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On Saturday, AT&T announced it was acquiring Time Warner today for $85.4 billion, giving the telecommunications conglomerate ownership over all of its subsidiaries, including film studio Warner Bros., game developer Warner Bros. Interactive. and networks like CNN and HBO.
The $85.4 billion acquisition marks the largest deal of the year, but the bigger question is what that means for AT&T and Time Warner subscribers. Similar questions about a merger of this size and what it meant for consumers popped up in 2011 when Comcast purchased a 51 percent stake in NBC Universal for $13.75 billion, and again in 2013 when Comcast purchased the remaining 49 percent for $16.7 billion from General Electric. Both Comcast Ventures and NBCUniversal are investors in Polygon’s parent company, Vox Media.
Both Comcast and AT&T acquired NBCUniversal and Time Warner for similar reasons: in an era of television and internet where content reigns, having more of it and controlling those avenues that people can access it is incredibly important.
One of the biggest changes that consumers could see is the speed at which over-the-top (OTT) content is released. OTT is content that networks make but distribute over the Internet without go-betweens like a cable provider. Time Warner, which owns a 10 percent stake in Hulu, is gearing up for a live OTT service in 2017 that will give Hulu subscribers the opportunity to watch live content without a cable package. AT&T and DirecTV are also planning to launch DirecTV Now, which included three OTT-TV packages for live, on-demand streaming. As more consumers are cutting the cord and turning away from cable, streaming services like HBO Now and Hulu, alongside titans like Netflix, are going to look especially appealing to internet providers looking to make a profit off of content.
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With AT&T’s acquisition, one of the biggest grey areas is how the company will handle the multiple streaming services its coming into. HBO has its own stand-alone streaming service, HBO Now, and as mentioned above, it also owns a stake in Hulu. If AT&T can control the distribution of such services, as analysts have pointed out, then it would give the company competitive leverage over traditional companies like Verizon and Sprint, as well as Comcast and Netflix. It’s why AT&T purchased DirecTV for $49 billion last year. AT&T is one of the largest internet providers in the United States, and being able to streamline exclusive content through its own service to subscribers is a possibility.
This is where the concern, not just from consumers, but federal regulators comes in. The FCC has long suggested that the integration of content owners — such as Warner Bros., Turner and HBO — with a distribution platform — in this case, AT&T — could turn out to have negative consequences for its consumer base. When Comcast acquired NBCUniversal, Free Press argued that the cable and internet provider could restrict where NBC content was streamed. That’s why when Comcast acquired NBCUniversal in 2011, the FCC came up with a long list of conditions that had to be met in order to prevent the cable and internet giant from owning a monopoly on the market.
This will be one of the biggest conditions that AT&T and Time Warner will have to agree to. HBO Now and Hulu programs would have to be available to all other consumers on different networks for the same price that AT&T subscribers are paying. The acquisition can’t be anticompetitive, so exclusivity deals are going to be analyzed to death going forward. The benefit to AT&T acquiring a massive content provider like Time Warner is the revenue it will make off of owning those shows.
In today’s market, it’s all about acquiring. This year, NBCUniversal purchased DreamWorks Animation for $3 billion. Meaning, that Comcast acquired DreamWorks Animation and now has total ownership over the films that are produced through the studio, and will profit off of each feature.
In 2009, Comcast tried to implement a hostile takeover of Disney for $42 billion, but the deal fell through. Instead, Disney spent its time acquiring other studios, like Marvel and Lucasfilm, building up its own empire of film companies.
The deal still needs to get full approval from the FCC before it can be signed and sealed, but considering there’s precedence for it, there’s no reason to think this won’t get approved in due time.
