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Comcast to Acquire TWC- Our Take

Comcast to Acquire TWC- Our Take

Last week, Comcast announced that it has agreed to acquire Time Warner Cable (TWC) for $45.2 billion. This is a deal between the country's two largest cable companies; here's our take on how this merger will shake out:

  • Regulators will approve the merger, although there may be some market reduction to accommodate the regulatory limits (30 percent).
  • Comcast and TWC compete in mostly different markets. For TWC customers, the potential upside is access to Comcast's investment in its X2 platform, Xfinity, and sharing of core technologies. However, it's unlikely that any customers should expect their monthly television and/or Internet bills to go down.
  • Comcast and TWC worked together on RDK so it's not a total surprise that they followed this path. The hope is that this will accelerate rollout within the subscriber base and adoption within the industry.
  • This is a defensive maneuver; not only did Charter make a run at TWC, but Verizon (with its digital acquisitions--OnCue, upLynk, EdgeCast--and wireless market of 100MM subscribers) and the OTT alternatives (Netflix, Sony, Aereo… and the looming threat of Apple) are making Comcast's future "cloudy" indeed.
  • Not surprisingly, this is really about the New York City and Los Angeles markets. Comcast's takeover of TWC will ensure that it gains high-value, high-income subscribers. This translates into better average revenue per unit (ARPU) and a better presence in front of agency decision-makers who do the media buying and will know Comcast Spotlight--its multi-screen advertising solution portfolio--and the service better.

In addition, this deal should help Comcast continue to promote and build awareness of TV Everywhere. But, it will also reinforce--rather than reinvent--the existing pay TV business structure. A larger cable behemoth, with Comcast and its innovation at the core, will only mean more of the same.