Two New Giant Redwoods

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Nothing like the creation of a 22 million-subscriber MSO to cap off a tumultuous year in which industry consolidation continued unabated.

Indeed, Comcast Corp. finally got AT&T Broadband, after it returned to the table with a sweetened deal in what became a fiercely heated bidding war that had actually started back in July with an unsolicited "bear hug."

The new entity — AT&T Comcast Corp. — will be something to behold. AT&T Corp. chairman and CEO C. Michael Armstrong will head up the jumbo MSO as its chairman, and Comcast's Brian Roberts will serve as its CEO.

That merger — and Charlie Ergen's successful deal to combine his EchoStar Communications Corp. with DirecTV Inc., which, once approved, would create a 17 million subscriber satellite giant — has many media observers wondering, "What's next?"

The new landscape is daunting. Two giant distributors will wield a great deal of power over content providers that want carriage. Those programmers might now find the negotiating climate, with the chips further stacked against them, even more perilous.

Other MSOs are also likely to rethink their present broadband strategies. Is there a merger in the winds for Cox Communications Inc., which also bid on AT&T Broadband, but is now suddenly dwarfed by the new AT&T Comcast Corp.?

For now, Cox says no. But the oddsmakers say, "You bet."

Then there's Charter Communications Inc., which didn't get involved in the Broadband bidding. For now, industry sources believe the company will go it alone, rather than beef up through a merger or acquisition. But I wouldn't make that bet.

Others predict Adelphia Communications Corp. — which has been on a buying spree of its own and now struggles with heavy debt — may be the next to seek a partner to stay in the game. That might be a very good idea.

Of course, this is all nothing but idle speculation. At the Western Show last month, AOL Time Warner Inc. vice chairman Ted Turner predicted there would soon be two cable MSOs and five programmers.

Others don't see it that way. Instead, they see a world of first-, second- and third-tier cable markets. For now, the new AT&T Comcast has the first tier all to itself. And there are a handful of other MSOs, like Mediacom Communications Corp. and Insight Communications Co., which are thriving in the so-called second- and third-tier markets that the other would-be first-tier players will probably not pursue.

And what about the programmers? We already know that Discovery Communications Inc. talked with NBC last summer about joining the Peacock's stable. Those negotiations stalled, but a nagging question remains: If a company the size of Discovery can't go it alone in this new forest of giant redwoods, what about the others?

Do the highly successful Scripps networks, like Home & Garden Television and Food Network, have enough bargaining power to wrangle with the new giants?

Maybe all they need to do is stay neutral like Switzerland. Their very independence might make them less likely to get singed in what are likely to be intense and heated battles over future deals.

One thing is clear: With the upcoming holiday break, all industry titans will take a deep breath as they try to figure out how they fit into this new and decidedly tilted landscape.

And we at Multichannel News
will also be taking a breather from next week's printed edition. We will return in January, ready to report on the new nuances of this brave new world.

In the meantime, happy and safe holidays to all. And heartfelt thanks for your support during a year we that will all never forget.

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