Comcast chief financial officer Mike Cavanagh addressed the elephant in the room at the JP Morgan virtual Technology, Media & Communications conference Wednesday, telling the audience that while the company will look at every opportunity, it doesn’t believe it needs to do a big merger deal to survive.  

Cavanagh said that Comcast has the bandwidth to do deals and would look at any opportunity through a strategic lens. But he said there are other factors to consider, including whether an asset can be had for the right price, will add value and can help further execute the overall business strategy.

"Obviously, we know how to do that if necessary," Cavanagh said. "But hear me loud and clear: We like the hand we have, and M&A is not an answer. We like the hand we have without M&A, but we’ll obviously do what’s right for shareholders as time passes."

Cavanagh's comments come shortly after John Malone, who agreed to convert his super-voting shares in Discovery to facilitate the WarnerMedia deal, said that Comcast chairman and CEO Brian Roberts had considered merging with WarnerMedia but backed off because of regulatory concerns.  

Analysts have wondered what effect WarnerMedia’s pending merger with Discovery will have on the rest of the business, and several have speculated that it could force companies like ViacomCBS, Comcast, Fox and Disney into looking for big deals. On Wednesday, Amazon said it would purchase movie studio MGM for $8.45 billion, a move that most likely wasn’t motivated by the Discovery deal. But the Amazon/MGM deal is another example of how even large streaming video providers feel they need more scale. 

Comcast, which has about 42 million signups to its own streaming service Peacock, has been under some pressure from analysts who have speculated that spinning off its NBCUniversal programming business would unlock value. At the JP Morgan conference, Cavanagh didn’t talk about spinoffs, but said that making acquisitions doesn’t always lead to success. 

"Just because you own something or buy it from the other guy, it doesn’t mean you’re going to operate it well," Cavanagh said. "So, we’ve been very focused on making sure when we acquire stuff, we do not take lightly the ability to operate well, execute well. And that’s critical if you’re going to go about it that way."

He added that M&A isn’t off the table, but there are other ways to gain scale, including partnering with other providers and investing in more content. 

"We can do what we need to do in a variety of different ways--invest in content as it is appropriate, partner with other people in some markets as it’s appropriate, and certainly we can consider M&A," Cavanagh said. "But there are a whole host of things you’ve got to face up to if you’re going to go down that third route."

Critics of AT&T’s pending $108.7 billion purchase of Time Warner have pointed to the myriad dangers of consolidating large content and distribution companies – but some analysts say the environment is already headed in that direction.

The U.S. Dept. of Justice has already said it would block the AT&T-Time Warner merger, with the parties scheduled to go to court to state their cases on March 19. Whatever the outcome, the rush for scale won’t be slowed, UBS Securities telecom analyst John Hodulik said.

Related: Feds Lay Out Court Strategy for Blocking AT&T-Time Warner

Hodulik — who believes the deal will be approved — cited in a research note the steady decline of traditional TV distributors, the accelerated push for heft and the inevitable move to direct-to-consumer services as catalysts for more deals. Subscribers to traditional pay TV providers have declined by about 50% since 2010 and dipped 14% in 2017 alone, he noted.

OTT Has Changed Everything
“OTT is clearly the future of video distribution,” Hodulik wrote, and is likely the main driver behind the mega content deal between The Walt Disney Co. and 21st Century Fox, Comcast’s unsolicited bid for British satellite TV company Sky and CBS’s moves to revisit a recombination with corporate sister Viacom.

Hodulik argued that government fears that a combined AT&T-Time Warner would limit content choices and drive up prices run counter to the OTT-inspired shift. And if AT&T isn’t allowed to purchase Time Warner, another company will.

Earlier this month, at an industry conference, CBS chief operating officer Joe Ianniello called the current environment an “arms race” to accumulate content needed to drive direct-to-consumer products.

Ianniello said CBS All Access, the broadcaster’s own OTT product, will add six to seven new shows in the next 12 months, just to compete with the likes of Netflix and other providers. “We’re doubling down,” he said.

Hodulik thinks the land rush for content is warranted. He predicted that virtual multichannel video programming distributors such as Sling TV and DirecTV now will nearly triple their subscriber bases from about 5.5 million in 2017 to 15.1 million by 2020.

Watch MCN: vMVPDs by the Numbers

At the same time, pay TV subscribers, down 3.6% in 2017 to 95.4 million customers when vMVPDs are included, are expected to dip another 4.4% in 2018 to 91.2 million, according to the analyst.

Cable Gets Into the Act
Hodulik said traditional distributors dipping their toes in the vMVPD waters — like Comcast and Charter Communications — will make the full plunge in the next few years.

Comcast introduced Instant TV in late September, a package of broadcast and education channels for $18 per month, to compete with Sling TV and DirecTV.

Charter unveiled its “Choice” package — 25 channels for $21.99 per month — earlier this year.

Mostly because of a desire not to cannibalize existing, higher margin businesses, the offerings haven’t been broadly offered. That is about to change, especially as streaming services gain scale, Hodulik believes. He said he thinks it won’t be long before their OTT offerings mirror their existing video packages.

“We believe scale benefits will eventually lead cable to offer streaming TV services out of region, likely in conjunction with a wireless offering,” he wrote.

Taking a page from the specificity of digital media, NBCU Universal says it will provide its client base with commercial inventory that better reaches their specific consumer groups via its new Audience Targeting Platform.

ATP will integrate set-top viewing data from several third-party sources with first- and third-party consumer data to identify top-performing, client-specific inventory in select categories across its portfolio of cable channels and NBC broadcast network, which feature the James Spader-starrer, The Black List (pictured).

. 

By melding TV viewing data with other consumer information, NBCU believes it can more effectively allocate high value television inventory to optimize client media plans by combining the benefits of  targeting with the medium's audience scale.  This will enable marketers to go beyond conventional age and gender demographics in selecting audiences and move toward metrics tied closely to brand-specific KPIs.

“Marketers no longer have to choose between digital media’s data-driven targeting and television’s scale and unparalleled ability to communicate via great storytelling,” said Linda Yaccarino, chairman, Advertising Sales and Client Partnerships, NBCUniversal.  “Now, we are unique in our ability to deliver on our promise of targeting nationally and insights-driven program selections across the entire NBCUniversal portfolio. Video content is more powerful in the presence of data.”

The ATP gambit follows the company’s launch last year of NBCU+ Powered by Comcast, which represented the first offering by the MSO and its programming arm to jointly deliver measurement and targeting solutions.