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Urge to Merge

Comcast’s pending merger with Time Warner Cable, expected to close by year-end, will create a 30 million-subscriber powerhouse with customers in nearly every major U.S. city — including New York, Los Angeles, Chicago, Miami, San Francisco and Dallas — and has spawned other mega-deals in the space.

Just weeks after Comcast’s $69 billion deal for Time Warner Cable was announced, AT&T made a $67 billion bid to control satellite-TV behemoth DirecTV, which would give the telco a nationwide scope as well as create a 26 million-customer No. 2 rival to Comcast-TWC.

Not to be outdone, Charter Communications, whose own pursuit of TWC was bested by Comcast’s February bid, negotiated a series of swaps, sales and spinoffs with the nation’s largest operator that will eventually give Charter control of an additional 3.9 million subscribers in major markets in the Midwest (Minneapolis and Indianapolis) after the larger deal is completed. Charter also is expected to be a major consolidator of smaller cable operators, with Cable One, Mediacom Communications and Suddenlink Communications among its possible future targets.

All the consolidation talk has programmers in a quandary: Should they bulk up to compete against what is becoming an increasingly concentrated distribution base? Or should they ride the storm, believing that content will be even more valuable as new over-the-top distributors come on the scene?

While there is no guarantee that all these deals will pass regulatory scrutiny — should that occur, more than 60% of TV households and the vast majority of broadband homes would be controlled by just three companies — most analysts are betting that content consolidation is inevitable.

Just how that will play out is anyone’s guess, with some analysts advocating for the joining of already huge content companies like The Walt Disney Co., 21st Century Fox, CBS, Viacom and Time Warner Inc. Others believe smaller content providers such as AMC Networks, Scripps Networks Interactive and Discovery Communications are likely to be the first to fall.

21st Century Fox is expected to be a major player in consolidation, especially if it tightens up its European satellite-distribution assets. Fox’s 40%-owned British Sky Broadcasting unit said it was in early talks to buy Fox’s interest in Sky Italia and Sky Deutschland, assets valued at about $14 billion, which could give the programmer a hefty war chest for acquisitions.

Others such as Discovery, Disney and Time Warner Inc. could look to M&A as a means to increase its affiliate-fee leverage and bolster ratings.

To help track these mercurial developments, see the scorecard below.

To view this infographic, click here.