As Netflix Resists, Most Firms Just Try to Befriend Comcast
In the middle of an otherwise routine earnings report last week,Netflix took an unexpected detour into the realm of antitrust enforcement: It opposed Comcast’s proposed purchase of Time Warner Cable, it said, because the deal would create a powerful giant with “anticompetitive leverage.”
The statement certainly grabbed the attention of the entertainment and communications industries. What it did not do was rally many others to the fight. Netflix stormed the hill, only to look back and find that almost no one was following it.
The $45 billion merger would transform Comcast into a vastly more powerful gatekeeper, giving it control of 40 percent of the country’s Internet service coverage and 19 of the country’s top 20 cable markets. As such, it could potentially disrupt the entire media and technology ecosystem.
For the time being, almost none are publicly speaking out, partly because they are wary of antagonizing a company with which they do business.
Privately, though, media executives are eager to echo Netflix’s concern about the deal, and to cast themselves as victims of the potential megamerger. They use words like “omnivorous” and “rapacious” to describe Comcast, while expressing skepticism on the prospect of the largest cable company buying the second-largest.
“Every company, including ours, knows how we feel about the merger, but the question is, Are we going to do anything about it?” said one senior media executive, who like others, insisted on anonymity to discuss a sensitive business relationship. “Who’s going to be the first to kick sand in the bully’s face?”
That distinction already belongs to Netflix, and it drew a quick, sharp response from Comcast, which accused the company of disingenuously cloaking its business interests in pro-consumer rhetoric. Comcast said Netflix simply did not want to bear the costs of the enormous amount of Internet traffic that its subscribers generate. (During peak hours, Netflix streaming can account for nearly one-third of worldwide Internet traffic.)
Comcast has contended that the merger is not anticompetitive because the company has very little geographical overlap with Time Warner Cable. More to the point, Comcast says that the content providers are the players holding most of the power in their relationships. If consumers cannot watch their favorite shows and sporting events, they will just cut the cord. When Time Warner Cable blacked out CBS during a dispute over fees last year, the cable provider lost hundreds of thousands of subscribers. CBS received most of what it asked for in the contract negotiations.
The proposed merger, though, could potentially upend this dynamic, in which programmers have traditionally had the upper hand, and as a result, put billions of dollars in play. Media companies are heavily dependent on the immense fees they receive from Comcast and other distributors. They worry that if Comcast gets bigger, it will have the ability to drive down those fees. And because Comcast is also in the business of creating content, through its ownership of NBCUniversal, competitors worry that the company will offer preferential treatment to its own networks.
Media executives say a supersize Comcast will essentially have veto power over any possible innovation. Even something as straightforward as trying to make content available on a new device would require Comcast’s approval.
The chief executive of Univision, Randy Falco, said this week that the deal was “truly a cause for concern.” But apart from it and Netflix, almost every other media and technology company has so far opted for strategic silence. Some analysts say these companies may be holding on to the threat of publicly criticizing the merger, while they try to negotiate new agreements with Comcast.
“You can bet that everyone and his brother is trying to strike a sweetheart deal with Comcast right now in exchange for either supporting or simply not opposing the deal,” said Craig Moffett, an independent media analyst.
Read more: http://www.nytimes.com/2014/05/02/business/media/as-netflix-resists-most-firms-just-try-to-befriend-comcast.html?ref=technology&_r=1
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