NEW YORK - Charter Communications' announcement Tuesday that it is buying Bright House for $10.4 billion is the latest big deal in the pay-TV industry.
Companies want to merge as costs for channels such as ESPN have shot up, while their video subscribers have dipped and online video providers such as Netflix become more popular. Combining gives them more negotiating power against programmers such as the Walt Disney Co.
Last year, Philadelphia-based Comcast said it was buying Time Warner Cable for $45 billion, and AT&T is purchasing DirecTV for $48.5 billion. Both deals are under long-running regulatory reviews.
The Comcast-Time Warner deal has raised concerns from competitors and consumer and Internet advocates, who say too much of the country's Internet access would be under one company's control. They also say it could hurt growing online video providers such as Netflix, who would need its pipes to get to consumers, and lead to higher prices.
Comcast says that it works cooperatively with online video companies such as Netflix and that content providers, not distributors like itself, currently have bargaining advantages.
Advance/Newhouse - the parent company of Bright House - will own 26.3 percent of the combined company. Charter is paying it $2 billion in cash and the rest in stock and preferred units that convert into common stock of the new company.
Charter's buying Bright House, which hinges on regulators approving Comcast's purchase of Time Warner Cable, is "kind of small in the scheme of things," says John Bergmayer, a senior staff attorney at Public Knowledge, a nonprofit group that advocates for Internet access. "Trends in consolidation are always worrying, but this deal by itself is not as bad as some other deals out there."
Public Knowledge is against Comcast's buying Time Warner Cable. Most analysts expect the deal will go through, but some have become less optimistic.
Charter and Bright House said Tuesday that the deal would create the second-largest U.S. cable operator. But they are not in any of the same markets, so their subscribers would not lose the ability to switch to a competitor cable company.
The pay-TV industry overall has been slowly shedding video subscribers in recent years, according to an analysis by MoffettNathanson analyst Craig Moffett, who expects that to continue. New options for video that appeal to "cord-cutters" have sprung up in recent months, such as a Web version of HBO, an online set of about 20 channels from Dish called Sling, and a $50-a-month service from Sony.
Charter Communications Inc. has been trying to get bigger. It wanted to buy Time Warner Cable Inc. but got outbid by Comcast Corp. With the Comcast-Time Warner deal, however, it is already growing substantially, paying $7.3 billion for 1.4 million Comcast subscribers and getting a one-third stake in a new cable company comprising 2.5 million existing Comcast customers. It's also swapping 1.6 million customers with Time Warner Cable.
Charter, based in Stamford, Conn., is currently the fourth-largest cable operator in the United States, with 4.3 million video customers, mostly in the Midwest, West, and South. Bright House Networks L.L.C. is the sixth biggest with two million customers, mostly in Tampa and Orlando, Fla., but also in Alabama, Indiana, Michigan, and California.