Here’s the simple breakdown of the comprehensive showdown between the U.S. and goliath AT&T and what it means to the media business.
The Battle: More than two years ago, AT&T approached Time Warner to purchase its stock for $85 billion so that it could have its channels, which include CNN, HBO and TNT. The U.S. Department of Justice, thereafter, sued, claiming that such a deal is in violation of anti-trust laws as it will give the new AT&T too much power in the industry, thereby unfairly causing its customers to see their monthly cable bills increase and harming competitors in the industry. The case was vigorously litigated in federal district court in D.C. While the government believed the transaction violated the anti-trust laws, Judge Leon flatly rejected that argument, ruling that the newly combined company will be no different from the Silicon Valley giants that make and distribute video content.
The court was convinced by the 140-year-old telephone giant’s argument that it was in an existential crisis and needed the deal with Time Warner to compete against tech companies. AT&T convinced the court that the merger, a “vision deal,” will allow AT&T to better match up against Facebook, Amazon, Apple, Netflix and Google. Indeed, while the merger is massive, in light of the size of the other conglomerates, the Court could not find that the government met its difficult burden to prove antitrust violations.
The Future: How does this effect the media business? Will prices for subscriptions go up? The answer to the latter question is “no” and to the former question is multifaceted. In today’s media world, content is king; meaning that the companies that have actual streaming content to provide customers are ruling the arena. So, companies like Netflix, Amazon and even Apple are very much in play, as the revenues and profits from those businesses are monstrous. With this ruling, its open season for vertical mergers. That is, tech and telecom giants now have the green light to pursue a slew of major media acquisitions. And the content companies are all now in play. Indeed, Comcast is widely expected to bid within days for part of 21st Century Fox that would set up a showdown with Disney, which has already put in a bid for those assets.
As for AT&T consumers, because it is the largest telecommunications company in the world that now has a slew of content, it will not ramp up prices but will make that content easily and readily available to consumers – at a price. With 140 million connections, customers will be able to access their favorite programming through their telephone provider. While it will be a whole new world, it should not influence monthly service charges.