This week, rising media company Comcast announced a $45 billion merger with slumping media company Time Warner Cable. The agreement, which has been approved by both Board of Directors, would be entirely in stock where Comcast will trade 2.875 shares of Comcast for each of the 284.9 million Time Warner Cable shares. When the deal is complete, TWC shareholders will own about 23 percent of Comcast's common stock.
This merger has a lot of implications in the media industry. First, with Time Warner joining the Comcast family, that will add more chefs into the kitchen that is Hulu. While it is only a stock transfer, there will be a large collection of new shareholders, as well as an expected addition of new executives, that will have ideas different from the norm inside Comcast. There is no telling if this could be better or worse, but with Comcast's seeming disinterest with the brand, also operating a competitor, we might finally see either a full buy-in or abandonment of Hulu.
The new company would also have 33 million cable subscribers and almost as many broadband subscribers. Of course, with that many customers, this will give the new Comcast absolutely incredible buying power when negotiating prices with networks. Obviously there will never be any contention with the NBCUniversal networks, which are owned by Comcast, but it will mean a lot of trouble for the Big 3 competitors: News Corp. (FOX), Disney (ABC) and CBS.
The 33 million customers also means that the company will have even more power to control the content you receive and the price you pay for it. We know that several Internet service providers have trialed tiered bandwidth throttling plans, similar to what you get with T-Mobile plans: slowing your speed after you use the service too much. Perhaps we could see something like that come back now that Comcast has even more power.
Now, with all of this bargaining and pricing power, Comcast and Time Warner Cable say that this merger is a good thing for everyone involved. D. Marcus, Chairman and CEO of Time Warner Cable, said,
This combination creates a company that delivers maximum value for our shareholders, enormous opportunities for our employees and a superior experience for our customers. Comcast and Time Warner Cable have been the leaders in all of the industry's most important innovations of the last 25 years and this merger will accelerate the pace of that innovation. Brian Roberts, Neil Smit, Michael Angelakis and the Comcast management team have built an industry-leading platform and innovative products and services, and we're excited to be part of delivering all of the possibilities of cable's superior broadband networks to more American consumers.
Comcast also reminds people, in the hopes that the Federal Trade Commission will hear, that Comcast and Time Warner Cable have zero overlap in markets, meaning nowhere in the country will this create a market-level monopoly, like Verizon's purchase of Alltel created.
Will this argument be enough to get this merger past the FTC, or will this go the way of AT&T/T-Mobile? Sound off in the comments.