According to a report in The Wall Street Journal, the Federal Communications Commission (FCC) is now probing whether the large cash-rich cable companies like Comcast Corp. (CMCSA - Free Report) and Charter Communications, Inc. (CHTR - Free Report) are adopting a certain clause in their agreement with media companies. The clause in question inhibits these media companies from sharing their TV content with any online video streaming provider. The cable companies believe that the non-availability of TV programs on the online platform will help curb competition.
According to industry experts, pay-TV companies – mostly cable TV and satellite TV operators – ink agreements to carry the costs of the media and television network companies, in exchange for inserting such clauses as described above. In some cases, media companies are allowed to share their content with ‘On Demand’ streaming services only if the prices that the cable firms pay are lower than that of the former.
The FCC recently summoned leading media companies like The Walt Disney Company (DIS - Free Report) and Time Warner Inc. to discuss the issue. Both the companies issued a statement asking the FCC to consider such issues that are detrimental to the media industry.
Focus on Time Warner Cable-Charter Merger
With this ongoing issue, the FCC is most likely to focus on the impact that the impending Charter Communications-Time Warner Cable Inc. merger will have on the industry. The said merger, if completed, will create a duopoly in the cable TV industry that may potentially lead to more blockages of content distribution to online streaming providers in the future. Moreover, Dish Network Corp. (DISH - Free Report) has reiterated that the merged entity would be having almost 24 million customers and would attempt to throttle the prospects for DISH’s Internet TV service – Sling TV.
The Bottom Line
Technological advances and increased usage of mobiles and other handheld devices recently bumped up demand for the ‘On Demand’ video streaming service providers like Netflix Inc. (NFLX - Free Report) and Hulu.com. This has resulted in customer losses for the pay-TV operators in recent times. The pay-TV industry has been striving hard to protect its financial interests. The inclusion of these restrictive clauses was one such measure. However, with such moves now under the FCC’s scanner, we can expect fair competition in the near future.
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