Tales of the Sausage Factory: Comcast pulls out of Disney Deal, But More Cable Consolidation Coming

Comcast has withdrawn its offer for Disney. Much as I’d like to claim this as a kill for the public interest community as some of my colleagues have, I think that was only part of the calculus. But don’t worry all you big media fans, because with Adelphia on the chopping block and MGM being courted, we can count on the media feeding frenzy to continue.

So Comcast withdrew its bid for Disney. One can never be sure exactly why, of course, or whether this is just a dodge until King Eisner is overthrown.

And I do think the public interest community can claim some credit. As I have posted before, the current political climate for big media mergers is very hostile. That drives up the price of the merger, and may even spill over into other areas like access to affiliated programming by competitors, whether Comcast would give Disney’s digital content preference over independent content, and Comcast’s broadband Internet package would all come into the mix.

But there are other economic concerns. Many folks thought the Comcast bid too low, and expected it would have to offer a higher per share price. Many investors who got burnt on the “content synergies” story when AOL and Time Warner merged have become very suspicious of vertical integration mergers with strong cultural differences.

But we can expect more deals in the making. As part of its bankruptcy restructuring, Adelphia Cable is now up for sale, in whole or in part. The Wall St. Journal today (4/28 ) reports that Time Warner is likely to bid on pieces. Comcast may as well (Adelphia covers contiguous territory in some places, which is valuable to cable operators).

If Comcast bids, it will run into some big regulatory hurdles, since that will push it over the FCC ownership limit. Technically, there is no ownership limit in place since it was struck down more than three years ago by the D.C. Circuit, but for various political reasons everyone pretends there is a limit, and pretends that the mergers come in under the limit. At this point, even the FCC’s denial of reality can’t stretch far enough to find Comcast-Adelphia under the non-existent limit.

And, for those looking for hot vertical integration, there is always MGM. Sony is cottoning up to them, which solidifies the content cartel. But Comcast could make a move if it is still hot for vertical integration.

So, as I always say,

Stay tuned . . . .