Merger with Time Warner Cable is a financial concern for independent programmers
The networks behind hit shows like The Walking Dead and House Hunters have little to celebrate over Comcast Corp.'s planned takeover of Time Warner Cable Inc.
The $45.2 billion deal, which combines the two biggest U.S. cable operators, increases the clout of pay-TV providers and makes it harder for independent programmers like AMC Networks Inc., where The Walking Dead is shown, and HGTV owner Scripps Networks Interactive Inc. to demand more money for their shows.
While bigger media companies such as CBS Corp. and Walt Disney Co. say they aren't worried, small and midsize programmers like AMC and Scripps may seek partners to bolster their positions, according to Michael Nathanson, an analyst at MoffettNathanson Research in New York.
"The pressure from programming costs is a big reason why cable operators and station operators are merging," said Robin Flynn, research director at the media advisory company SNL Kagan. "Everyone's trying to get a stronger position at the bargaining table."
Philadelphia-based Comcast, already the largest U.S. pay-TV provider, would become the industry's unchallenged king, with about 30 million subscribers, compared with more than 20 million at No. 2 DirecTV. The combined company expects to save $1.5 billion a year in costs over the long term, with Nathanson estimating $500 million less for broadcast and cable networks.
Programming costs are a logical source of savings. Spending on shows at the largest cable-TV companies, including Comcast and Time Warner Cable, increased 10 percent per subscriber in the third quarter from a year earlier, while customers' bills grew 5.7 percent, according to SNL Kagan.
CBS, owner of the most-watched television network and home of popular shows like NCIS, recently concluded a new programming agreement with Time Warner Cable after negotiations that included a monthlong blackout. CBS won a fee increase that led Time Warner Cable's then-CEO Glenn Britt to call for federal action to settle retransmission disputes.
The result has been much different for the Weather Channel, the independent cable network jointly owned by Blackstone Group L.P. and Bain Capital Partners L.L.C., with Comcast's NBCUniversal a passive investor. The Weather Channel has taken a beating in fee talks with El Segundo, Calif.-based DirecTV and was kicked off the satellite-TV service last month, as some fans of shows like Storm Chasers already know.
Smaller, family-friendly networks like the Hallmark Channel, home to I Love Lucy reruns and original movies like Finding Christmas, already face an uneven playing field, said Tim Winter, president of the Parents Television Council, a Los Angeles-based nonprofit that opposes the merger.
"When anyone tries to negotiate, they get squeezed," Winter said.