AT&T + Time Warner Merger Official

AT&T + Time Warner Merger Official

Will this AT&T and Time Warner merger change the media industry?

A federal appeals court upheld AT&T’s $81 billion takeover of Time Warner, which includes Turner Networks, on Tuesday in New York. This approval is one of the biggest media deals to ever happen. The three judges explained that the government failed to take into account an arbitration agreement that Turner had offered carriers in the event of a pricing or contract dispute. So, why did AT&T want to merge with Time Warner? Since cord cutting has grown extremely popular, the importance of traditional TV has lost its value. Time Warner “owns popular channels including HBO, CNN, TNT and TBS, plus Warner Bros. movies such as the Harry Potter and DC Comics superhero franchises.” This makes AT&T believe that with their ability to deliver to homes and phones, they can tap into more of the video streaming market.

During the federal trial, both AT&T and Time Warner argued that they have no reason to trigger a blackout because they make their money from advertisements and subscriber fees. If a blackout occurred, it would not allow other distributors to show their content. By dropping a distributor, a loss in their financials would occur. “They also claimed that they need the merger to compete with the likes of Netflix (NFLX), Google (GOOGL) and Facebook (FB), and to bring cost savings and new innovations to their customers.”

The Justice Department believed that AT&T would have bargaining leverage over rival TV distributors. This is because the Turner networks have valuable live content, sports from TNT and CNN’s news coverage that many distributors would like to use. In addition, the Justice Department brought up how AT&T could raise the prices for their content to competitors. After the ruling was upheld Jeremy Edwards, a department spokesperson said, “We are grateful that the Court of Appeals considered our objections to the District Court opinion. The Department has no plans to seek further review.”

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Valerie Stephen
valeriestephen@geo-tel.com