Here’s the groundwork laid out by the television-broadband market to make room for the proposed $56.7 billion marriage of Charter Communications and Time Warner Cable, which the two companies announced Tuesday.
If the merger is approved by regulators, the new company, which would be made up of Charter, Time Warner Cable, and Bright House Networks, would become the second largest cable company in the U.S. after Comcast. Charter acquired Bright House in March for more than $10 billion. This merger is not expected to meet the kind of regulatory opposition that recently killed the proposed Comcast-Time Warner deal.
That’s mostly because the new Charter-Time Warner would become Comcast’s formidable competitor.
The new Charter giant would control nearly a third of the U.S. broadband market and that’s huge because tradition cable TV “bundled” subscriptions, which customers complain cost too much for scores of channels not worth watching, are on the decline. The pay-TV industry, satellite and cable, lost 31,000 subscribers in the first quarter of the year, marking the first time that the industry lost subscribers during what is typically a strong period.
“Cable-cutting” Americans are streaming more video online than ever, via Netflix, Hulu, Amazon and other services sprouting from media companies like weeds over an abandoned house. Even premium TV networks such as HBO and Showtime, which have only been available in premium packages to those who subscribe to cable or satellite TV bundles, are offering standalone streaming services.
Meanwhile, Verizon Communications is expected to roll out an Internet pay-TV service in the second half of 2015, likely with between 20 and 30 channels, targeting younger consumers who aren’t interested in full-blown cable. In January, Dish Network unveiled its plans for its first Internet-delivered pay-TV service, dubbed Sling TV, which includes ESPN and 11 other channels for $20 per month.
While TV subscriptions are declining, cable broadband Internet service is booming, with no letdown in sight.
During the first quarter of the year, the same three months that saw the historic the decline in TV subscriptions, the 17 largest cable companies in the U.S. — about 94 percent of the market, added 1.2 million broadband subscribers, according to Leichtman Research Group, a media and telecommunications research firm.