Competition in any business can grow fierce. It can cause damage to competing companies if they are not ready. In the case of business giants, the competition can sometimes affect the bottom line. To resolve this, some companies prefer to buy out the other in order to create a bigger and a more formidable business entity. It also helps dissolve the competition and improve on increasing revenues. This may be the some of the reasons behind the recent Comcast-Time Warner Cable merger.
A few days ago, reports swirled about the two cable giants planning a merger and become the biggest cable business entity in the country. It was eventually confirmed when Comcast issued a statement that it is buying Time Warner Cable in a multi-billion dollar deal. How much? It is worth about $45 billion, with Comcast buying Time Warner Cable stocks at around $159 per share. The deal is still under federal scrutiny and may have the chance of not even pushing through, deeming a deal that may be too big for comfort.
Many say that the deal will create a monopoly in the cable business as it stems to dissolve the competition. But both companies state that their businesses do not directly compete with each other as they operate in different zip codes. But the merger does stand to create the biggest cable operator in the country, combining the reach of the largest and the second largest cable company into a single business. So despite being bigger, it will not create a monopoly in the business since the merger only consolidates each company’s market reach and strengths into a single company. There are other competitors in the market that they need to deal with.
Aside from cable operators like Comcast and Time Warner Cable, there are other players in the market that compete for more customers. There is satellite TV as well as online video content provider Netflix that offer somehow similar content to customer using different platforms. In a way, the Comcast and Time Warner Cable merger may be seen as a way of strengthening the legacy cable business as it competes with other emerging video content providers in the market. Whether the actual merger deal will push through still remains to be seen. It will still take several months for the federal authorities to review the deal for approval.