JESSELL AT LARGE

No Reason To Cheer Comcast-TWC Collapse

With Comcast, broadcasters have been dealing with a cable operator that has been more willing than most to meet their demands for retransmission consent fees and a broadcast network (NBC) that has been less aggressive in its reverse comp demands.With the merger now undone, Comcast will be free of conditiions governing its relations with affiliates in 2018 rather than 2024 and Time Warner will be cut loose to resume its confrontational retrans negotiating tactics and its assault on broadcasters' retrans rights.

When Comcast announced its $45.2 billion bid for Time Warner Cable in February 2014, the smart money was that Comcast would slip the deal pass the Justice Department and the FCC with the same aplomb it had its takeover of NBCUniversal in 2011.

Well, the smart money turned out to be not so smart.

Comcast said last Friday that it is was abandoning the merger after it became clear that the regulators weren’t about to approve a deal that would allow it to control nearly one third of all cable subs and nearly three-fifths of all broadband subs.

FCC Chairman Tom Wheeler portrayed the collapse of the merger as a win for consumers. “Today, an online video market is emerging that offers new business models and greater consumer choice. The proposed merger would have posed an unacceptable risk to competition and innovation given the growing importance of high-speed broadband to online video and innovative new services.”

I’m not so sure about all that. Wireless is a broadband alternative to cable just about everywhere in the country. And didn’t the FCC just adopt net neutrality rules aimed at keeping any broadband distributors like Comcast from misbehaving?

Nonetheless, many are cheering the demise of the merger, including cable programmers, consumer groups and, I presume, all those “innovative” online video services that the government seems determined to nurture and protect.

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But broadcasters should not join the celebration. In fact, they may have reasons to regret the collapse of the deal.

Comcast is the broadcast-friendly cable operator.

Among other things, it has been more willing than most to meet broadcasters’ demands for retransmission consent fees, thereby avoiding blackouts and the nasty PR wars that attend them; it has steadfastly refused to join the rest of the cable industry in lobbying to diminish broadcasters’ retrans rights; and NBC, its broadcast network, has been less aggressive in its reverse comp demands.

There are reasons for Comcast’s amiability.

First, Comcast is a broadcaster through it ownership of NBC and its stations, and thus has a greater appreciation for the medium. It reaps retrans fees as well as paying them out.

For the past 15 months, Comcast has had to be on its best behavior. While trying to convince regulators and policymakers that it’s a good citizen, Comcast didn’t need any stations threatening to yank signals over retrans or have NBC affiliates squawking that they are being driven to the brink by excessive reverse comp demands.

Most of all, Comcast is obligated, virtually by law, to treat affiliates well. In 2010, when Comcast was trying to win approval of its takeover of NBCUniversal, the affiliates extracted a slew of promises from Comcast. Those promises became binding conditions to the FCC’s approval in 2011.

The ABC, CBS and Fox affiliates won guarantees that Comcast would act in good faith and not discriminate in favor of its own stations or affiliates in retrans negotiations.

NBC affiliates got commitments that NBC would maintain its network at a competitive level, not bypass them, not move NFL games or other major sporting events to cable and not lobby against retransmission consent in Washington.

Over the past four years, Comcast has held up its side of the agreements and then some.

However, all the provisions expire in 2018. The Comcast-Time Warner merger was a chance for the affiliates to review and update the provisions and to extend them. And they seized the opportunity.

The renegotiated deals would have stayed in effect until 2024, assuming that the merger had closed this year. But no merger means no extension.

No merger may also mean the campaign to gut broadcasters’ retrans rights in Washington will be reenergized. With the exception of the incentive auction and all that goes with it, it’s the greatest challenge broadcasters face in Washington.

Honoring its agreement with the NBC affiliates, Comcast has stayed out of the battle over retrans. And for the most part, it has kept the National Cable & Telecommunications Association out of the fray as well.

