About a year ago, AT&T announced its strategic response to the proposed Comcast-TWC merger ...become a bigger (stronger) firm in pay-TV by merging with DirecTV. The value of the merger? $48.5B
While the number of competitors in many local markets will be reduced in this horizontal merger, the merger is likely to be approved by regulators. Why?
1) No effect on the growing broadband market as DirecTV does not offer broadband
2) While there will be fewer competitors in the AT&T U-verse markets in 22-states, the growth in Pay-TV subscribers has turned negative in the past few years.
3) No vertical restraint issues as AT&T/DirecTV have very limited content ownership interests
4) The hope/promise of a stronger competitor (better pricing bundles, service) to Comcast and TWC in local markets
5) Greater bargaining power with content owners
6) Promise of broadband expansion to more rural communities
7) Regulatory approval concessions
Will consumers be better off? Who knows! Maybe the best we can hope for is not to be any worse off.
Monday, April 27, 2015
Tuesday, April 21, 2015
Skinny bundles: Can a la carte pricing be around the corner? Verizon says NO.
A 2014 Nielson survey showed that the average US TV household watches just 17 channels but pays for 189. While the size of program packages has expanded significantly over the years and prices have risen greater than 2x the rate of inflation, the average number of watched channels as changed very little.*
Not surprisingly, cable customers, for decades, have advocated for a la carte pricing. It never came. But, change came in another way and it has forced video providers to offer more pricing options.
It began with over-the-top programming that allowed consumers to view shows anytime, anyplace. Cord-cutting, cord-skimming, and cord-avoiding shifted some bargaining power to consumers. While they still don't have a la carte pricing, slimmed down product bundles, like Verizon's Custom HD for $55/month, might be a "step in the right direction" (Tami Erwin, Verizon Fios President on a recent CNBC interview).
Will this make some of us happy for now? Verizon and the other MVPDs certainly hope so! The rest of us aren't so sure.
*Today, if a TV bundle is $90/month, the price per watched channel is more than $5/month.
Not surprisingly, cable customers, for decades, have advocated for a la carte pricing. It never came. But, change came in another way and it has forced video providers to offer more pricing options.
It began with over-the-top programming that allowed consumers to view shows anytime, anyplace. Cord-cutting, cord-skimming, and cord-avoiding shifted some bargaining power to consumers. While they still don't have a la carte pricing, slimmed down product bundles, like Verizon's Custom HD for $55/month, might be a "step in the right direction" (Tami Erwin, Verizon Fios President on a recent CNBC interview).
Will this make some of us happy for now? Verizon and the other MVPDs certainly hope so! The rest of us aren't so sure.
*Today, if a TV bundle is $90/month, the price per watched channel is more than $5/month.
Monday, April 20, 2015
What if...
the Comcast-TWC merger doesn't go through? We know that the Charter-Bright House deal would be called off. The AT&T-DirecTV deal would be under even greater regulatory scrutiny and the likelihood of approval would diminish.
But, would customers of these ISPs be worse off? The ISPs argue that they need greater scale in order to negotiate favorable programming terms. However, in a CNBC interview on Friday, April 17, the President of Verizon Fios, Tami Erwin, indicated that at 9 million broadband customers currently ( a third of the size of a combined Comcast-TWC) the firm has "sufficient mass".*
Who do we believe? Bigger is not always better. In fact, it could be a lot worse. Just look to the financial services industry.
*This excludes the impact of a pending sale to Frontier of California, Florida, and Texas systems, with 1.6 million subscribers.
But, would customers of these ISPs be worse off? The ISPs argue that they need greater scale in order to negotiate favorable programming terms. However, in a CNBC interview on Friday, April 17, the President of Verizon Fios, Tami Erwin, indicated that at 9 million broadband customers currently ( a third of the size of a combined Comcast-TWC) the firm has "sufficient mass".*
Who do we believe? Bigger is not always better. In fact, it could be a lot worse. Just look to the financial services industry.
*This excludes the impact of a pending sale to Frontier of California, Florida, and Texas systems, with 1.6 million subscribers.
Saturday, April 11, 2015
A Match Made Out of Necessity. Who's Next?
About ten days ago, Charter announced its plans to purchase Bright House Networks LLC for $10.4B. Charter, the third largest cable broadband provider (behind Comcast and Time Warner Cable, is in line to add 3.4 million subscribers through acquisitions this year (2 million from Bright House and an additional 1.4 million from TWC if its merger with Comcast is approved by regulators.) Increasingly, the focus is on scale, primarily as it relates to negotiating favorable terms with content owners. Among cable and telco firms, Charter will be near the subscriber count of Verizon if the deals go through. It begs a few questions...
1) Are more deals likely? Might the likes of Cablevision and the next-tier of cable providers or even Verizon feel a need jump into the acquisition fray?
2) What's the "right" size for an ISP given the changing landscape of video delivery services?
1) Are more deals likely? Might the likes of Cablevision and the next-tier of cable providers or even Verizon feel a need jump into the acquisition fray?
2) What's the "right" size for an ISP given the changing landscape of video delivery services?
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