Comcast Corp. and Charter Communications Inc. may have to sell their TV services nationwide to fend off online rivals, creating "mayhem" in a cable industry without head-to-head competition, Discovery Communications Inc.'s chief executive said.
Online-only video services from Sony's PlayStation Vue and AT&T's DirecTV Now, which include Discovery networks like TLC and Animal Planet, will eventually pressure cable operators to compete beyond their regional footprints, David Zaslav told reporters Tuesday. Vue, which debuted two years ago, and DirecTV Now, which went live last fall, each have more than 400,000 subscribers, he said.
For big cable operators like Comcast and Charter, selling a bundle of channels to any consumer in the U.S. would upend a long-held tradition of not competing with each other in the same market. While Comcast sells cable service in cities like Chicago and Philadelphia, it doesn't compete with Charter in New York or Los Angeles, an arrangement that allows both companies to invest in their networks without competing directly.
But if the popularity of new web-TV services grows, cable operators may have no other choice but to go nationwide with online versions of their services, Mr. Zaslav said on the sidelines of an event where Discovery previewed its new shows and its annual sales pitch to advertisers. That would not only disrupt its industry but start a "a street fight" between cable distributors and streaming services that have been gaining subscribers, he said.
"Every cable operator is probably lying and waiting, and they need to have their own over-the-top solution," Mr. Zaslav said, using the industry term for nationwide online-TV services.
Cable operators need to be "very careful about pulling the trigger" because they have a compelling regional business, with strong broadband growth and a new Trump administration that appears "quite favorable" to the industry, he said.
Comcast has acquired rights from cable-network owners to offer their channels nationwide, Bloomberg reported last week, citing people familiar with the negotiations. The rights allow the company to sell video service for the first time outside its regional territories. For now, Comcast has no plans to offer a video service nationwide because it still sees opportunity to gain cable-TV subscribers in its footprint, according to a person close to the company.
Matt Strauss, exec VP for video services at Comcast, said at a conference in November that there is more "upside and profitability" in focusing on the company's geographic base than pushing a video-only offering nationwide.
Selling an online package nationwide would "destabilize a very stable and strong growth industry," Mr. Zaslav said. "It's a very tricky challenge."
Comcast and AT&T declined to comment on Zaslav's comments. Sony and Charter couldn't be reached for comment.
-- Bloomberg News