Last Saturday, AT&T formally announced its intentions to purchase Time Warner Inc. for about $85.4 billion in cash ($107.50 per share). This merger follows AT&T’s acquisition of DirecTV in 2015. Pending regulatory approval, this merger will allow AT&T to simultaneously be a distributor of content as well as a carrier of the content. This would also make it one of the largest media deals in U.S. history.
An acquisition allows AT&T access to a treasure trove of content. According the official announcement:
“Each of Time Warner’s three divisions is an industry leader: HBO, which consists of domestic premium pay television and streaming services (HBO Now, HBO Go), as well as international premium & basic pay television and streaming services; Warner Bros. Entertainment, which consists of television, feature film, home video and videogame production and distribution.”
AT&T is already the largest pay-TV subscriber after its DirecTV acquisition and owning Time Warner would give AT&T significant leverage to other carriers who pay Time Warner to distribute content from Time Warner on their respective networks. The move would also enable AT&T to offer priority and/or exclusive content to DirecTV or AT&T Wireless subscribers (think free HBO Go on your smartphone with an AT&T Wireless subscription).
Obviously, a transaction this massive requires regulatory approval from the Federal Communications Commission (FCC) and the United States Department of Justice as both of those agencies would likely look for any impact to competition and consumers. Additionally, the merger is coming under attack from major political figures including both major party presidential candidates. According to CNN, Republican Donald Trump denounced the merger as “an example of the power structure [he’s] fighting” and that his administration would block the merger, citing it as “too much concentration of power in the hands of too few”. This comes somewhat as a surprise considering most Republicans are not in favor of government intervention in private businesses. A Hillary Clinton spokesman weighed in as well saying, “We think that marketplace competition is a good and healthy thing for consumers and so there’s a number of questions and concerns that arise in that vein about this announced deal”
A deal this massive will certainly be heavily scrutinized by the government and citizens alike. Only time will tell if such a large merger will benefit consumers in the long run.
