The Proposed Merger of Comcast and Time Warner Cable

Comcast and Time Warner Merger Case Study
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Comcast and Time Warner Merger Case Study
In February 2014, Comcast and Time Warner Cable forged a $45 billion deal that would enable the former to acquire 100 percent of Time Warner shares. The merger would also see the companies own the largest portion of Cable TV and Internet provision in the United States. The notion that the merger would jeopardize competition in cable TV and broadband internet service led to a massive opposition of the idea from the outside forces. Although representatives from both parties were confident that the deal meant good for the industry, some legislatures and authorities had legitimate concerns, some arguing that the monopoly that the companies were seeking could be harmful. The deal also appeared to be a lucrative business transaction for those partaking in the merger, with the then Time Warner CEO reportedly looking forward to walking away with over $79 million as a payoff. Eventually, the Department of Justice resorted to suing the company that led to the eventual cancellation of the deal.
The merger between Comcast and Time Warner Cable is a typical example of vertical integration in business because the ultimate goal of the merger is to gain control in the same industry segment of content production and delivery. Vertical integration has both advantages and disadvantages. A merger between Comcast and Time Warner Cable allows the company to leverage on arising economies of scale as well as improve the operational efficiency in content delivery and production. On the flip side, vertical mergers between companies in the same industry domain create impenetrable barriers to new entrants into the market, greatly damaging the competition. The large company formed through the merger would be in control of the prices and standards that may negatively impact the industry.
Before the ...