Already a leader in mobile, fixed telephone and satellite television services, AT&T is apparently looking to boost content – by acquiring TV Network Time Warner. And, it’s willing to shell out $85.4 billion for it.
AT&T is already a provider of broadcast television services through DirecTV. But, as online video streaming rapidly takes over traditional pay-TV viewership, AT&T’s proposed merger could be its ticket to stay ahead of the curve. To cater to a population increasingly hooked to their mobile gadgets, AT&T is apparently looking to beef up content for multi-device viewing. And joining hands with content maker Time Warner – owner of HBO and CNN – could just be the perfect catalyst for that purpose. The deal could reap rewards for AT&T, given a projected +25.5% growth in the number of mobile video viewers in the U.S. over 2015-2019 against the expected deceleration in the number of American pay-TV households across the same period.
Source: Statista
Source: Statista
Recent GfK reports reveal that already about 25% of U.S. households don’t subscribe to pay-TV. The trend is expected to only intensify in the next couple of years, with evolving technology such as the 5G spectrum to proliferate mobile video viewership.
Already, AT&T is set to launch its online streaming platform, DirecTV NOW. The merger should only make it easier and probably economical for AT&T to get access to the extensive repertoire of movies/TV series as well as new content from the Warner factory. The coupling could even spell an influx of advertisers hoping to leverage AT&T’s data/user base. All this could potentially get translated into lower prices for subscribers of AT&T.
Does the Merger Pose Threat to Competition?
But the million-dollar question is: would the deal get the regulatory nod? Last year, the Comcast-Time Warner Cable proposed deal was deemed by the Department of Justice to violate competition laws. The deal involving AT&T and T-Mobile USA was blocked on similar grounds in 2011. However, unlike the cases mentioned above, the merger between AT&T (America’s fifth-largest firm by profits and second-biggest wireless carrier) and Time Warner (the world’s third largest TV network) would not be a horizontal merger since it involves the integration of a distributor with a content maker. So, chances are the proposed merger will not necessarily be seen as violating antitrust regulations.
Nevertheless, speculations are rife on the possibility of AT&T thwarting its rival broadcaster/streamers from licensing Time Warner content at fair prices, should the union happen. Some are also pointing towards the likelihood of AT&T charging their subscribers disproportionately more for watching content produced outside of Time Warner – akin to the “zero rating” concept in web browsing and thereby frustrating viewers’ choices.
But, a potential antithesis is that AT&T’s focus on bolstering content production/distribution for online streaming could actually galvanize other players in the broadcasting/media industry to up their game. That, in turn, should lead to more innovation – fueling competition along the way – to whet the burgeoning consumer demand for mobile videos/online streaming.
Also, it is likely that regulators would approve the deal conditional upon AT&T agreeing to charge fair and non-discriminatory prices to other broadcasters/online distributors for licensing Time Warner content. Regulators offered similar protection to video distributors in case of the Comcast-NBCU merger.
Bottom Line for Investors
It is still too early to tell whether or not the AT&T-Time Warner deal will get regulatory approval. But, the proposal is yet another instance of companies seeking every opportunity to milk the growing consumer appetite for fast-evolving technology. And, that could eventually lead to more choices in content, viewing devices and broadcasters for consumers.
Regardless of the status of AT&T’s plans to acquire Time Warner, it’s evident that broadcasters are looking for ways to diversify into more platforms/devices and boost content to compete with rapidly growing online video streaming firms.
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