With the sale of Cablevision Systems and the acquisition of Time Warner Cable by Charter Communications getting closer to completion, the chatter is getting louder that programmers will have to merge to maintain leverage against consolidated distributors.
Usually, when the advantages of programmers bulking up are enumerated, they include cost savings and increased clout against distributors to avoid blackouts and keep pushing for subscriber fee increases.
In a new report, Michael Nathanson of MoffettNathanson Research points to another adversary stronger programmers would be better able to stand up to: Netflix.
“Cable networks consolidation could also lead to upside if the larger portfolios take a more thoughtful longer view on selling their content to SVOD services,” Nathanson said in a research note Monday. Smaller companies seem more likely to take the short-term earnings—and resulting executive compensation—that dealing with Netflix produces.
Nathanson pointed to statements by James Murdoch, CEO of 21st Century Fox, about working with Hulu, and Jeff Bewkes, CEO of Time Warner, about stacking old seasons of TNT and TBS shows, at last week’s Goldman Sachs Communacopia conference that indicate their inclination to put their content on streaming and on demand platforms they control.
“While it ultimately comes down to which management teams controls the deck, if consolidation does occur, we would hope that the industry coalesce around a strategy that trades today’s lunch for tomorrow’s dinner,” Nathanson said. “While comments alone may not get investor money back into the sector any time soon, an M&A cycle coupled with more thoughtful ecosystem management might be the long-term tonic for our rapidly changing world.”