Comcast (NASDAQ: CMCSA) was lucky to get out of an antiquated deal that was proposed before landmark events such as the launches of Sling TV and HBO Now fundamentally changed the pay-TV game.
So says Forrester Research VP and principal analyst James McQuivey. Had the FCC and Justice Department approved the proposed Comcast-Time Warner Cable (NYSE: TWC) merger with conditions, Comcast would have spent another year trying to satisfy mandates to gain more broadband subscribers, rather than keeping up with a pay-TV business undergoing massive disruption.
"Despite the obvious egg on the face, Comcast executives either already know or will soon realize that losing this deal this soon is one of the better things to happen in a long time," McQuivey writes in Re/code. "Because Comcast needs to direct its attention elsewhere immediately--or miss the biggest shift in pay TV history since the advent of cable itself.
"Comcast executives were smart to realize that wasting a year trying to accommodate regulators' concerns is a colossal waste of time when there are other, more pressing issues to confront," he added.
To McQuivey's thinking, adding "tens of millions" of broadband subscribers would deliver short-term profits. Despite the FCC's claims about limited broadband competition, he believes that a big technology company like Google (NASDAQ: GOOG)--in a decade's time--will have disrupted any market dominance by Comcast, or any other cable company, with an innovation such as wireless.
"Think of it financially," he wrote. "Do you spend tens of billions to add a few tens of millions of households to your customer base--profitable customers, to be sure, but also costly to maintain--and then still have to figure out how to reach the rest of the country with some kind of digital offering, more in the vein of Sling TV? Or do you spend less than a billion to offer a lower-cost, lower-margin pay TV product that can scale up to serve all U.S. households and even go global? The economics of the '90s suggest you do the former. The economics of digital disruption practically insist you do the latter."
- read this Re/code post
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