The AT&T – Time Warner Merger: What it Could Mean for Consumers

Court allows AT&T purchase of Time Warner in major media acquisition

A federal judge approved AT&T’s attempt to purchase Time Warner Inc Tuesday, allowing a major change in the media industry and thwarting attempts by the Department of Justice to block the acquisition on grounds of an antitrust law violation.

AT&T originally announced its intentions to purchase Time Warner, which owns Atlanta-based Turner Broadcasting, in 2016. The $85 billion move has been on hold for a year and a half as the two companies have faced a challenge from the Department of Justice, which has questioned whether or not it is lawful for television providers to purchase companies that produce content for TV and film.

The ruling could also have an impact on potential mergers and acquisitions between content providers and creators in the near future, a practice known as vertical integration.

Critics of the merger, including the Department of Justice, say AT&T can now charge consumers or competitors more to access content created by Time Warner since it now owns the rights to it. AT&T claims the merger will actually increase its ad revenue and cut costs for customers.
Photo: The Atlanta Journal-Constitution

Judge Richard Leon of the U.S. District Court for the District of Columbia announced the ruling Tuesday afternoon, allowing the acquisition to go through without restrictions. Former CNN anchor and current professor at George Washington University Frank Sesno said the government failed to prove the merger is any more anti-competitive than existing media companies such as Netflix and Google.

“As much as everyone would like mom and pop to be running the general store, that’s not the way the world works any longer,” Sesno said.

The federal government maintained the purchase violated antitrust law because AT&T owns satellite provider DirecTV, a content distributor, and Time Warner is a content producer, owning several TV, film and digital entities. According to the Department of Justice’s original complaint, filed in November of 2017, the merger between AT&T and Time Warner would result in higher prices for consumers and lessen competition in the realm of subscription television.

Critics have said that could happen if AT&T chooses to raise its prices for customers to access content it now has exclusive rights to.

AT&T argued the move did not violate antitrust law, and said an acquisition of Time Warner would benefit consumers by creating an alternative to traditional cable and internet providers. When the purchase was announced, AT&T and Time Warner also said the deal would improve AT&T’s advertising model, cutting costs for consumers.

“We look forward to closing the merger on or before June 20 so we can begin to give consumers video entertainment that is more affordable, mobile, and innovative,” said David McAtee, AT&T general counsel, after the ruling.

Turner Broadcasting declined to comment on the issue, instead deferring to statements released by Time Warner.

Employees at CNN and other units of Turner Broadcasting in Atlanta are closer to becoming part of AT&T. A federal judge shot down Justice Department efforts to block the telecommunications company from buying Time Warner, which owns Turner as well as HBO and Warner Bros. HYOSUB SHIN / HSHIN@AJC.COM
Photo: The Atlanta Journal-Constitution

Al Meyers, a former vice president of strategy for Turner Broadcasting in the 2000s, said he doesn’t expect any major changes at Turner in Atlanta in the near term.

“This merger was never about cost cutting,” he said. “You won’t see any big shifts here.”

Tuesday’s ruling could affect potential future acquisitions between TV providers and content creators that are on the horizon. Cable company Comcast announced in May it is considering buying 21st Century Fox. That deal would not include news entities such as Fox News and Fox Broadcasting to avoid potential monopoly concerns since Comcast already owns NBC News and NBC Sports.

The decision does not necessarily give the green light to all upcoming mergers and acquisitions, said Thomas Arthur, a law professor at Emory University who specializes in antitrust law. Arthur said merger rulings can rely heavily on the judge who is presiding over the case.

AT&T is already one of the largest telecommunications companies in the world, with a total value of over $200 billion. It is the country’s second largest wireless phone provider and has 25 million video subscribers through its video services, including U-Verse and DISH Network.

John Martin, the chief executive of Time Warner’s Turner Broadcasting unit, said in a 2017 interview that becoming part of AT&T could help Turner get more information about groups of consumers, making it easier to serve them with programs and advertising. HYOSUB SHIN / HSHIN@AJC.COM
Photo: The Atlanta Journal-Constitution

Time Warner has a total value of $75 billion based on its current market cap and consists of three divisions: TV and digital content creator Turner Broadcasting, subscription-based TV channel HBO and film, and TV studio Warner Bros. Turner Broadcasting was founded by Ted Turner in Atlanta in 1970 and today operates media properties such as CNN, TBS and Turner Sports.

Cox Communications, a national cable and internet provider, expressed reservations about the merger during the court process.

“We hope the government keeps a close eye on the merged company’s activity to ensure that consumers are not harmed,” said Todd Smith, a company spokesman. “We’ll continue to aggressively invest in our network and products to compete in the communities we serve.”

Cox Communications is part of Cox Inc, which is the parent company of The Atlanta Journal-Constitution.

The Department of Justice has the ability to appeal the decision to a U.S. appeals court, but has not yet indicated if it plans to do so.

Staff writer Rodney Ho contributed to this article. 

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