AT&T deal: merger for new media era or a bad remake?

WASHINGTON―An AT&T-Time Warner mega-deal could create a new kind of media-tech firm in an age where consumers get content Netflix-style, when they want it on any device.

Or it could be a remake of another huge merger 16 years ago that sought to unite the media-entertainment giant with another tech sector leader but ended in failure.

The deal unveiled Saturday aims to make AT&T a powerhouse positioned for a sector facing major technology changes.

The stock-and-cash deal worth $108.7 billion including debt gives a value of $84.5 billion to Time Warner, which includes the Warner Bros. studios in Hollywood and an array of TV assets such as HBO and CNN, rights to sporting events including basketball and baseball and a major video game publisher.

It would give the big US telecom and internet operator “the world’s best premium content with the networks to deliver it to every screen, however customers want it,” a statement from the companies said.

But analysts say the deal faces multiple challenges, including winning regulatory clearance for a massive merger affecting tens of millions of consumers, and successfully combining two different kinds of companies, one in content and the other in delivery.

“We’ve seen this movie before and it didn’t end well,” said Rebecca Lieb, an independent media consultant and analyst, referring to a 2000 deal merging AOL and Time Warner that was unwound nine years later.

“It’s difficult merging technology and creativity.”

However, AT&T “didn’t want to sit on the sidelines” while rivals such as Comcast and Verizon expanded to become more than simply operators of “pipes” that deliver internet and television, Lieb said.

Comcast, which began as a cable operator, took a stake in NBCUniversal in 2009 and full ownership of the media-entertainment group in 2013 to achieve “vertical integration” of content and delivery. 

“All the pipe operators are trying to get content,” Lieb said. “They don’t want to be just delivery entities.”

The sector’s economics have changed as many consumers―especially younger ones―reject the pay TV “bundles” of hundreds of channels that often cost $100 or more and have long been lucrative for both delivery and content operators.

Topics: AT&T-Time Warner , media-tech firm
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