By contrast, Time Warner had been a leader in the war of retrans. Along with Dish, it has been a big funder of the American Television Alliance, the cable/satellite PR coalition that has taken dead aim at retrans.

I don’t think I need to tell any broadcaster that Time Warner has also been one of the most combative retrans negotiators. It doesn’t get any nastier than the battle it fought (and ultimately lost) with CBS in the fall of 2013.

With the Comcast merger undone, Time Warner is free to resume its hard-line retrans negotiating and amp up its anti-retrans efforts.

Speculation on Friday had Charter Communications stepping in to gobble up Time Warner. A merger between the two would yield a cable behemoth second only to Comcast, with 15.6 million video subs and 16.4 million broadband subs.

Broadcasters should not expect much quarter from such a company either at the negotiating table or in Washington. Charter is controlled by John Malone, whom longtime broadcasters will remember as the executive who led the cable industry’s stubborn refusal to pay retrans fees after broadcasters won their retrans rights from Congress in 1992.

Like Time Warner, Charter is a charter member of the ATVA.

When I said that “broadcasters” should not be cheering the merger collapse, I didn’t mean to include ABC, CBS and Fox. They are owned by big multimedia companies with programming interests that go way beyond broadcasting. Disney-ABC and 21th Century Fox, in particular, have long rosters of cable networks. A smaller Comcast is easier for them to deal with.

But the pure-play broadcasters, those without cable networks or OTT bundles to pitch, should hope that Comcast’s appetite for assets that trigger antitrust review is unsated. Under the close government scrutiny of an merger approval process, Comcast has proved to be an amiable and obliging business partner.

Harry A. Jessell is editor of TVNewsCheck. He can be contacted at 973-701-1067 or [email protected]. You can read earlier columns here.


Comments (26)

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Brian Bussey says:

April 27, 2015 at 9:24 am

Comcast IS a broadcastor. With retrans, they just move money from one side of the legder to the other. Thousands of people are not going to be laid off throught consolidation of basck office support. That is a real win.

    Wagner Pereira says:

    April 27, 2015 at 1:04 pm

    When Charter takes them over, the same thing will happen and Customer service will be even worse for over 10 Million Customers. Just like the no win Democratic choices in 2008 of Obama and Hillary, Comcast would have been the lesser of two evils than Charter will end up being.

Marcelo Gama says:

April 27, 2015 at 9:36 am

I’ve heard the flip side of your point; that a Comcast-TMC merger would mean a much more aggressive and larger cable operator willing to push harder through retrans negotiations.

Gregg Palermo says:

April 27, 2015 at 9:49 am

Seeing something bad happen to Comcast is an understandable joy for anyone who have dealt much with Comcast as a customer. There’s a reason Bob Garfield started a “comcastmustdie” website 8 years ago: It resonated with millions of people!

Julien Devereux says:

April 27, 2015 at 9:50 am

The only losers here are the stockholders. Comcast may have been “friendly” to networks, but they were anything but to their consumers.

    Wagner Pereira says:

    April 27, 2015 at 1:07 pm

    No the loser will be the Customers, as Charter is much worse in that Department. The stockholders will get paid when Charter takes them out.

kendra campbell says:

April 27, 2015 at 10:25 am

Harry – You are being shortsighted in constantly cheerleading ever increasing retrans fees. Subscribers have reached the tipping point and are fed up with their cable bills. Significant annual increases coupled with the insane commercial glut is a big problem. Dropping the TV component, and returning to OTA plus Netflix, Hulu, Roku, Amazon, etc. is the preferable future for many folks.

    Jeff Groves says:

    April 27, 2015 at 11:53 am

    Seconded! Time and again I’m finding people who have “cut the cord”. Pay-TV has reached a “Price Plateau” and they simply refuse to pay for a subscription. Other sources, which are CHEAPER than a pay-TV subscription costs. The value isn’t there anymore for Pay-TV. Too much money and too many commercials. People have better things to do than pay for stale programming INFESTED with 20-26 minutes of commercials.

