Mike Farrell

The pending combination of Comcast and Time Warner Cable could be the final piece of the interactive ad puzzle, spurring other distributors to embrace what has been a market on the verge of a breakout for about a decade, Bank of America Merrill Lynch Global Research senior media and entertainment analyst Jessica Reif Cohen said. Reif Cohen added that so far, interactive advertising has taken “baby steps.” But with the creation of a 30-million subscriber cable company, the industry will finally have an addressable ad champion with the necessary scale and scope.

“The tipping point of addressable advertising will be Comcast/Time Warner Cable,” Reif Cohen said, adding that other components like measurement also will need to fall into place. “There are steps that need to happen, but clearly it will be an area of growth.”

Reif Cohen pointed to the impact that Comcast already has had on the video side of the business with its current scale -- 22 million subscribers -- focusing on video on demand, TV Everywhere and its robust user interface platform, the X1. She noted that because of those efforts, Comcast customers watch more TV (more than 7 hours per day vs. 4-5 hours on average for the rest of the country) and more channels (about 40% more than average viewers.)

AT&T chief financial officer John Stephens answered a question that has been on many investors’ minds in the past few days, saying that regulators would have had difficulty approving a deal for Dish.

Stephens said while DirecTV’s was still the carrier’s first choice, Dish’s spectrum would have made it more difficult to obtain regulatory approval. “Dish has been very loud about their intentions to get into broadband,” Stephens said. “From a regulatory perspective, bringing a company that either is or intends to be in broadband with another broadband company would be likely to raise additional regulatory scrutiny.”

[Commentary] AT&T finally pulled the trigger on an acquisition of DirecTV. The merger creates a 26-million subscriber rival for the television business.

But as AT&T and DirecTV tout the benefits of the merger, analysts and observers are split as to the deal’s benefits. On the plus side, it could allow AT&T to free up bandwidth for its U-verse broadband service -- it currently allocates 15 Megabits per second for video and 10 Mbps for high-speed Internet service in about 25% of the country, and could give the telephone giant the incentive to upgrade its digital subscriber line plant (which maxes out at around 1.5 Mbps) to fiber.

Critics of the deal point to the merger as a temporary fix -- DirecTV’s video business is basically flat, adding just 12,000 net new customers in the first quarter -- and though the business is well run, operating DirecTV as a separate entity would require AT&T to support two cost structures in 25% of the country with just a one-product offering in the other 75%.

Here’s a look at some of the reasons for DirecTV to sit this one out.

• The price could be too “frothy” or too pricey for what is at best a stable business.
• The merger will solve AT&T’s cash problem, but only temporarily.
• On the surface, it doesn’t look much better from a DirecTV perspective.
• The broadband benefit to the deal is questionable.
• AT&T gets a national video footprint in a slow-to-no growth business.

Dish Network chairman Charlie Ergen, reaching back into his ample sack of poker metaphors, said that he would prefer to sit back and watch the current merger frenzy in the media business play out, noting that as a former professional card player he “learned to trust my cards.”

Ergen said he didn’t have the firepower to outbid Sprint for T-Mobile or AT&T for DirecTV, citing two of the top rumored deals of the week, and would likely stick to the sidelines for the time being.

In a report that is sure to be fully embraced by the broadcast community, SNL Kagan said that retransmission consent fees, also known as the bane of multichannel video service providers, account for just 8.9% of total fees distributors pay to networks and is expected to rise to just under 13% by 2017.

The Kagan report comes just weeks after the Federal Communications Commission moved to prohibit Joint Sales Agreements where two of the top four stations in a market join forces to negotiate retransmission deals. Part of the reason for the ruling was to prevent what some MVPDs have said was onerous pricing for retransmission and to stop blackouts of channels. In its analysis, SNL Kagan said they saw little evidence for either.

The research house said that rising retransmission fees are just one factor in escalating programming costs -- others were the additional expense of TV Everywhere and multiplatform agreements, increasing costs for cable network programming (especially sports), and additional channel launches.

In one of the shortest retransmission consent blackouts in recent memory, Dish Network said it had reached an agreement with Hearst Television a mere 14 hours after the broadcaster’s 29 channels went dark to Dish customers in 25 markets.

Hearst stations went dark to Dish customers at about 9 p.m. central time April 8, after the two could not reach an agreement. Hearst accused Dish of seeking terms that ere “radically off-market,” while Dish said the broadcaster’s “unreasonable demands” prevented a deal. Apparently they worked out their differences.

Rural Broadband Investments, the small-market cable operator formed by private equity firm GTCR in 2013, has closed on the acquisition of a municipal cable system in Poplar Bluff (MO), for an undisclosed sum.

The deal is the fifth for RBI and puts the company on the path toward building a platform of 300,000-to-400,000 cable subscribers in small-to-mid-sized rural markets. RBI now served more than 150,000 customers and passes more than 430,000 homes in Illinois, Indiana, Missouri, Arkansas, Louisiana, Mississippi, Texas and Nevada.

RBI’s first acquisition was its purchase of NewWave Communications in February 2013, followed by Cable Management Associates and McDonald Cable/Cablevison systems.

Noting at an industry conference that Comcast has tackled big integrations before, Comcast Cable CEO Neil Smit said the cable giant has already assembled a small integration team for its pending merger with Time Warner Cable, adding that the initial focus will likely be on upgrading TWC plant to all-digital. Smit, speaking at the Deutsche Bank Media, Internet & Telecom conference in Palm Beach (FL), said the primary focus will be to keep both businesses running well.

[March 10]