AT&T Time Warner merger
Tom Dougherty, CEO – Stealing Share
14 June 2018
Could the AT&T Time Warner merger actually be good?
The potential of an AT&T Time Warner merger fascinates me. Because, in light of a district court judge’s decision to allow it, the ramifications are enormous.
And you can see both arguments. For the consumer, the Department of Justice’s contention that it will harm competition is on the money. On the other, as lawyers for the AT&T Time Warner merger argued, how else can anyone compete with Netflix and Amazon, not to mention the behemoth in the room, Apple, without it?
Media paints the ruling as a blow to President Trump because he was against the merger and instructed the Justice Department to file suit against it. He claims it will result in higher prices and, ironically, less choice for the rest of us.
He’s right, but there’s another issue at play. Companies often consolidate during times of change. Airlines respond to high fuel prices years ago by joining forces. Phone carriers, like AT&T, respond to a quickly maturing market by consolidating. It’s not so much about survival as it is pleasing stockholders.
The ruling opens the door to other proposed mergers. Disney remains on the brink of acquiring FOX. Although new reports suggest Comcast lurks around FOX too, keeping silent until the judge rules. Now that he has, Comcast is urging FOX investors to reject Disney’s bid and accept Comcast’s offer.
“But the judge bought the argument that, without these mergers, Netflix would continue to dominate and maybe more. In today’s landscape, so much good programming gets lost and forgotten because of small marketing budgets.”
Is the AT&T Time Warner merger unique?
Where does this all shake out? Higher prices? Yes. Fewer streaming options? Probably.
For that reason, I’m generally universally against consolidation because it always hurts consumers like myself. Wonder why we’re treated like lemmings by airlines? Consolidation means we have no other choice but to take it.
But there is one potential benefit to the AT&T Time Warner merger that’s unique. The entertainment category is becoming increasing dominated by Netflix, which creates an entertainment atmosphere it hopes you never leave. It has a programming budget of $8 billion. Amazon spends half that.
If the properties AT&T acquires are to continue, it needs to match those budgets. Now, budgets don’t necessarily translate into better entertainment. (The best show on TV recently is Killing Eve, a modestly budgeted BBC American program. Or, my personal favorite, The Terror from AMC, which basically takes place on two sets.)
But the judge bought the argument that, without these mergers, Netflix would continue to dominate and maybe more. In today’s landscape, so much good programming gets lost and forgotten because of small marketing budgets. (How many of you have even heard of The Terror?)
While I’m highly skeptical, the argument is persuasive because of the unique nature of Peak TV. Think about this. I subscribe to cable, Netflix, Amazon and Hulu. How much am I spending now? Does consolidating mean I won’t have to subscribe to as many outlets? Or is it just another addition?
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