Time Warner Essay
In actuality, Time Warner is one of the leading media companies in the US holding a strong position in the publishing and cable television. However, at the moment, the company undergoes considerable changes and restructuring in terms of the development of new effective marketing strategies which can help Time Warner to enhance its competitive position and provide the company with an opportunity to accelerate its business development. At this point, one of the main issues that the company faces at the moment is the merger of Time Warner Cable with Comcast, which opens wider opportunities for the further business development of the company. At the same time, the company attempts to separate its publishing business, which has become unprofitable for the company in recent years and now is one of the major causes of the slowdown of its business development. Therefore, Time Warner undergoes consistent changes aiming at the improvement of its marketing performance through reorganisation, structural changes, separation and the merger that the company expects to lead Time Warner to the new stage in its business development and help the company to break through in the highly competitive business environment.
Recently, Time Warner has announced the merger of its Time Warner Cable with Comcast, the leader of the cable television (Quain, 2). In fact, the deal will involve the sale of Time Warner Cable to Comcast. At this point, it is worth mentioning the fact that, at the moment Time Warner still consist of two major units, the publishing business and cable television unit. Time Warner Cable represents the cable television unit of the company and this unit plans to merge with Comcast. This is an important decision in the business development of the company because it opens new opportunities for the business development of the company after the merger. The merger will involve Comcast, the largest cable television company of the US, and Time Warner Cable, the second largest cable television company in the US (Quain 2). Therefore, their merger will put them in the advantageous position in the US market, while their rivals will hardly be able to reach such a market share as the merged company uniting two behemoths of the industry.
In fact, consequences of the merger are apparently very attractive for both Comcast and Time Warner Cable because the new company will have about 70 million subscribers nationwide that is about 30% of the total market share in the US (Quain, 3). The consistent market expansion opens wider opportunities for Time Warner Cable after the merger because the new company will control almost a third of the US cable television market. Therefore, the company can set the pace in the industry, while its further growth and expansion will enhance the position of the new company in the market even more.
In such a situation, rivals of the company turn out to be in the absolutely disadvantageous position because not a single rival of the merged company, such as Charter Communications for instance, can even challenge the position of the merged company, while outpacing it is virtually impossible, at least in a short-run perspective. The dominant position of the new company opens wider opportunities for the faster market expansion and taking even a larger share of the market. As a result, Time Warner Cable can make a breakthrough in its business development in the cable television market, in case the merger with Comcast completes successfully. This is why both companies are so interested in the merger because, instead of the fierce rivalry, they can unite their efforts to take not just the lead in the industry but to become the company dominating over the cable television industry.
Furthermore, the merger apparently secures the position of the company in the market because rivals will be unable to outpace the company, unless they introduce innovations that will revolutionize the industry. At the moment, there are no such rivals of the company and Time Warner Cable can take the lead after the merger with Comcast. The company can also raise barriers to entry that will decrease the risk of the emergence of new rivals that can potentially threaten to the position in the company and tighten the competition in the industry.
On the other hand, the merger may raise the problem of the possible monopolization of the cable television market by the merged company since the company will take the consistently higher share of the market compared to rivals. Moreover, in a long-run perspective the company can increase its market share even more and take dominant or monopolistic position in the market. The monopolization can occur faster, if the company continues the strategy of mergers. However, the monopolization of the market or taking the absolutely dominant position raises the risk of the violation of the anti-trust law and investigation of policies conducted by the company. Therefore, in case of unfair on unreasonable policies of the company, when it takes the dominant position in the market, the company can face the risk of the investigation of its policies under the anti-trust legislation. The company may also face the risk of lawsuits, if its policies will breach existing anti-trust regulations and legal norms. If the company sets unreasonably high price or forces customers to buy extra-products which they do not want to buy, the company is likely to face considerable problems because of the violation of the anti-trust law, as was the case of Microsoft, for instance.
However, Time Warner attempts to optimize its performance not only through the merger with Comcast but also through restructuring. For instance, Time Warner Cable spinoff has actually nothing to do with Time Warner since Time Warner Cable has focused on its own development, while Time Warner is a different company now (Flint, 1). Nevertheless, neither company plan to change their name so far, unless the merger agreement of Time Warner Cable and Comcast may require such a change (Flint, 3). At the same time, the merger is a part of the large scale plan of Time Warner to undergo consistent restructuring. The merger is one of the key elements of the restructuring which allows the company to accelerate its business development through focusing on the cable television market mainly and taking the lead in the market through the merger. This strategy is efficient because Time Warner prioritizes the most profitable part of its business and, more important, enhances its position in the market through the merger.
