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Wide Open West Will Be Wide Open to Merger/Takeover After Launching IPO

Phillip Dampier March 27, 2017 Competition, Consumer News, Editorial & Site News, WOW! 1 Comment

One of America’s handful of cable overbuilders that provide competing cable television service will be ripe for an acquisition or merger after launching an initial public offering that could raise as much as $750 million and make them a juicy target for a takeover.

WideOpenWest, which customers know better as WOW!, provides almost a half-million customers in Alabama, Florida, Georgia, Illinois, Indiana, Maryland, Michigan, Ohio, South Carolina and Tennessee with a choice of a second cable company. It has consistently won reasonably high scores in ratings issued by Consumer Reports and often offers better speed and service than incumbent providers. WOW has been quietly and slowly expanding service, but in the last two years has attracted the interest of private equity firms and Wall Street banks. One of those equity firms — Crestview Partners, invested $125 million in WOW 18 months ago. UBS Investment Bank and Credit Suisse have teamed up to manage the IPO.

Jeff Marcus, who also happens to be a partner in Crestview, has been named chairman of WOW. Avista Capital Partners still owns almost 60% of the company.

By entering the public market, WOW could quickly come under pressure from Wall Street analysts to get out of the cable business by selling the company and profiting investors. The drumbeat for mergers and acquisitions has only intensified with a corporate-friendly Trump Administration that has sought to appoint “hands-off” regulators at the FCC and Justice Department. There are several likely buyers — the various cable companies that face direct competition from WOW and would like shut the company down and upstarts like Altice, which has targeted smaller cable operators like Cablevision and Suddenlink.

Marcus has telegraphed he is isn’t in a hurry to spend investors’ money, which could leave WOW flush with cash, something else attractive in a takeover. Multichannel News reports that one of WOW’s “main directives” would be to offer “video, voice, and data services in packages that consumers want,” — hardly a revolutionary concept. In a July interview, Marcus made it clear there was ‘no burning need to increase scale.’ That tells would-be buyers the company hasn’t any immediate plans to spend a lot of money or expand service, things that could drive away some buyers.

“It’s all opportunistic,” Marcus said. “When I started Marcus Cable with 18,000 subscribers, I had no idea that it would get to 1.3 million. One thing led to another and we took advantage of opportunities as they presented themselves. I think that’s what is going to happen here.“

A wealth opportunity for Marcus would be collecting significant proceeds selling the operation. There is a good chance WOW will either buy other companies or be bought itself as the cable industry consolidation wave continues. Other operators about its size — Cable ONE and until recently NewWave Communications, have been considered takeover targets for years. NewWave was acquired by CableONE in January for $735 million in cash, coincidentally slightly less than the potential upper limit of WOW’s proceeds from an IPO.

Comcast Securing Rights to Offer Nationwide Online Cable TV Replacement

Comcast could kick the door open on the traditionally closed cable-TV monopoly.

Comcast has a “Plan B” in case rival online-TV streaming providers start a major wave of cable TV cord cutting: the right to offer its own online cable TV replacement nationwide.

Bloomberg News reports Comcast is quietly acquiring national online distribution rights from cable networks, which gives the cable giant the right to sell cable TV-like packages outside of its cable company service area.

Comcast maintains “most favored nation” clauses in its contracts with cable programmers, which means if those networks agree to online distribution of their programming over online competitors like Sling TV, AT&T DirecTVNow and PlayStation Vue, those same rights are also available to Comcast.

For now, insiders claim Comcast has no immediate plans to start competing outside of its home service areas, but it wants to accumulate the necessary rights to hedge against online rivals.

“When you really try to evaluate the business model, we have not seen one that really gives us confidence that this is a real priority for us,” Matt Strauss, Comcast’s executive vice president for video services, said at a conference in November. “There is significantly more upside and profitability in going deeper and deeper into our base first versus following a video-only offering OTT,” he added, using the industry term for nationwide online video.

Comcast has been gradually picking up online distribution rights as it renews contracts with the networks it carries. A sign Comcast may imminently launch a competing product similar to DirecTVNow would come if it chooses to renegotiate contracts before they expire. Comcast last negotiated with CBS in 2010 and ESPN in 2012. Both contracts don’t expire until 2020. Without renegotiation, any online offering from Comcast would not include networks owned by those two companies.

Comcast is downplaying any interest in breaking the traditional cable television business model, which depends in part on friendly relations with other cable companies and staying out of their territories. The prospect of Comcast selling cable TV service in Charter’s service area would threaten a still lucrative source of revenue if a price war develops. Video represents about 50% of Comcast’s cable sales.

