Comcast-TWC Deal Floundered Amid Rise in Customer Experience ExpectationsMonday, May 4, 2015, 1:40 PM ET|Posted by Will Richmond
On last Friday's podcast, Colin and I discussed the failure of the $45 billion Comcast-Time Warner Cable merger. I asserted that a key reason the deal didn't get approved was due to the rise in customer experience expectations. Today I'm going to flesh that out further, and describe why customer experience is becoming key to defining the video industry's winners and losers.
First, it's important to understand that the traditional notion of "customer service" has been supplanted by the far broader concept of "customer experience" - the TOTAL perception of ALL of our touchpoints with any company we do business with. Because we now live in an unprecedented time for humanity - when everything we need or want is just a handful of clicks away, anytime we choose, the bar has never been higher for our expectations of customer experience.
In this context of high expectations, any time any of us now has an experience that falls short, it is not just more noticeable, but also more objectionable. And that's where the Comcast-TWC deal's issues come into focus. From the time the deal was announced in February, 2014 to when Comcast pulled the plug, I read dozens of article covering the deal.
Invariably there were 2 things that always came up: concern about the percentage of U.S. broadband subscribers the combined company would have, and Comcast's woeful customer service. What almost NEVER came up in the coverage were the billions of dollars in investments that Comcast has made over the years that have fundamentally reinvented the company's services, nor the how its investment program would help TWC customers.
Comcast has been a leader in broadband upgrades (accounting for 56% of connections over 25 mbps, even though it only has around 25% of total U.S. broadband subscribers), TV Everywhere, VOD content selection and set-top box hardware with X1, to name just a few areas. These are key contributors to defining Comcast's customer experience. Nonetheless, the company's underwhelming customer and technical service, plus its packaging and pricing, are what ultimately define it in the eyes of many of its customers, and arguably for regulators.
As regulators evaluated the deal, they were of course concerned about the concentration of broadband subscribers under one company, and the potential gatekeeper role it could play. But I'd argue a lot of this concern would have been ameliorated in a hypothetical, alternate world where Comcast was among the "most admired" companies in America, instead of near the bottom of J.D. Power's annual rankings.
In that alternate world, regulators may well have WELCOMED the deal, because it would have been perceived as giving TWC's subscribers access to both world-class technology and world-class customer experiences. That would have been an extremely compelling argument for Comcast to have made in the deal's defense. The deal still may have failed, but I think it would have had a much better chance of approval.
Fantastic customer experiences are all around us these days; all one needs to do is walk into an Apple store, use Netflix a few times or have Amazon customer service call back seconds after entering your phone number online. What's confounding to me is that Comcast (and others) must have been observing the rising importance of customer experience, yet they haven't been able to figure out how to deliver it themselves.
Why Comcast didn't hire, for example, the top customer care executive from a most admired, consumer-focused company like American Express or Disney at least 5 years ago, and charge that person with completely overhauling Comcast's customer experience, is a mystery. Instead, only last September, did Comcast belatedly elevate a well-respected internal executive (Charlie Herrin, who oversaw X1's development) to this role. On this morning's earnings call CEO Brian Roberts again said customer experience will be a priority, which he and other Comcast executives have been saying for years.
Ultimately, the Comcast-TWC deal's failure is an illustration of the ascendance of strong customer experiences in driving a company's reputation. Not providing them can home to roost in many ways, including getting regulatory approvals for deals.
More broadly, customer experience is now defining winners and losers in the video industry. Companies like Netflix, Hulu and Amazon, which all place a heavy emphasis on customer experience, are all growing quickly, while pay-TV operators are losing video subscribers and TV networks are losing audiences.
Categories: Cable TV Operators, Deals & Financings
Topics: Comcast, Time Warner Cable