements from Hindery, the architect of a series of cable system acquisitions and swaps in 1997 that we called the "Summer of Love," are as relevant today as ever.
"Disparate agendas are going to change this industry. We have, in consolidating the industry on the distribution side, opened up the opportunities for disparate agendas to rise to the surface. I think it is going to be hard for the industry," Hindery said at the 1999 Western Show convention in Los Angeles. "There are others in the industry who have suggested that to meet their national telecom agenda, they will select noncable strategies in selective markets, while pursuing cable strategies in others. That has to be understood and reconciled. It's going to be hard on the emotions of the industry and the camaraderie of the industry. "The 'Summer of Love' is over. It's clearly over. And that's too bad, perhaps."
In recent years, those disparate agendas have seen programmers strike deals with online video providers such as Netflix, Amazon and Hulu to offer Web surfers subscription video-on-demand (SVOD) content.
The Comcast-TWC merger, which will likely win regulatory approval, could result in more deals between major programmers like Viacom and Walt Disney Co. and online video providers. The programmers, wary of being squeezed by Comcast and the leverage it will gain with 30 million subscribers in negotiations for carriage deals, will form stronger relationships with over-the-top video providers.
The deal could also accelerate the launch of virtual MVPDs (multichannel video programming distributors). Viacom CEO Philippe Dauman has predicted that at least one virtual MVPD will emerge this year. Verizon, which is already one of the largest competitors of Comcast and TWC, will likely be one of the first out of the gate. And DirecTV won't be far behind.
The deal also makes a DirecTV merger with Dish Network inevitable. "There is going to be more consolidation. That's just a function of business," Joseph Clayton, Dish Network's CEO, told us last month. But it's worth noting that Clayton said a merger with DirecTV wouldn't solve all of Dish's problems. He said the company is focused on using its wireless spectrum to compete head-to-head with cable operators.
Longtime cable analyst Craig Moffett said Thursday that he could see a DirecTV-Dish merger resulting from the Comcast-TWC deal, and that Charter Communications could face competition to acquire systems counting 3 million subscribers that Comcast has said it will divest after closing the TWC deal.
"One could argue that this proposal would give DirecTV and Dish a reason to try to merge now before the dust has settled and they could still have a say in how the outcome was shaped," Moffett, who launched MoffettNathanson last year, wrote in a research note.
The deal is clearly a blow to Charter and Liberty Media. Charter stock had dropped nearly 6 percent by our deadline. John Malone's Liberty Media was down 1.2 percent.
We'll look out for more mergers and acquisitions, and for deals between programmers and online video providers. But before networks go over the top of the operators who have been their distribution partners for decades, let's remember Hindery's take on the nascent streaming video business back in 1999.
"If the Pandora's box opens, the demons are multiple. Streaming video is in that box," he said.--Steve