By Ronald Grover and Liana B. Baker
LOS ANGELES/NEW YORK, March 13 Media companies
plan to press Comcast Corp for higher fees in the
coming year, seeing an opportunity to squeeze better terms from
the U.S. 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. They declined to give specifics,
citing confidential contracts.
"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 in March 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
"There's going to be a lot of discussions going on about how
you get those two contracts together," he said, referring to the
melding of Comcast and Time Warner Cable's licensing agreements.
"There are certain things that we want to stay out of that
deal and there are certain things probably that Comcast doesn't
want," Moonves said.
ADDING DIGITAL RIGHTS
Comcast currently 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," Marcus said on Wednesday, "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."
Time Warner Cable's programming costs have increased in the
last five years by 42 percent, from $23.60 a subscriber in 2008
to $33.62 a subscriber in 2013, according to financial filings.
Its overall programming costs will increase to $5.2 billion in
2014, an 8.3 bump percent from 2013.
Some programmers are looking at adding digital rights to
their contracts with Comcast to push for better terms. The model
is Disney's long-term deal with Comcast in 2012 that included
added payments for WatchESPN and WatchDisneyChannel apps and
other digital content.
Since then, Disney announced a video streaming agreement
with Dish and is negotiating a similar one with DirecTV,
under which the satellite provider would pay more for the rights
to use ESPN, the Disney Channel and content from its ABC
stations in an Internet-delivered video service.
Media executives say most of their contracts are outdated
and they see an opening as Comcast and other cable operators
beef up their digital and on-demand offerings to compete against
the likes of Netflix Inc.
CBS signed a 10-year agreement with Comcast in 2010, that
"greatly expanded on-demand access" to its CBS and Showtime
programming, according to a press release at the time.
But that deal does not give Comcast the ability to stream
video online or to offer video outside the home, and limits the
amount of video on demand, said a person with knowledge of the
A spokesman for CBS declined to comment. A Comcast
spokeswoman had no immediate comment.
Analysts say Comcast could eventually institute "usage based
pricing" to charge its subscribers for the broadband they use.
Content owners want to make sure they are not left out of such
arrangements, which they fear could put their own
direct-to-consumer apps at a disadvantage.
"If I was a media company, I'd be down there with Comcast
every few days asking for what I want," said Michael Nathanson,
an analyst at MoffettNathanson Research. "It's time to haggle."