In today's cable television industry, you either get big or get out. With its weekend agreement to acquire the cable properties of the E. W. Scripps Co., Comcast Corp. has reaffirmed its belief that bigger is better.
The $1.58 billion deal, which will bring Comcast's subscriber base to 4.3 million, will make the company the nation's third-largest cable TV operator.
Comcast, which owns cable TV systems serving Baltimore, Harford and Howard counties, will still lag far behind the twin titans of the industry, Tele-Communications Inc. (TCI) and Time-Warner Corp. Both of those giants boast about 11 million subscribers.
But the subscribers the Scripps deal will bring to Comcast provide 792,500 more reasons why the Philadelphia-based company is likely to be one of the survivors when the consolidation trend in the cable industry finally sputters out.
Like its rivals and Continental Cablevision and Cox Cable Communication, Comcast has been eagerly gobbling up midlevel players wherever it can find them. Last year, Comcast added the 550,000 U.S. subscribers of Canada's Maclean Hunter. Cox added the 1.2 million subscribers of Times Mirror Corp. This year, Continental bought out the Colony Cable properties owned by the Providence Journal in Rhode Island.
Steve Effros, president of the Cable Telecommunications Association in Fairfax, Va., said many of the recently acquired cable companies have been ones with between 500,000 and 1 million subscribers.
"The general feeling is you've got to be above a million subscribers to be in the big leagues in the major markets," he said.
The industry consolidation is driven by the realization that cable companies will need considerable financial muscle and technological expertise to meet the expected challenge from the nation's telephone companies. Networks will have to be upgraded to provide additional channels and speedy Internet connections, and complicated switching systems will need to be installed as cable companies prepare for their own assault upon long-standing telephone monopolies.
"There's a feeling that we're going to have maybe six or seven major cable operators, plus the phone companies," said Peter Krasilovsky, senior analyst at Arlen Communications Inc. in Bethesda. "The little guys might survive, but they'll never really be profitable operators."
The Scripps deal does not bring Comcast one of the things cable companies are looking for these days -- a "clustering" of its current markets so that separate systems can share facilities and marketing expenses. Scripps' properties are far from Comcast's Northeastern strongholds -- concentrated around Knoxville and Chattanooga, Tenn., and Sacramento, Calif.
But those disadvantages could be outweighed by the fact that Comcast's purchase of Scripps properties means that none of its rivals adds those subscribers. Scripps' Sacramento holdings, with 230,000 subscribers, are viewed as an especially attractive acquisition, said John Mansell, senior analyst at Paul Kagan Associates in Fairfax.
Mr. Mansell also noted that, even if the Scripps systems are not a good long-term fit for Comcast, they could represent attractive trade bait.
For instance, if TCI were to decide that some of the Scripps properties would fit in well with its systems, Comcast might be willing entertain an offer involving TCI's Baltimore system, which it has openly coveted.
But a Comcast spokeswoman said that, while the company would listen to any offers, that was not the reason Comcast acquired the systems. She said the systems are already well clustered by Comcast's standards.