For now, Comcast’s most evident online competitor is AT&T’s DirecTVNow which has added 200,000 subscribers nationwide since launching in November. But that remains just a fraction of Comcast’s 22 million cable-TV customers, a reason why Comcast may be in no rush to enter the online streaming cable-TV business. That may change when two high-profile online video providers get into the business later this year. YouTube and Hulu are both expecting to launch cable-TV alternatives in 2017.

One Down, 70+ to Go: Esquire Network Signs Off Cable TV for Good This Spring

Phillip Dampier January 18, 2017 Consumer News, Online Video 1 Comment

NBCUniversal has discovered fewer viewers than ever care about live, linear television. Fewer still cared about Esquire Network, the studio’s male-targeted cable network you probably never watched.

The cable channel will go dark on your cable lineup for good this spring, according to Advertising Age, and move to the internet on Esquire.com.

Esquire Network launched as a partnership between NBCUniversal and Hearst Magazines, and took over the channel space formerly occupied by the Style network in September 2013. Esquire was supposed to reach young rich guys, among the most difficult audiences to reach. Esquire had an extremely low chance of succeeding, if only because young men in their 20s and early 30s are among the least likely to subscribe to cable television. Men in this age group are also notoriously intolerant of live commercial-laden television, and would be unlikely to treat Esquire’s original shows as worthy of appointment viewing.

Can America live without cable carriage of shows like “Knife Fight?” Apparently so.

Although Esquire Network turned in much better ratings than its predecessor Style, which couldn’t draw flies to a horse barn, NBCUniversal decided to pull the plug anyway after the network averaged only 141,000 primetime viewers nationwide, many outside of the age range advertisers wanted to reach. In 2016, every cable subscriber with Esquire Network paid a portion of their cable bill to keep the network on the lineup, even though it scored less than one-tenth of a single ratings point among adults 18-49 years old. Viewers had as much chance landing on the network by sitting on their remote controls by accident as intentionally selecting the channel. Other channels sharing space in Esquire’s ratings basement include never-heard-of Pop, Reelz, and Destination America.

For the tens of viewers that cannot miss Esquire’s original shows, including  “Edgehill,” an investigative series about a 1998 unsolved murder of a Yale undergrad, no worries — it and other shows including “Borderland USA,” “Knife Fight,” “Brew Dogs,” and “Best Bars in America” will be ready and waiting for on-demand viewing on its website, where it may actually attract a larger audience.

The cable TV lineup comes at an ever-increasing cost for subscribers, and low-rated cable networks that force their way on the dial in bundles with more popular cable networks are partly responsible for the cord-cutting trend. Many customers are finding they can live fine without hundreds of cable channels they pay for and never watch, and as cancellations continue to grow, some studios admit it may be time to slim down the cable package and move low-rated cable channels to on-demand, online viewing instead.

Frontier Refuses Refunds When Its TV Package Gets Slimmed Down By Contract Dispute

Phillip Dampier January 16, 2017 Competition, Consumer News, Editorial & Site News, Frontier 2 Comments

Frontier FiOS TV customers in the Seattle area are still paying the same price for a cable television package missing one of its most popular channels and the phone company won’t lower the bill.

Since the New Year began, a retransmission consent dispute between Frontier Communications and Sinclair Broadcast Group — the nation’s largest station group owner, has meant customers can no longer watch KOMO-TV (ABC) in Seattle on their Frontier FiOS lineup.

Daily Herald columnist Julie Muhlstein pondered if that should inspire more Washington residents to retaliate with some cord cutting of their own, especially after Frontier Communications delivered an unsympathetic response to the questions many cable customers ask when channels suddenly vanish from the lineup – why isn’t the bill going down?:

Not only is FiOS my source of TV at home, The Daily Herald has a Frontier hookup. For now, there will be no watching KOMO News or ABC on our newsroom TV.

I don’t watch “The Bachelor,” but that’s not the point. Shouldn’t all local affiliates of major commercial broadcast networks — particularly the traditional big three, ABC, CBS and NBC — be the minimum of what cable providers offer? I think so.

And if Frontier Communications offers less, shouldn’t monthly bills be reduced? I think so.

That’s not the way the business works, said Javier Mendoza, director of communications for Frontier Communications. Mendoza confirmed Tuesday that Frontier’s agreement with Sinclair Broadcast Group, Inc. has expired. Sinclair owns Seattle-based KOMO TV, the local ABC affiliate.

“FiOS occasionally changes its channel offerings. That’s covered in our customer service agreement,” Mendoza said. “Such programming package changes are part of normal business and no discounts are available.”

In other words, tough luck and no refunds. Watch something else.

Phillip Dampier: TV retransmission consent disputes will eventually cost both sides money and customers.

