Cox Communications President Pat Esser says he doesn’t feel like the odd man out in all the deals underway among Comcast, Time Warner Cable, and Charter. The agreements “help us move along that continuum of the industry working together,” he said today on a panel at the Cable Show in LA. That’s important because cable needs to move to a common platform both in TV and broadband — including public WiFi hot spots. With 250,000 of them, “we have more nationwide hotspots than anyone.” That could help cable to compete with wireless companies. “For the majority of usage that you do on a daily basis you’d be surprised” at how much goes over WiFi, he says.
They might be after speculation about a transaction fueled a 45% increase in its stock price over the last six months (to $138.22 on Friday), MoffettNathanson Research’s Craig Moffett says this morning. Some analysts say that a buyer — potentially Charter, Comcast, or Cox — would have to pay $150 a share or more to land the No. 2 cable operator. Moffett says he can’t justify more than $120 — and places his target price for the stock at $108. Time Warner Cable “is not doing well, and using outsized broadband price increases to paper over otherwise terrible operational performance is unhealthy and unsustainable.” A buyer, eager to land TWC, could argue that a high price makes sense because it could run TWC better. But there’s “little secret sauce in the cable business,” Moffett says. The “readily-identifiable synergies” probably amount to just $12 a share, “lower than most expect.” And the odds are low that buyers will engage in a bidding war. As the No. 1 cable operator and owner of NBCUniversal, Comcast “has less of a need for a transaction than anyone else in the industry” — especially if federal regulators demand lots of concessions. Privately held Cox hasn’t shown a burning desire to grow. That leaves Charter, which clearly is salivating over TWC. If it’s the lone bidder then it wouldn’t have to offer a big premium. Its pitch to shareholders …
Listen to (and share) episode 61 of our audio podcast Deadline Big Media With David Lieberman. Deadline’s financial editor talks with host David Bloom about the latest potential entrant, Cox Communications, in the cable TV consolidation sweepstakes that seem to be just about to take off via Time Warner Cable; the uncertain future of DVR maker TiVo despite a terrific quarter; a surprising shakeup at the top of No. 2 event company AEG Live; and a whole new game for Take-Two Interactive, which weeks after the billion-dollar debut of Grand Theft Auto V has bought out investor Carl Icahn, sparking analyst concerns that its stock price has peaked.
It’s safe to say that everyone who could conceivably benefit from merging with the No. 2 cable company is taking the idea seriously. And that includes Cox Communications, The Wall Street Journal says this afternoon citing unnamed sources. A deal would make as much sense for Cox as it would for Charter, which has been salivating over TWC. Privately held Cox is the No. 3 operator with about 4.5M video subscribers, a little more than Charter. While federal officials would closely scrutinize any cable deal, Cox and Charter would have an easier time winning approval than would Comcast — the No. 1 operator, and owner of NBCUniversal, which is also eyeing TWC. The big question is whether either Cox or Charter could take on enough debt to swallow all of TWC, which has 11.7M video subs. Given the problems any single company would have handling a deal, some analysts now believe that a combination of cable operators may buy TWC and then divide its systems between them. Cox is in 18 states and its biggest markets include San Diego, Phoenix, Las Vegas, Louisiana, Northern Virginia, and Rhode Island.
Deal discussions seem to be at an early stage according to the report about them today on Bloomberg, citing “two people with knowledge of the matter.” Execs haven’t decided how a deal might be structured, or even who’d be the acquirer. Still, the disclosure of Cox President Pat Esser’s conversations with Liberty Media, which owns 27% of Charter, helped to send cable stocks on a wild ride today. Charter jumped 3.7% in mid-day trading while Time Warner Cable — another potential target for Charter — is -2.3%. (Cablevision is up about 4% after CEO Jim Dolan said he wouldn’t rule out a sale.) Analyst Craig Moffett says a combo of Charter and privately held Cox “makes a ton of sense for Charter.” The companies are close in size (Charter with 4.4M subs and Cox with 4.8M). Since they could merge as equals, “nosebleed leverage wouldn’t be necessary” leaving open the possibility of making additional deals. In addition, a merger would make Charter and Cox “a player of real scale” able to negotiate lower prices from broadcasters and cable networks. The analyst adds that Liberty Chairman John Malone is close with Cox Enterprises’ Jim Kennedy.
Apparently so, according to a Reuters report. The No. 2 cable operator has spoken to Cox and Cablevision about possible deals “in recent months” and continues to be interested in them, the news wire says. Execs recognize that the cable industry is mature and poised for consolidation. But they’re also cool to the idea of combining with Charter, a much smaller company that’s seen as a stalking horse for John Malone after his Liberty Media paid $2.6B for a 27.3% stake. The problem: Charter, which has a market value of $12.5B, likely would have to take on a lot of debt in order to buy Time Warner Cable, valued as $32.7B. And Evercore Partners’ Bryan Kraft notes that TWC’s board might “see selling now as premature if it believes management is righting the ship.” TWC already has rejected Malone’s overtures, leading him to take his case directly to its investors, The Wall Street Journal says. TWC, which has about 12M video subscribers, is the only cable company big enough to turn Charter into a major industry player. Investors have waited for years, though, to see TWC (which controls the system in Manhattan) combine with Cablevision (which dominates NYC’s surrounding boroughs and suburbs). TWC has had to bide its time because the Long Island-based Cablevision — with a market value of $4.5B — is controlled by Charles …
The arrangement, which the companies call a “new early renewal,” is similar to ones that Disney cut this year with Comcast and Cablevision: It’s a “long-term” arrangement, covers 70-plus networks and services (including ABC, ESPN, and the planned ABC News/Univision Joint Venture), and it enables Cox to offer more content via VOD and TV Everywhere. The cable company has rights to offer in-home and out-of-home viewing on computers, smartphones, tablets and gaming consoles for Disney’s line of Watch services: WatchESPN becomes available today, and next week it will introduce WATCH Disney Channel, WATCH Disney XD and WATCH Disney Junior. Cox will have WATCH ABC and WATCH ABC Family when they’re launched. In addition, customers who are at home can use the Cox TV Connect app on their iPad, iPhone, and iPod touch devices to watch live broadcasts of ESPNEWS and ESPN Classic. The number of channels on Cox TV Connect rises to 90 on Monday. Cox is “enabling our customers to access their favorite news, sports and entertainment video content whenever and wherever they want it,” says its Chief Marketing and Sales Officer Mark Greatrex.
