To understand just how problematic the tie-up is, it’s important to look at both why it’s happening and, more importantly, what it will mean for you.
Why Is This Happening?
The short answer: money! But that’s the short answer for most things. Let’s look at a slightly longer answer.
Since cable companies are largely regional operators, it’s sometimes hard to get perspective on just how big they are relative to one another. Comcast is gigantic; it leads the U.S. with nearly 22 million cable subscribers and over 20 million broadband subscribers. Time Warner Cable is the second-biggest cable co., though its rough 11 million cable and broadband subscribers are obviously dwarfed by Comcast’s Death Star proportions. Combined, they would represent roughly half of all paying cable-TV-phone customers in the United States.
It’s not quite Coke buying Pepsi, but it’s close enough to raise alarms. But it’s also easier to see why both companies might feel the need to be even bigger. They’re threatened from every conceivable angle.
The Threat of Blackout
As the the New Yorker points out, the cost of being a cable company is going up, and you don’t need to look very far back in time for an example of the fallout. Last summer, TWC and CBS couldn’t reach an agreementon the latter’s “retransmission consent” fee. These kinds of disagreements happen all the time, and lead to posturing you might be familiar with. Call your cable company now if you want to continue enjoying these programs.
This time, though, what had been a familiar game of posturing ended with CBS blacked out for millions of Time Warner Cable customers. For an entire month. The only thing that repaired the relationship was theonset of the NFL season.
A stalemate that long, though, proved to cable providers that they no longer have the leverage they once thought. And the quickest way to gain leverage is size.
The Threat of Cord Cutting
This is a point that’s been repeated often enough, for long enough, that you don’t need much background. Suffice it to say, though, that thanks to cable alternatives like Hulu Plus, Netflix, and Aereo, the TV industry is coming off its worst year ever. Companies like Comcast and Time Warner Cable are losing customers by the hundreds of thousands every quarter. It is not sustainable.
Again, size matters. By combining forces, Comcast and TWC will be able to capture whatever cable TV market is left, even as it dwindles. And because they barely overlap in coverage areas, it’s almost pure addition. There’s not a lot of redundancy here: