AT&T’s Time Warner green light: The mega merger age?

The Daily Star (Lebanon) - - BUSINESS - By Marcy Gor­don and Mae An­der­son

WASH­ING­TON: Brace your­self for a likely new era of me­dia megamerg­ers. AT&T’s vic­tory over the gov­ern­ment’s at­tempt to block its $85 bil­lion takeover of Time Warner un­der­scores just how much the way peo­ple watch – and pay for – TV has changed.

It also high­lights how cor­po­rate Amer­ica wants to adapt to deal with its new en­vi­ron­ment. In short: Big­ger is bet­ter. The gov­ern­ment ar­gued the merger would sti­fle com­pe­ti­tion and lead to higher ca­ble bills. But U.S. District Judge Richard Leon ul­ti­mately agreed with AT&T’s as­ser­tion it had to grow to sur­vive in the era of Google, Ama­zon and Net­flix.

“It re­ally was a stun­ning re­buke of the Depart­ment of Jus­tice,” said me­dia an­a­lyst Craig Mof­fett.

“Judge Leon was wholly un­per­suaded by their case.”

The rul­ing could open the flood­gates to deal mak­ing in the fastchang­ing worlds of en­ter­tain­ment pro­duc­tion and dis­tri­bu­tion.

Ma­jor ca­ble, satel­lite and phone com­pa­nies are bulk­ing up with pur­chases of en­ter­tain­ment con­glom­er­ates to com­pete against ri­vals such as Ama­zon and Google. And there are po­ten­tial big-bil­lions deals in­volv­ing 21st Cen­tury Fox and Dis­ney, Ver­i­zon and CBS, T-Mo­bile and Sprint. Com­cast and Ver­i­zon are also jock­ey­ing for po­si­tion.

A com­bined AT&T-Time Warner could also get a boost from the of­fi­cial end of net neu­tral­ity, the Obama-era rules bar­ring broad­band and wire­less com­pa­nies from fa­vor­ing their own ser­vices to the detri­ment of ri­vals like Net­flix. As of this past Mon­day, AT&T and Ver­i­zon can pri­or­i­tize their own movies and TV shows, to the likely dis­ad­van­tage of ri­vals such as Ama­zon, YouTube and fu­ture star­tups.

The judge’s de­ci­sion frees wire­less and pay-TV gi­ant AT&T to ab­sorb Time Warner, which owns CNN, HBO, the Warner Bros. movie stu­dio, “Game of Thrones,” cov­eted sports pro­gram­ming and other “must-see” shows.

The re­sult for con­sumers? More op­tions, es­pe­cially if they’re AT&T cus­tomers al­ready, said GBH In­sights an­a­lyst Dan Ives.

He said con­sumers can ex­pect to have more things to watch and more stream­ing op­tions, like bun­dled pack­ages with HBO, CNN or sports.

“It’s a ma­jor shot across the bow at other wire­less and ca­ble providers,” Ives said. But he ac­knowl­edged con­sumers might even­tu­ally end up pay­ing more, too.

Leon said the gov­ern­ment failed to prove the merger would lead to higher prices and other harm to con­sumers. De­spite Jus­tice Depart­ment lawyers tak­ing their “best shot,” he said, their ev­i­dence was “too thin a reed for this court to rely on.”

The judge added he wouldn’t tem­po­rar­ily block the merger for a pos­si­ble ap­peal by the gov­ern­ment.

The “drop dead” dead­line for com­plet­ing the merger is June 21.

If it’s not wrapped up by then, ei­ther com­pany could walk away, and AT&T would have to pay a $500 mil­lion breakup fee.

The rul­ing was a sting­ing de­feat for the Jus­tice Depart­ment. Op­pos­ing the merger forced fed­eral an­titrust lawyers to ar­gue against stand­ing le­gal doc­trine that fa­vors merg­ers among com­pa­nies that don’t com­pete di­rectly with each other.

An­other wild card: When first an­nounced in Oc­to­ber 2016, the deal drew fire from then-can­di­date Don­ald Trump, who promised to kill it “be­cause it’s too much con­cen­tra­tion of power in the hands of too few.” Trump has also pub­licly feuded with Time Warner’s CNN, call­ing it “fail­ing” and a pur­veyor of “fake news.” The pres­i­dent’s state­ments didn’t come up dur­ing the trial.

John Bergmayer, se­nior coun­sel at con­sumer group Pub­lic Knowl­edge, said the de­ci­sion could have lon­glast­ing neg­a­tive ef­fects due to “the many other merg­ers it will en­cour­age.” In a state­ment, Bergmayer called for “rein­vig­o­rated reg­u­la­tory over­sight of the video mar­ket­place.”

Dal­las-based AT&T is a wire­less, broad­band and satel­lite be­he­moth that be­came the coun­try’s big­gest pay-TV provider with its 2014 pur­chase of DirecTV. It claims about 25 mil­lion of the 90 mil­lion or so U.S. pay-TV cus­tomer house­holds.

AT&T gen­eral coun­sel David McA­tee said the com­pany plans to close the deal on or be­fore June 20.

AT&T are in line to take over Time Warner for $85 bil­lion.

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