AT&T deal could lead to more consolidation
Some analysts predict more blockbuster deals reshaping the industry.
Wall Street gave a cool reception this week to AT&T’s plan to buy Time Warner Inc., illustrating sharply divergent views on whether the blockbuster deal will usher in a new era of media consolidation or merely more scrutiny from federal regulators.
But the uncertainty didn’t stop some analysts from speculating about various combinations that could transform the media business — tantalizing pairings of tech giants with studios, and cable companies with wireless carriers.
A motivator for more deal-making: survival. Traditional media companies are girding for battle with tech powerhouses Google, Facebook, Apple and Amazon. com. Amazon and Netflix already have made aggressive moves into producing Hollywood content.
“Overall, we believe we are likely one more deal away from potentially reshaping the landscape for at least a decade,” Barclay’s Equity Research analyst Kannan Venkateshwar wrote in a Monday report. “We are in the midst of a great convergence cycle, which is likely to impact business models for years to come.”
AT&T’s top executive said Monday that he didn’t want his Dallas company to get trampled in the stampede.
“The convergence in terms of media and distribution is moving fast,” AT&T Chairman and Chief Executive Randall Stephenson said. “We want to be at the front of it. We don’t want to be chasing it.”
Analysts were split on whether AT&T’s move would spur other companies to combine. Several attributed AT&T’s play as a way to position itself as a more robust competitor to Google and Facebook, which capture the lion’s share of online advertising, and Amazon and Apple, which have strong customer relations.
“These are the big bullies on the playground now,” said Laura Martin, a managing director at Needham & Co. “And AT&T will be roughly the same size if it is allowed to buy Time Warner.”
Some observers believe that another cellphone giant, Verizon Communications, might be interested in buying CBS and Viacom to bulk up in a similar way that AT&T is trying to do with its acquisition of Time Warner, which owns HBO, CNN, TBS and Hollywood’s largest film and television studio, Warner Bros.
CBS Corp. is mulling whether to recombine with Viacom Inc., which owns Nickelodeon, MTV, Comedy Central and Paramount Pictures — a marriage proposed by the controlling shareholder family of Sumner Redstone. Viacom and CBS were part of the same company until Redstone divided his empire in 2006.
Tech giants Apple, Google and Amazon are seen as likely players in the entertainment industry and could be interested in buying content firms. Many have speculated that Apple Inc., which is sitting on more than $200 billion in cash, might buy a content company to jump-start Apple TV.