Comcast has announced that it intends to acquire Time Warner Cable for $45 billion. We really should not be surprised by this deal. As industries mature and growth declines (or evaporates), firms look to consolidation as a means of cutting costs and enhancing the bottom line. With cord-cutting a potentially growing phenomenon, the cable companies have to be wondering how they will grow profits moving forward. Finding cost savings through consolidation may be a reasonable strategy. Beyond that, the news raises several interesting questions for the key players in the media and entertainment business.
1. Will federal authorities intervene to stop the merger on antitrust grounds?
2. Will Comcast agree to expand its net neutrality agreement to cover TWC subscribers as well?
3. Will cable television networks find themselves in a disadvantageous position as they try to negotiate with Comcast-TWC? How much will the enhanced bargaining power of Comcast-TWC affect profit margins for the major entertainment content providers?
4. Perhaps most interestingly, will this hasten or dampen efforts to crack the dominant position that cable has in distributing content? Will firms such as HBO become more reluctant to strike new deals to distribute content, or will they become more emboldened to find new distribution avenues given the increased clout of Comcast-TWC? In other words, is HBO now going to be more willing to sell HBO Go subscriptions directly to consumers? Similarly, will ESPN become more or less willing to consider selling Watch ESPN subscriptions to consumers directly? What about Netflix? What are the implications for that firm, as the cable players are clearly concerned about cord-cutters that rely on Netflix for a large portion of their entertainment viewing?