    Wagner Pereira says:

    April 27, 2015 at 1:09 pm

    You mean like the stale programming you have on 1000s of VHS tape?

    Jeff Groves says:

    April 28, 2015 at 2:31 pm

    Hey Troll, I mentioned NOTHING about my collection. Even if I did, most of my collection consists of programming I’ve NEVER seen before. Be it a 1925 “Silent” movie or an episode for Law & Order from last year (You may call me “The World’s Looooooooooooooooooooooooooogest Time-Shifter because I am ready and willing to wait until a show come out on DVD so I can watch it WITHOUT having to cope with the insane amounts of advertising INFESTING today’s programming), it’s just as new for me as anything making it’s premier today.

Grace PARK says:

April 27, 2015 at 11:00 am

Harry, I appreciate the insight provided here, but this “defeat” had little to do with policy makers or the AG’s office. Welcome to the revolution. http://billypenn.com/2015/04/24/ex-comcast-exec-frustrated-customers-killed-the-time-warner-cable-merger-opinion/%E2%80%9D

    Wagner Pereira says:

    April 27, 2015 at 1:14 pm

    Incorrect. The Comcast – TWC merger could have gone through if Comcast would dispose or either (A) NBC Universal or (B) X1 Platform. NBC Universal was a non-starter. As for the X1 Platform they have spent major money to develop and it will make them money as other Companies like Cox use the system, they decided after 14 months of stops and starts to walk away. If they had decided to sell of X1, this would have gone through, but obviously that was more important than TWC to them.

Ellen Samrock says:

April 27, 2015 at 12:10 pm

I have to question the idea that Comcast and TWC are broadcaster-friendly. Both parties have done their best to keep LPTV stations off of their cable lineups. In markets where these cable companies dominate the number of LPTV stations that have carriage verses stations that don’t are low to nonexistent. Sure, Charter isn’t much better. But there is no reason why any of these companies should reap the benefits of a mega-merger as long as they engage in the noncompetitive practice of freezing out low power broadcasters.

Brad Dann says:

April 27, 2015 at 1:06 pm

Harry’s [oint, which everyone seems to be missing, is that Gov’t scrutiny and concessions make (made) Comcast more amenable than other MVPD on issues important to Broadcasters. Those concessions sunset in the next couple years and now that the merger is off, there’s little incentive to play nicely, which means headaches for Broadcasters (especially those dealing with TWC).

    John Bagwell says:

    April 27, 2015 at 2:23 pm

    Finally….somebody gets it.

    Wagner Pereira says:

    April 27, 2015 at 5:44 pm

    Yep….but that is because most posters are not Broadcasters.

    Gene Johnson says:

    April 27, 2015 at 7:56 pm

    Most Americans and consumers are not broadcasters either. Regarding the point that conditions on the Comcast/NBC Univ. deal helped make Comcast more amenable to broadcasters, and which sunset in the next couple of years, any new conditions that might have resulted from a Comcast/TWC merger also might have included a sunset provision, and once those conditions ended, it could be “Katie bar the door” to whatever anticompetitive conduct might ensue. Temporary conditions are not necessarily consistent with what is in the public interest for the longer term. Comcast’s role as both a broadcaster and MVPD, with its broadcaster role a significant one in terms of programming and station ownership, is just as likely the cause of Comcast’s more friendly, or less confrontational approach to broadcast issues. To the extent that’s the case, the sunset of the conditions on the NBC Universal merger is not likely to change things much. However, the situation would be far different with respect to broadband service and the expiration of any applicable conditions intended to “protect” competition had the merger proceeded may very well not have provided the necessary protections to the best interests of consumers and the public. Besides, we don’t need a company as large as a Comcast/TWC entity would have been, able to wield as much power as it would have created.

