Oligopoly brief: Comcast
While Comcast recently dropped, at least for now, its bid for Disney, the company is ready to take the next step. It is apparently in the running for the scandal-ridden and bankrupt cable system Adelphia, and acquisition of its 5 million subscribers would enhance its standing as the #1 national cable company with over 30% market share. It already claims to be the market leader in 8 of the top 10 markets in the US and has 70% of the subscribers in the top 20 markets.
While Comcast will face opposition from rivals like #2 Time-Warner, a Reuters report said recently that analysts believe the two companies may team up to divide the spoils. While some antitrust opposition is possible, the FCC is not all that likely to act, according to that Reuters story ("Comcast, Time-Warner may link on Adelphia-Analysts", 4/28/04):
However, a deal involving Comcast and Time Warner to buy Adelphia would be unlikely to raise antitrust concerns because their operations have little overlap. To allay concerns about access, regulators in past deals, such as News Corp. Ltd.'s acquisition of DirecTV, have asked for guarantees that the parties wouldn't withhold key programming from competitors.
Of course, the fact that Comcast owns a 21% share of Time-Warner Cable may make any deals easy to make; after all Comcast is likely to do well whatever the division.
In any case, Comcast is unlikely to be slowed down by abandoning the Disney deal. The company has a reputation for integrating its takeover targets rapidly, and it has a large treasure chest. It is likely to pursue both cable systems and programming opportunities. One often mentioned possibility is expanding its current sports content (Philadelphia, the Southeast, and soon Chicago) to come up with a rival to ESPN, which may have been the main reason for the attempted acquisition of Disney in the first place. A serious rival to ESPN might be a better result for Comcast.
Out of nowhere, Comcast rose in fifteen years form yet another local cable company to the titan in its industry, building a company through aggressive acquisitions and "mergers". We put mergers in quotes, since with every merger, the Roberts family who founded the company have replaced the upper management of the companies they merged with and retained the Comcast name.
Comcast has a triple revenue stream. First, it charges its subscribers, and has learned to maximize that with tempting added services. Second, it sells advertising on its system, which now reaches across the US, and can offer both localized and national buys. Third, it develops its own programming, some of which its sells to other cable systems.
Comcast had led the industry in developing its on programming for its own and other cable channels. It started with home shopping channel QVC, which it later sold off. But Comcast now runs a variety of companies, including the golf Channel, E!, Outdoor Life, Comcast Sports Network, Comcast Sports Southeast, Style, CN8, G4, TV One, and soon-to-appear Chicago SportsNet. It recently bought the TechTV channel.
Comcast owns significantly sports interests in Philadelphia through its Spectacor division. It owns and operated the 76ers basketball team, the Flyers hockey team, the Phantoms (minor league hockey), Wings (lacrosse), Kixx (indoor soccer), Soul (arena football), and several minor league baseball clubs. The company also owns and runs the Spectrum and the Wachovia Center, Philadelphia's two major indoor arenas.
Between 1986 and 1998, it built a cellular phone company by acquiring several smaller companies. It sold out the business to SBC, which has since added it to its Cingular system.
Comcast has also increased profits due to its cutrting0edge technology commitment. IT was a leader in digital video (7.6 million) and HDTV cable. It's a leader in high-speed Internet delivery (5.2 million customers). It has also been a pioneer in Internet telephony, VOIP (now in pilot programs), actively testing solutions and planning a major roll-out in a few years. All of these are areas of big growth that ride easily the already existing infrastructure, and a guarantee of future growth, even if standard cable TV use stays frozen.
Growth of Comcast's cable system
- 1963, founded in Tupelo, Mississippi.
- 1986, moved headquarters to Philadelphia. Reached a million subscribers by buying a major piece of Group W cable.
- 1988, reached 2 million subscribers with the purchase of half of Storer Communications (then it became #5 cable company).
- 1994, acquired Canadian company McLean-Hunter's US assets, giving it over 3 million subscribers, and making it the #3 cable company in the US.
- 1995, bought E.W. Scripps cable system, reaching over 4 million subscribers.
- 1998, acquired Prime Communications cable system and Jones Intercable, now growing to over 6 million subscribers.
- 1999, acquired Philadelphia Cablevision, and merged with MediaOne ($60 billion deal) Also picked up 2 million AT& T Broadband subscribers.
- 2000, acquired Lenfest Communications, and swapped customers with Adelphia and AT& T in order to consolidate service regions.
- 2001 merged with AT& T Broadband for $47 billion, making Comcast the #1 cable network with 21 million customers in 35 states.
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