The U.S. Justice Department is looking into whether Comcast (NASDAQ: CMCSA) is wielding too much influence in the $5 billion "spot" cable advertising market.
Comcast spokeswoman Sena Fitzmaurice told FierceCable today that her company will fully cooperate with the DOJ inquiry, which was first reported by the Wall Street Journal.
Through its Comcast Spotlight division, the MSO is accused of wielding too much influence in the spot cable market, where local ad time that is set-aside for pay-TV operators as part of their carriage deals is sold.
In addition to selling Comcast's own local inventory, Comcast Spotlight also represents operators including AT&T U-verse. The division accounted for 48.1 percent of all cable advertising sales in 2015, according to SNL Kagan.
"Local cable advertising competes with local broadcast TV, radio, newspapers, outdoor display and the rapidly growing digital marketplace," Comcast responded. "All multichannel video providers account for only about 7 percent of local advertising sales."
But as the WSJ noted, citing documents provided by unnamed individuals -- the DOJ isn't commenting -- the investigation goes deeper than local cable advertising.
Regional advertisers buy ad time from so-called "interconnects," which are essentially ad sales and technology cooperatives made up of all the pay-TV companies operating in a specific area. Typically, the biggest operator in any given region dictates the deals that get made with advertisers on behalf of the local interconnect. Comcast manages interconnects in 26 of the top 50 markets in the country.
According to the WSJ, Comcast has demanded in recent years that other pay-TV companies that want to be part of the interconnects it manages agree to let Comcast Spotlight also represent their sales in the local spot cable market.
A rival cable-ad representation firm, Viamedia, told WSJ that Comcast threatened to block it and two of its pay-TV clients from two interconnects in 2012, unless the operators, WideOpenWest and RCN, agreed to let Comcast Spotlight rep them for spot sales.
Viamedia refused the deal, citing a 50 percent fee increase. However, both WideOpenWest and RCN have since agreed to move their spot cable business from Viamedia to Comcast. In fact, the latter decision was reported just last week, just five days before the WSJ broke the story about the DOJ investigation.
"To better compete with local advertising platforms with significant scale, like a broadcaster or web app that can sell an entire geographic market, and to provide more and better choices to advertisers, MVPDs have long worked together through local interconnect arrangements to sell local advertising," Comcast said in a statement. "These interconnects increase efficiency and help keep costs down for advertisers and are responsive to the needs of major local advertisers. We believe these long-standing industry practices are good for advertisers and consumers, and we and other MVPDs are continuing to provide these important services to our clients."
- read this Wall Street Journal story
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