Old-school ruling on the future

The trial that will reshape media and entertainment for decades to come was, naturally, overseen by a decidedly old-school judge. Richard Leon, the federal judge overseeing the US justice department’s lawsuit attempting to block AT&T’s acquisition of Time Warner, did not allow phones into his courtroom. As he read the decision in Washington on Tuesday, there were no real-time tweets or news flashes to immediately share the verdict with the world.

Leon’s jurisprudence also happened to be classical, as he allowed the deal to go forward free of any remedies or conditions. The department’s legal theory asserted that a vertical merger would harm consumer welfare as AT&T’s vast distribution capability — mobile phone service, as well as fibre and satellite television — would hold too much sway when combined with Time Warner’s HBO shows and the Turner networks’ sports and news.

While Time Warner CE Jeff Bewkes will get his golden parachute, his shareholders can fairly lament whether launching media merger mania nearly two years ago will be as good for them.

Leon noted that the “video programming and distribution industry has continued to evolve at breakneck pace”. As evidence look no further than AT&T. Its shares have fallen by 15% in the past two years as it bleeds mobile and television subscribers. That is problematic for Time Warner shareholders as initially 50% of their consideration was to come in AT&T equity. That slide is so sharp that the “collar” that fixed the value for Time Warner shareholders has been breached. As such, the price per share they are receiving has fallen 6%.

At the same time, AT&T rivals such as Disney, Comcast, Verizon and Charter have become ready to pay top dollar to keep up with Netflix and Amazon. Time Warner has done them all a favour by winning the legal precedent that paves the way for massive consolidation, now largely unencumbered by regulatory constraints. London, June 13