Pay-TV consolidation won’t necessarily be good for consumers
Cable pioneer John Malone, chairman of Liberty Media, hasn’t been shy about advocating for more consolidation in the pay-TV space.
Last week, at the Allen & Co. conference in Sun Valley, Malone suggested that satellite broadcasters DirecTV and Dish Communications should merge. Malone isn’t the first to advocate a Dish-DirecTV marriage. A decade ago the two companies tried to combine forces but were rebuffed by regulators.
Besides pushing for the nation’s two satellite players to combine, Malone has said some of the biggest cable operators also should consider getting together. Malone’s Liberty owns almost 30% of cable operator Charter Communications, which has made no secret of its desire to do a deal with Time Warner Cable.
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One of the arguments Malone has made for consolidation is that bigger pay-TV distributors could rein in programming costs.
To be sure, bigger distributors often can use their size to get programmers to reduce costs.
But that won’t necessarily mean lower bills for consumers.
“In 25 years of doing this kind of policy work, and despite the many promises of ‘synergies’ and consumer benefits, I’ve never seen the benefits of a media merger redound to the public either through better programming or through lower prices,” said Gigi Sohn, president of Public Knowledge, a nonprofit media watchdog.
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In other words, just because larger pay-TV distributors can lower programming costs, don’t expect the savings to be passed along to subscribers. This is about the distributors increasing their own profit margins.
And if the big pay-TV distributors are able to force programmers such as ESPN, TNT and MTV to lower costs, smaller distributors could end up picking up the slack. Smaller cable operators already often pay higher rates for programming than their big brothers do. That’s why over the next few years some small mom-and-pop cable operators may pack it in and focus solely on selling Internet service.
Public Knowledge’s Sohn said the only thing that might lower prices is “fierce competition.”
But even then the incumbents have the edge and will use their power to make it difficult for newcomers to get access to programming at decent prices.
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Follow Joe Flint on Twitter @JBFlint.
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