AT&T-Time Warner deal is just the latest sign of denial
Note to the telephone and television industries from your friends in newspapers: We feel your pain.
This Internet thing can be great for consumers, but it has disrupted long-established distribution channels and replaced them with a digital free-for-all that’s hard to monetize and impossible to control.
We couldn’t help but notice you’ve been more resistant to these changes. You’ve continued to wall off television in pricey bundled packages, even as consumers flee for the more economical world of streaming. And you still charge hefty fees for land line phone service, even as cord-cutting consumers go wireless.
Good luck with all that. And good luck with these mega merger ideas that come along with almost predictable regularity and typically don’t work out (Remember AOL-Time Warner?).
The latest — AT&T’s $85 billion bid for Time Warner — is perhaps the best example. While many politicians and consumer organizations are rushing to denounce this proposed deal as a threat to competition, we see these kinds of cross-industry linkups more as signs of desperation than as bids for world dominance.
As you know, there are two types of merger. “Horizontal” mergers involve two competing companies, such as American Air- lines and US Airways. They generally work well for the bottom line. At some point, though, an industry becomes too consolidated and the anti-trust authorities stop allowing these acquisitions.
The other type, known as “vertical” mergers, involves companies in adjacent industries up and down the supply chain, such as an oil company buying refiners and gas stations. The proposed acquisition of Time Warner is this kind of deal.
AT&T distributes digital content thorough its land line and wireless networks, and through DirecTV, the satellite television company it bought last year. Time Warner generates digital content through HBO, CNN, the Warner Bros. movie studio and other channels.
The AT&T bid warrants careful regulatory scrutiny, particularly to ensure that Time Warner content doesn’t get preferential treatment. But frankly, our first impression of the deal is that it is unlikely to change much for consumers.
Time Warner used to have a distribution arm, a company that was spun off as Time Warner Cable in 2009. If this kind of vertical integration was such a bad thing for consumers (and a good thing for corporate profits), Time Warner never would have parted ways with its cable system.
The merger of Comcast and NBC Universal is instructive. It is widely viewed as successful in that Comcast’s stock has done fairly well since the deal concluded in 2013. It has not, however, resulted in reduced competition, or Comcast forcing people to get their news from NBC.
Our problem with the AT&T-Time Warner deal is that it appears to be one more instance of an industry trying to stave off the inevitable. With the possible exception of sports programming, the era of television as something distinct from Internet video is coming to an end.
That might not be easy to accept, but it’s the new reality.