A WGAW research analyst troubleshoots the proposed Comcast-Time Warner merger.
By Marvin Vargas, WGAW Research Analyst
(March 7, 2014)
If you thought your cable TV or Internet service couldn’t get any worse, think again. Last month, cable behemoth Comcast agreed to purchase Time Warner Cable in a $45 billion deal. The results of this massive merger would mean even less competition in the TV and Internet markets and possibly higher prices and worse service for subscribers. It would also spell trouble for content creators who would face an even bigger gatekeeper on both of these key platforms.
Contrary to the cable companies’ spin, the multichannel video programming distribution (MVPD) market, which includes cable, satellite TV, AT&T’s U-verse and Verizon’s FiOS, is concentrated in the hands of a few companies and lacks real competition. The top four TV distributors alone control 67% of the market by subscribers, revealing the MVPD market to be an oligopoly in which the companies use their market power to raise prices on consumers and cut costs for programming networks, sometimes pulling networks from the air.
In almost all markets, the best consumers can hope for is the choice between a cable provider and the two satellite providers. However, satellite service can be hard to receive in areas with severe weather or an obstructed view of satellites in the southern sky. As a result, the FCC reports that there is little price competition in areas where only satellite competes with the local cable monopoly and 55% of subscribers continue to get their cable TV through wireline companies like Comcast and Time Warner Cable. If these two were to merge, the combined company would control 30% of the MVPD market.
Writers, who have experienced the detrimental effects of consolidation between studios and networks over the past two decades, understand why this consolidation is bad. It will give these distributors, Comcast in particular, more power over programming. With a larger market share the company has more power to cut costs when negotiating retransmission and affiliate agreements with broadcast and cable networks. These are incredibly important revenue sources that help fund the original programming Guild members create. If Comcast represents one-third of the television audience and can threaten to blackout a network unless it agrees to cut costs, the effects could be disastrous to content and its creators. Meanwhile, on the consumer side these companies can use their power to raise prices. They know consumers have few viable alternatives.
A Comcast-Time Warner Cable merger would be just as bad for Internet users. Comcast recently reintroduced data caps on its broadband service in some cities while charging for Internet use beyond a monthly 300 gigabyte limit. Those caps will probably also be extended to Time Warner Cable customers who now have unlimited data. As the use of video streaming grows, more broadband subscribers will find that they can’t watch as much online video as they might like to without being hit with extra fees.
Furthermore, Comcast has a strong incentive to limit independent online video because it is both a distributor and owner of video content. In fact, the company has already done so. In response to the popularity of online video sites like Netflix, Comcast developed its own service called Xfinity Streampix. However, unlike every other video site, Streampix does not count against Comcast’s data caps when watched through an Xbox. This discriminatory treatment is an example of how Comcast can use its power to favor its own content over that of competitors. This is particularly bad news for writers, who are beginning to benefit from the additional creative and economic opportunities of new online competitors like Amazon and Netflix.
The proposed Comcast-TW Cable merger still requires both FCC and Department of Justice review. During this window of time, the WGAW will be strongly urging both government agencies to deny the acquisition and working hard to make them understand how seriously content creators will be harmed by further consolidation.