Keith ONeal says:

April 27, 2015 at 9:26 pm

Well done, DOJ. Next step is to reject the proposed Charter takeover of Bright House.

    Wagner Pereira says:

    April 28, 2015 at 1:18 pm

    Your only hope is that Charter has to drop Brighthouse takeover as a condition of TWC takeover. Otherwise, welcome to Charter Hell.

    Keith ONeal says:

    April 28, 2015 at 9:29 pm

    I’d rather cut the cord and go OTA than be a part of Charter Hell, thank you very much!

    Jeff Groves says:

    April 29, 2015 at 7:38 am

    High (and getting higher, thanks to “retransmission”) prices, Insane amounts of advertising, Poor Customer Service, and the oligopoly known as Pay-TV can’t figure out why people are “cutting the cord”. Let them (Pay-TV Providers) rot in their own greed, all the way to beautiful lake gehenna!

    Wagner Pereira says:

    April 29, 2015 at 2:02 pm

    Well, let’s look at that statement. The average re-transmission fee for ABC/CBS/FOX/NBC is $1 now and will grow to $2 by the end of this decade. So the average bill will go up around $1 a year due to re-transmission fees. Meanwhile ESPN’s main channel will go up more than that in the next 2 years (from $6.05 now to $8.50). So ESPN alone is going up more than ALL the Big 4 combined in retransmission fees. Also at $6.05 and $8.50 in 2 years, ESPN cost more than all the Big 4 combined. Sort of hard to blame a $1 increase based on retransmission a $75 – $150 bill as being the reason cable bills are out of Control.

Jeff Groves says:

April 29, 2015 at 8:08 pm

That’s just for ONE Station. Now let’s look at a major metropolitan center, for example Detroit, Michigan. There are seven OTA stations there (eight if you include CBET from across the river) If each station demands a “Retransmission” fee that’s an ADDITIONAL seven or eight dollars per subscriber. Add “Administration Fees” and other “Expenses and the amount is certainly more than that. Oyh yes, Detroit has Four Major League Teams (That’s the Detroit Tigers, The Detroit Lions, The Detroit Pistons and the Detroit Red Wings for those of you in Rio Linda!), and lets say each secures a multi-million dollar contract to televise their games on Pay-TV. SOMEBODY has to pay that money, and as usual costs are passed on to (who else?) the subscribers and if they aren’t being passed on as higher fees they are instead passed on with EVEN MORE advertising on a system that’s already overloaded. I hate to say this but Pay-TV is pricing itself off the market. People are refusing to carry these costs, either as higher fees or increased advertising, so they are giving up subscribing and are switching over to other sources to satisfy their entertainment and informational needs. Sooner or later the entire system will COLLAPSE, you can’t keep rising costs and lowering quality.

    Wagner Pereira says:

    April 30, 2015 at 3:22 am

    Once again, you are incorrect. Just because a station is OTA does not mean it is getting retransmission dollars. And Independents are not getting anywhere near what the ABC/CBS/FOX/NBC affiliates are getting. But regardless, lets go with unrealistic figures you claim. If ALL the OTA’s stations were taken off the MVPDs, your bill would NOT be reduced more than $5 – and that is for the stations that 35% of the MVPD viewing is tuned to. While I agree that cable bills are at the breaking point, it is NOT from retransmission fees to local stations.

    Keith ONeal says:

    April 30, 2015 at 8:42 pm

    Two points for both Regulus and Insider to consider: (1) Not all Broadcast stations on Cable or Satellite Providers have retransmission consent deals. Some are there due to the ‘must carry’ rule, and the providers don’t pay any money to those stations. (2) I noticed on my latest Bright House bill (which was an increase) a $2 fee called “Broadcast TV Fee.” Are all the other Providers doing this too?

    Wagner Pereira says:

    April 30, 2015 at 10:59 pm

    I do not need to consider point #1 as I pointed it out in the second line of my post – but God forbid you actually read it before you just had to let us know the consciousness of your mind.


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