What Does the Comcast, Time Warner Merger Mean for the SEC Network?
Published on: February 17, 2014
Written by: Clay Travis
The $45 billion Comcast-Time Warner merger is a huge story as it cements Comcast's standing as one of the most powerful media companies in the world. Just a year after purchasing all of NBC, Comcast, if the merger is approved, will now have in the neighborhood of 30 million cable subscribers and right at 38% of all broadband subscribers, dwarfing all other cable companies. But the merger story isn't just about media as a whole, it also has a particular sports media angle.
And what's the most interesting sports media angle about the timing of the upcoming FCC merger battle? The SEC Network will be debuting in mid-August, directly in the midst of the ongoing debate about whether or not the merger will be approved.
It's fascinating timing because the three toughest carriage battles the SEC Network is likely to fight are with Comcast, Time Warner, and DirecTV. Now two of those companies are seeking to merge. In theory one reason that Comcast and Time Warner want to merge is to increase the overall bargaining power of cable companies when it comes to holding down the costs extracted by channels. (Remember, every cable channel costs a different amount for the cable and satellite companies to carry. Right now the most expensive channel on everyone's cable bill is ESPN, which costs in the neighborhood of $6 a month. This means that every cable and satellite subscriber is paying right at $72 a year just for ESPN. Sports media rights are soaring and cable and satellite companies want to keep these carriage fees low so they can extract as much profit as possible from their subscribers).
The SEC Network is seeking $1.30 a month in the SEC footprint, which would equate to right at $15.60 a year. Outkick has previously done the math on how much that network could be worth, over $500 million a year. Just in the SEC footprint, carriage fees could be worth $468 million. But in order to get to that sum, the SEC Network needs to be carried by every major cable and satellite subscriber in the South. So far only AT&T, already announced, and Dish Network, though it hasn't been announced yet, are guaranteed to have the network at launch, in less than six months.
The SEC expects the three toughest battles to be fought with Comcast, Time Warner, and DirecTV.
But here's a big question -- could the potential merger between Comcast and Time Warner be happening at the perfect time for the SEC Network?
It looks like it could be.
Because SEC fans who subscribe to Comcast and Time Warner are going to be furious if the SEC Network isn't carried in their local markets. That was going to happen whether there was a merger or not. The SEC knows this, it's why the SEC Network's football schedule is a series of landmines designed to exert maximum fan pressure on these cable and satellite companies. For instance, the first SEC Network football game ever is between Texas A&M and South Carolina. Check out the map of Comcast and Time Warner subscribers. The A&M at South Carolina game is a direct shot at Time Warner, exerting the maximum possible pressure in Texas and South Carolina, the two biggest SEC markets for Time Warner. Meanwhile, Thursday night's double header game, Temple at Vanderbilt, is a not so subtle shot at Philadelphia-based Comcast. A local Philadelphia-area team, Temple, visiting Vanderbilt in Nashville, a Comcast hub. The subtext of every SEC Network game is simple -- carry us...or else.
Even before the merger ESPN was confident that SEC fans would make life miserable for cable and satellite companies. The SEC Network has a fully drawn media battle plan and is ready to engage in corporate war with the cable and satellite companies over carrying the channel. Indeed, both sides were already armoring up for the coming media and public relations battle. But the merger throws an interesting wrinkle into the equation -- do Comcast and Time Warner really need to antagonize all those SEC fans while they're in the middle of arguing that their merger should be approved and won't be anti-competitive?
While Comcast and Time Warner might have both been planning on individually fighting the SEC Network even before the merger, now ESPN has a new weapon in the arsenal -- ESPN can argue that the combined company opposition to the SEC Network is evidence of the power that these two companies will bring to the market. Instead of serving the customers, ESPN can argue that their combination will keep games from fans and ESPN can also direct these SEC fans not to just contact their cable and satellite companies to carry the SEC Network, they can do something much more powerful as Comcast and Time Warner attempt to merge.
ESPN and the SEC can threaten to play the trump card and tell SEC fans to contact their congressmen and senators to oppose the merger.
You think any SEC state congressman or senator is going to be opposed to SEC football?
Good luck with that.
That's why when you really break it down, this merger is a gift to ESPN and the SEC Network. There's no way that Comcast and Time Warner want to be fighting for a merger at the exact same time that they fight SEC fans over refusing to carry the SEC Network.
Here's a bet that ESPN's corporate parent, Disney, will agree to play nice with the cable company merger if the cable companies play nice with Disney.
How do Comcast and Time Warner play nice? By agreeing to carry the SEC Network at launch.
Otherwise, is it really worth Comcast and Time Warner risking a $45 billion merger over a single channel? Probably not.
That's why it may be a bit counterintuitive, but thanks to this merger the SEC Network may well have just gotten Auburn at the end of the Georgia game lucky.