A federal judge ruled on Tuesday that AT&T’s planned acquisition of Time Warner is legal.
That clears the path forward for an $85.4 billion deal that will give AT&T ownership of cable channels like HBO and CNN, and create a telecom giant the likes of which the world has never seen.
Writers of dystopian sci-fi love to play with the concept of the “mega-corporation.” A conglomerate of businesses so large that it has, in effect, the same powers as a small government.
When AT&T buys out Time Warner, it will be well on its way to mega-corporation status.
This court decision could also clear the way for other telecom and media mergers. Comcast has been eyeing a similar deal to obtain Twenty-First Century Fox. They were preparing to announce an offer as soon as Wednesday, should the judge in this AT&T case give the green light.
Now that the judge in that case, Richard Leon, has given approval to AT&T, further acquisitions and mergers seem almost inevitable.
The Justice Department, however, has stated their displeasure with the outcome of the case. Assistant Attorney General Makan Delrahim issued a statement of disapproval on Tuesday.
“We continue to believe that the pay-TV market will be less competitive and less innovative as a result of the proposed merger between AT&T and Time Warner. We will closely review the Court’s opinion and consider next steps in light of our commitment to preserving competition for the benefit of American consumers,” Delrahim said.
The DOJ sued to block this merger last year. Their concerns in this case revolved around the fact that AT&T also owns the primary satellite TV provider in the country, DirecTV. The Justice Department feared that AT&T might charge rival distributors more for Time Warner content, which would drive up the costs for consumers.
AT&T’s response to that argument was the the point of owning content at all is to gain a broader distribution for it, driving up ad revenue and garnering affiliate fees. But time will tell whether their business strategy also includes price raises. Now that they will own a large chunk of both the satellite and the cable market, they may be able to get away with raising prices on customers who lack other TV distribution options in their geographic areas.
AT&T’s acquisition of Time Warner will make it a true media powerhouse, with strong hands in both content production and distribution, along with a huge revenue stream coming from wireless phone and internet customers. AT&T plans to bundle entertainment content with mobile service, to better compete against rivals like Verizon, who tend to provide better service, and Sprint, who tend to offer lower prices.
AT&T’s CEO, Randall Stephenson, has also said the deal would help AT&T compete against tech giants like Amazon and Netflix, both of whom are spending more on content production lately. Netflix plans to spend $8 billion this year on content for its wildly popular streaming service. Much of that is going towards producing original content.
Time Warner spent $8 billion on its own in 2017; with AT&T’s huge and diversified revenue stream, they may be able to spend significantly more on content in the years to come.
Which, if you’re a fan of quality television (and you ought to be, we’re living in a golden age of high-production values and mature, interesting story lines), may be something to look forward to as a result of this whole situation.
