Comcast
has been working overtime to secure their $45 billion merger with Time Warner
Cable but with the recent news of the DoJ preparing to block the merger, it
look like Comcast might be unsuccessful in its bid.
While Comcast might feel like the DoJ sent a fax to Cleveland in
their cornflakes, there's a strong argument that the DoJ just did
Comcast a solid. Mergers are not exactly a bad thing and could, if done right,
benefit both parties but as recent history has shown, mergers are particularly
difficult to pull off. There are a number of reasons why mergers are difficult
but the most difficult obstacle in the way of success is merging the
organizational culture of the parties involved which, more often than not, are
likely to clash.
Companies have enough trouble trying to get the
culture right in their own organization so just imagine the
tumult caused by trying to create a new culture when both parties were more
than happy with the ones they had. Why Comcast would be prepared to
take on all these hard issues to merger with Time Warner might seem strange
given the history of high profile mergers failing but in Comcast case, it's
actually a decent strategy. If the merger happens, Comcast would bolster their
dominant position in both cable and broadband.
It would also allow Comcast turn the screws on Netflix (which has
both Comcast and its nearest competitors beat combined in subscribers) even
more than it has already and check the trend led by HBO (who just happen to be
owned by Time Warner) and other popular cable networks of raising transmission
fees while launching their own standalone services to reach out
to millennial who largely get their entertainment fix online.
These rising transmission fees is why Comcast is known for
its exorbitant monthly cable fees and why there's a whole generation is cutting
their cable or avoiding cable altogether. Simply put, Comcast can see the blood
on the leaves and a merger with Time Warner is a move in the right direction to
make sure it's not theirs. But, in the end, the blood on leaves will be theirs
as regulators, cable networks and most importantly consumers see the
merger attempt for what it is.
What angers most about the Comcast and Time Warner is not the
merger itself but that Comcast has other options, the first being that
the Philadelphia company could go on the offensive and
tackle issues with its service and the new trends in their marketplace head on
but instead, Comcast has resorted to playing defense, badly. The executives
at Comcast are smart enough to know that a whole generation is more likely to
flick on their laptop or smartphone than their TV sets when they want to watch
their favorite shows but fail to meet the new demand for unbundled
"al a carte" television or even address its notoriously bad
customer service adequately.
Comcast
isn't necessarily doing anything wrong merging with
Time Warner but they're employing a defensive strategy that might buy them time
and some leverage but not for long. While Comcast is largely adopting a
strategy of mergers and acquisition that has come to define the cable and media
industry, it only points to the weakness of the industry as a whole as they try
to arrest the winds of change by huddling around a dimming camp fire.
In sum, whether the DoJ and/or the FCC (which they likely won't)
approve the merger or not, Comcast fate is largely in their hands.
