For media companies looking to dodge costs with a younger consumer base shifting away from expensive cable subscriptions to streaming services like Netflix or Hulu, it's time to huddle up and join forces.
This was the motivation behind a $85.4 deal struck between AT&T and Time Warner Cable that would hand over Time Warner and all its properties (including HBO, CNN and Warner Brothers media) to AT&T. The deal comes on the heels of a slew of media mergers over the past few years, with Comcast’s acquisition of multinational media giant NBCUniversal in 2011 and Verizon buying internet pioneer AOL in 2015 (and now Yahoo this year).
AT&T made it clear the cell business was hoping to break into entertainment markets with their newest purchase in their announcement of the merger, where CEO Randall Stephenson stated that "the future of mobile is video, and the future of video is mobile."
Cord-cutting millennials have proven a devastating challenge to cable profits, causing many channels to offer paid streaming services; HBO Now is such an example, hoping to cash in on younger markets who may want to follow up on Jon Snow and Daenerys Targaryen while also avoiding paying for channels they don’t use.
The companies expect the Justice Department to take the helm in the regulatory review, but that has still done little to allay the concerns of Washington and advocacy groups alike. Public Knowledge, an advocacy group involved in the digital marketplace, expressed concern, stating that they were “skeptical that further consolidation in the communications industry could be good for consumers.” Senator Al Franken (D-Minn) voiced his worry that the deal "raises some immediate flags about consolidation in the media market." Presidential candidate Donald Trump blasted the acquisition, describing it as a “deal we will not approve in my administration because it's too much concentration of power in the hands of too few,” to supporters in Gettysburg. While Democratic nominee Hillary Clinton has made no official comment as of yet, her running mate Tim Kaine asserting that an administration helmed by Hillary would confront the deal with skepticism.
The massive consolidation could prove a threat to net neutrality, raising costs for consumers by offering less options. Concerns that the recent barrage of corporate deals could crowd out competition (and thus economic growth) are rampant as well. AT&T could begin favoring Time Warner traffic across their network or charging competitors extra to access TWC content- worries that have also been leveled at entertainment giants like Comcast.
AT&T expects the deal to finish review by the Justice Department by the end of 2017. This would shift it over to the new presidential administration (likely Clinton or Trump’s) and the US Congress, proving this deal to be yet another key point for party platforms with only a couple of weeks left in the elections.
