After two days of “people close to situation” leaking information about a possible merger between AT&T and Time Warner Inc., the two companies have confirmed the deal which is valued at around $85 billion.
The merger combines the vast Time Warner media empire — which includes cable networks (HBO, TBS, TNT, CNN, HLN, among others), movies and home video (Warner Bros., New Line), comic books (DC, Vertigo), and other ventures — with the nation’s largest satellite provider, its second-largest wireless provider, and the operator of a sprawling landline telecom network.
As we’ve mentioned before — because it can get confusing — Time Warner Inc. is not Time Warner Cable. Time Warner spun TWC off into its own company in 2009 and was recently acquired by Charter. Additionally, Time Warner Inc. is not Time Inc., the publishing mega-house (People, Sports Illustrated, Fortune, among others); that division of the company was spun off in 2014.
The confirmation of the merger jives with earlier reports that said Time Warner shareholders would get around $110/share in the deal. The final number, as announced by AT&T, is $107.50/share.
AT&T says the boards of both companies gave unanimous approval to the deal.
Randall Stephenson, CEO of AT&T and chief ninja of the Robocall Strike Force, calls the deal a “perfect match of two companies with complementary strengths who can bring a fresh approach to how the media and communications industry works for customers, content creators, distributors and advertisers.”
Let’s be honest. You fell asleep halfway through that quote, didn’t you?
The merger, if approved (more on that in a bit), would give AT&T control over the biggest premium channel on TV: HBO, along with its HBO Go and HBO Now streaming services (“And don’t forget about me,” holler Cinemax from its wood-paneled room in the basement.)
“Premium content always wins,” continues Stephenson, who felt the need to dump this news just as Game 6 of a potentially historic National League Championship Series was starting. “We’ll have the world’s best premium content with the networks to deliver it to every screen. A big customer pain point is paying for content once but not being able to access it on any device, anywhere. Our goal is to solve that. We intend to give customers unmatched choice, quality, value and experiences that will define the future of media and communications.”
The big question remains: How much resistance will there be to this merger. AT&T’s $48 billion purchase of DirecTV went through with relative ease, both because the two companies provided complementary services without causing any obvious harm to their respective industries, and because the FCC and DOJ were so focused on investigating and blocking the failed merger of Comcast and Time Warner Cable (again: not the same company as Time Warner).
One of the big reasons the Comcast/TWC marriage was never allowed to happen was because Comcast had recently purchased NBC Universal, producing an all-in-one media giant with that provided cable, provided channels and shows that were on that cable, and many of the residential broadband connections for people seeking competition to Comcast/NBC’s products.
When AT&T acquired DirecTV, it increased its pay-TV audience by more than 20 million subscribers, and on Saturday night the company disclosed that it has actually added to its satellite customer base since taking over DirecTV. The Texas-based telecom giant (when you add in the existing AT&T U-Verse customers) the largest pay-TV company in the U.S.
There will almost certainly be a number of objections to the idea of allowing another huge pay-TV company to also own some of the most popular channels on cable.
This was a concern with the Comcast acquisition of NBC, but in most cases Comcast has little reason to charge another cable company an anticompetitive price. That’s because Comcast and other non-telecom terrestrial cable companies generally have very little overlap of service areas. So while Comcast is probably getting a better deal on carrying CNBC than other pay-TV providers, it has little motive to gouge Jim’s Cable Company since they don’t compete directly.
However, with AT&T/DirecTV, the landscape is different. AT&T offers U-Verse and GigaPower service in areas where it has landline phone networks. DirecTV is available anywhere with a clear view of the southern sky. So both brands go head-to-head with cable providers — large and small — virtually everywhere. We’re not saying AT&T would overcharge for Time Warner channels if this merger were approved, but we expect other cable and satellite companies will raise this objection a lot over the coming months.
Among those already expressing concern over the merger is Laura MacCleery, vice president of policy and mobilization for our colleagues at Consumer Reports.
“The argument that ‘bigger is better’ rarely rings true for consumers,” said MacCleery following Saturday night’s announcement. “As we review the details of this deal, it feels like ‘Comcast-NBCUniversal: The Sequel,’ and that’s a red flag. If AT&T gains control over all of this premium content, it’s difficult to see how that leads to more competition and choice for consumers. This combined company would have enormous power and influence over what we watch and read, how we get it, and how much we pay for it. We are going to keep digging deep into this deal and press regulators to make sure consumers don’t get slammed.”