Frontier may be its own worst enemy deleting major network affiliates from the lineup, because for many subscribers, those are the channels that keep them subscribed to a bloated, overpriced cable television package that includes dozens of channels they will never watch. Once off the lineup, customers begin searching for alternatives, and something as simple as a good over-the-air antenna can restore free television channels that now cost many cable subscribers several dollars a month only because they travel across a wire or through a satellite dish.

Sinclair, for its part, isn’t terribly sympathetic to the consumer either, demanding an ever-increasing amount of compensation from cable and satellite providers to carry their local stations on the lineup.

Barry Faber, Sinclair’s executive vice president for distribution and network relations, says their asking price was perfectly reasonable for other providers (even though many promptly pass those fees on to consumers in the form of a ‘Broadcast TV Surcharge’). Faber implied Sinclair offered a ‘take it or leave it’ price and Frontier left it.

“They just decided they don’t want to pay that amount. That’s their decision,” Faber said. “It’s up to subscribers to decide what they want to do. If I were a subscriber, I’d think about leaving them.”

Unfortunately for Sinclair, if subscribers go back to using an antenna for television, they will effectively no longer be filling Sinclair’s bank account either, because watching over the air television is still free, at least until someone tries to charge viewers for that as well.

Today is Last Day to Grab 100+ Channel DirecTV Now Promotional Package for $35/Mo

Starting tomorrow, new customers signing up for AT&T’s 100+ channel streaming television package will pay $60 a month, up from the $35 promotional price AT&T has been advertising during the holidays.

Today is the last day customers can lock in the $35/month price, and those willing to pay in advance will receive either an Amazon Fire TV Stick (prepay one month) or a 4th generation 32GB Apple TV (prepay three months).

Since launching, DirecTV Now has received mixed reviews. Many customers like the wide range of popular cable channels, and access to HBO and Cinemax for just $5 a month each. But early after launch technical glitches also proved frustrating for many subscribers. Among the most common are cryptic error messages that claim viewers are attempting to stream from outside the U.S. and another that claims customers have too many concurrent streams running. Several app updates have been released to deal with the problems, and complaints seem to be easing.

AT&T hasn’t reported how many customers convert from its free trial to become paying customers, but some analysts remain skeptical if customers without cable television care about a streaming package of linear TV, even at the $35 price point.

Fool.com:

When it first launched, Sling TV seemed like it would be a big hit. That has not proven to be the case possibly because the cord-cutting audience has learned to live without cable and the cord-never folks (people who never had cable in the first place) perhaps don’t miss what they never had.

[…] By putting an end date on this promotion, AT&T can gauge whether enough interest exists in live-streaming television for the company to continue. These are products that seem like a good idea, that have so far been rejected by the marketplace.

That may be because even the top packages from the live-streaming services have holes compared to cable. In most cases they are missing at least some broadcast networks and their interfaces — while not bad for a digital product — are clunky compared to just flipping around with a remote control.

It’s also very possible that cord-cutters and cord-nevers are finding their entertainment elsewhere.

Rutledge: Not worried about the competition

The CEO of Charter Communications continues to consider “cable TV alternatives” like Sling TV and DirecTV Now not much of a threat, because customers appreciate the convenience of having local channels and DVR capability available, and cable operators claim they provide a better set-top box experience.

“I think there’s a lot of reasons why the packages, the big rich packages, will stay together, and why people will continue to pursue their historic [consumer] patterns,” CEO Thomas Rutledge told the annual Citi 2017 Internet, Media and Telecommunications Conference in Las Vegas.

For many ordinary cable TV customers, taking the final step of canceling cable TV has been more psychologically difficult than dropping services like a landline phone because the alternatives available in the marketplace do not yet match the quality and convenience of the cable package.

AT&T apparently also believes a-la-carte cable TV sounds better in theory than practice, considering its marketing efforts have focused on a cable television replacement that most closely resembles traditional cable’s bloated TV lineup. Sling TV’s slim package has not been as successful in the marketplace as some investors had hoped.

For AT&T, there may be more at stake than just a standalone streaming television package. The company announced last week it planned to provide DirecTV Now over its 5G wireless network it plans to test in Austin later this year.

AT&T wants to see how 5G networks manage heavy video streaming traffic, according to a company news release. The development of 5G, which can achieve 14Gbps speeds in lab tests, could be critically important to AT&T’s plan to gradually decommission wired networks in its rural telephone service areas. Should AT&T be able to demonstrate 5G is a more robust replacement for traditional wired communications networks, it could bolster its argument to discontinue wired telephone and broadband service. But it could also mean the eventual end of DirecTV’s costly fleet of satellites in favor of broadband and wireless distribution.

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