Here’s the release:
BREAKING… Cox Communications and Time Warner Cable SportsNet have come to terms for the cabler to carry the sports channel and its Spanish-language sibling Deportes. That leaves DirecTV and Dish as the final holdouts among major providers. Last week AT&T U-verse TV, Verizon FiOS and Charter Communications all fell in line in time for the Lakers season opener on Halloween. In addition to carrying the Lakers, Sportsnet and Deportes are the local TV homes for the LA Galaxy and Los Angeles Sparks games. Sticking point as usual was pricing. Neither Cox nor TWC nor any of the other providers have commented on terms. Sports Networks come with hefty fees, and TWC’s asking price was reportedly $3.95 per subscriber. For comparison Disney’s ESPN commands an average of $5.13 per sub each month, according to SNL Kagan. Six other regional sports networks receive more than $3 per subscriber.
Englewood, Colo., October 8, 2012 – Starz Entertainment announced today the launch of the STARZ PLAY and ENCORE PLAY authenticated online services. The company made the announcement with Cox Communications, the first multichannel video provider to offer the service. STARZ PLAY and ENCORE PLAY services are available today for all Cox Communications customers in United States. Starz expects to launch MOVIEPLEX and MOVIEPLEX PLAY with Cox and announce additional launch agreements with its distribution partners in the future.
This is a fast-growing trend — and a worrisome one for many cable channels at risk of losing viewers, monthly payments from pay TV distributors, and advertising. But cable and satellite companies including Comcast and Time Warner Cable say they have to do something to keep cash-strapped customers from cutting the cord. Cox says that soon all of its markets will offer its TV Economy service tier for about $35 a month, far less than the conventional TV Essential expanded basic package that runs as much as $60. Although pricing and options will vary slightly by market, the discounted service typically will include a mix of standard definition and HD versions of local broadcasters, shopping channels, C-SPAN, and superstation WGN in addition to a lineup with AMC, Animal Planet, BET, Cartoon Network, CNN, Comedy Central, Discovery, Disney Channel, E!, Food, Fox News, FX, Galavision, History Channel, Lifetime, MSNBC, NatGeo, Nickelodeon, TBS, TV Guide, TruTV, The Weather Channel, TV Land, and USA. In order to keep costs down, it won’t have ABC Family, A&E, Bravo, CNBC, ESPN, ESPN2, HGTV, HLN, MTV, regional sports, SyFy, Speed, Spike, TNT, TLC, The Travel Channel, and VH1. Operators pay ESPN about $4.69 per subscriber each month, while TNT costs $1.16, and Disney Channel goes for 94 cents, according to SNL Kagan. Earlier this month Disney CFO Jay Rasulo told analysts that he isn’t concerned that lots of subscribers will accept the sports-less pay TV …
Cable and telecom execs are buzzing this morning about the possibility of a major deal involving Sprint Nextel that could help cable operators offer wireless services along with the standard “triple play” options: TV, wired broadband, and wired phone. Comcast and other operators are talking with Sprint about a buyout of struggling wireless firm Clearwire. Its shares are up more than 30% in mid-morning trading following a Bloomberg story about the possible deal. Here’s how it might work: Comcast and other operators – perhaps Time Warner Cable, Cox, Cablevision, and Bright House Networks – would make an investment in Sprint. The telecom company then would buy all or most of the 46% of Clearwire that it doesn’t already own. (It’s unclear whether that might include the 15% stake owned by Comcast, Time Warner Cable and Bright House Networks.) Presumably, cable companies then would offer Sprint’s wireless phone and broadband services.
Sprint could use some help: It has been in the red for 15 consecutive quarters. And if federal officials allow AT&T to buy T-Mobile, then Sprint could become an also-ran behind the newly merged company and Verizon. Clearwire’s also in trouble. It’s in the red and needs at least $600M to build and upgrade its speedy 4G network which is available to 130M households and has about 7.7M customers.
The big question is whether the deal would be worth the trouble for cable companies. Most have promised to return cash to shareholders — not to make big …
The Pac-12 Conference, which until July 1 was known as the Pacific-10 Conference, announced today that it is forming a national and regional sports network to launch in August 2012 that will broadcast 850 sporting events a year, including every football and basketball game, with subscribers also able to watch games on mobile and the iN Demand VOD platforms. A national network will join six regional channels – Washington, Oregon, Northern California, Southern California, Arizona and Mountain — to cover the six states in the college sports conference, which has added the University of Colorado and the University of Utah to its roster to give it 12 members. The 350 nationally televised games will be split with Fox and ESPN, which already have a long-term contract with the conference worth $3 billion. Comcast, Time Warner Cable, Cox Communications and Bright House Networks also are part of the venture, with satellite and telco platforms expected to come into play later. At its launch, the conference said the network will reach about 40 million cable customers nationwide.