Moreover, Time Warner is also considering the separation of its publishing business, although at the moment, the company is the largest magazine publisher in the US. Nevertheless, the company decided to separate Time Inc. last year (Team, 2). This decision complements the decision of the company to merge Time Warner Cable with Comcast. To put it more precisely, the company refuses from its publishing business which future may be uncertain for the company and focuses on cable television market entirely. Such a shift maximizes profits and benefits of the company.
At this point, it is worth mentioning the fact that the move to separate Time Inc. was, in all probability determined by the steady decline of the publishing business of the company. In such a way, the decision to separate Time Inc. from Time Warner was driven by the attempt of the company to preserve only the most prospective elements of its business and become a pure media company. In fact, this means the separation of Time Inc. from Time Warner is a strategically important step, especially in the light of the upcoming merger with Comcast. When the company has just started the procedure of separation, experts (Team 6) believed the separation was driven by pragmatic concerns of Time Warner and its attempts to save costs and attract investors due the better financial performance of the company free of the publishing business burden. What is meant here is the fact that initially, experts (Team, 6) stood on the ground that Team Warner is just trying to save costs and make its financial performance healthier. The step was quite reasonable in light of the declining publishing business which slowed down the business development of Time Warner.
On the other hand, cable television was and still is profitable business for the company. More important, cable television is more attractive market for the company and the business of Time Warner in this market keeps growing (Flint, 5). This is why the refusal from the publishing business of the company allows Time Warner to focus entirely on the cable television market. At the moment, the separation of Time Inc. is not completed so far but the company has already started negotiations on the merger with Comcast and this step reveals the intention of the company to accelerate its business development through the enhancement of its position in the most profitable industry. Moreover, unlike publishing business, cable television is likely to keep growing in the future. This is why the company can maximize benefits from the merger and shifting its business to the cable television industry mainly.
In such a context, the recent merger of Time Warner Cable is a reasonable step since after the completion of the separation of Time Inc. which is likely to be completed this year, the company will merge its more perspective unit, Time Warner Cable, with Comcast becoming one of the leaders in the industry and enhancing its position in the market. This step is strategically important for the company because it elevates the company to the new level in its business development and helps the company to take the lead in the industry and keep growing in the future since the cable television industry is growing.
However the merger with Comcast is driven not only by business concerns but also by the lobbying power of Comcast which can accelerate the further business development of Time Warner Cable after the merger (Shields, 3).
At the moment Comcast invests abundantly into lobbying and the company has increased the number of lobbyists in the 2000s consistently. The merger with such a company opens new opportunities for Timer Warner Cable to enhance its marketing position, enter new markets and increase its market share.
In such a context, there is no surprise that Charter Communications, another behemoth of the media industry, has failed to negotiate the merger with Time Warner Cable and has lost the deal to Comcast (Fung, 4). Charter Communications does not have such a strong lobby as Comcast and, therefore, cannot offer Time Warner Cable such good prospects for the further business development as Comcast does.
On the other hand, the merger of Time Warner Cable and Comcast can raise substantial difficulties in face of both companies because the merger will inevitably involve the restructuring of the new company. Comcast and Time Warner Cable have their own organizational structure and culture, while the merger will raise the problem of their mutual integration. In such a situation, the risk of conflicts within the new, merged company arises because employees working in the company may be resistant to changes or oppose to changes. As a result, the risk of the failure of the merger arises because if employees of the company resist to the change, the company may face substantial difficulties with the overall successful implementation of the change.
Furthermore, the restructuring of the company may raise the problem of job cuts and loss of well-qualified professionals, who, in face of the uncertainty in their future after the merger, may just transfer to another company, where they can be absolutely certain in their future. The loss of well-qualified professionals may also create substantial difficulties which the new company will have to overcome. Therefore, the merger is not always the right choice and, in spite of the obvious certainty of Comcast and Time Warner Cable in the overall success of the merger, there are still some risks and threats which may lead to the failure of the merger. At this point, it is possible to refer to other cases when mergers have failed, such as the case of Daimler-Chrysler which was considered to be one of the most prospective and strong alliances in the automotive industry but eventually ended up into the split of the two companies.
Thus, at the moment, Time Warner undergoes substantial changes. The company has initiated the separation of Time Inc. which comprises the publishing business of the company. At the same time, the company is about to merge with Comcast that means the shift of Time Warner from diverse business to the relatively narrow focus of the company on cable television business mainly. In such a situation, the refusal from the publishing business is reasonable to enhance the financial performance of the company. Moreover, the merger with Comcast will allow Time Warner Cable to take the leading position in the cable television industry that keeps growing. Therefore, the company will not only optimize its performance but also become the leader of the fast growing industry that will shift the business development of Time Warner to the new, upper level.
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