Comcast deal may offer media firms leverage on fees
LOS ANGELES/NEW YORK — Media companies plan to press Comcast Corp. for higher fees in the coming year, seeing an opportunity to squeeze better terms from the cable company as regulators review its planned takeover of Time Warner Cable Inc.
Comcast and Time Warner Cable paid nearly $14 billion to content companies last year for rights to distribute their films, television shows and sporting events.Broadcasters and cable television networks have “assignment clauses” in their contracts with Time Warner Cable that require the networks to sign off before Comcast can merge the two cable operators’ agreements, according to people who have negotiated agreements in the past.
Media executives say most programmers will push for higher rates in return for expanding their deals to cover digital distribution of their content.
“Media companies selling programming can be expected to leverage the policy and politics surrounding the proposed Comcast-Time Warner Cable merger to extract sizeable and unusual concessions,” said Jimmy Schaeffler, chairman of pay TV consultant firm The Carmel Group.
Comcast is expected this month to formally request a Federal Communications Commission review of the $45.2 billion Time Warner Cable deal. The combined company will control almost 30 percent of the U.S. pay television video market and about a third of the high-speed Internet market.
While content providers are broadly concerned about the long-term negotiating clout of the new company, many of them are looking for immediate ways to benefit from the merger, according to media executives who requested anonymity because their negotiations with Comcast will be private.
Media companies see increased value for their content following a recent deal by satellite operator Dish Network Corp. to pay Walt Disney Co. for the rights to stream ESPN, ABC and other programs over the Internet.
Analysts say Disney likely pocketed higher subscriber fees from Dish for channels such as ESPN and Disney Channel. In 2013, ESPN was paid an industry average fee of $5.54 per subscriber per month, while Disney Channel received $1.15 per subscriber per month, according to SNL Kagan.
CBS Corp. CEO Leslie Moonves hinted at an investor conference this week that he would push for better terms from Comcast. “There’s going to be a lot of discussions going on about how you get those two contracts together,” he said, referring to the two companies’ licensing agreements.
Comcast now pays the industry’s lowest rates because of its size. Time Warner Cable CEO Rob Marcus has dismissed the notion that the merged company will bully programmers.
“I just find that whole line of concern to be totally ironic,” he said, “given the experience that we have all had over the last dozen years or so where programming costs have risen at a level that far exceeds the price that customers will actually bear.”