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Where’s the Upside for Time Warner in the AT&T Deal?

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Nov. 1 2016, Updated 8:05 a.m. ET

Time Warner’s content availability

Time Warner (TWX) has largely been a media company that offers premium content that’s very popular such as HBO’s (Home Box Office) Game of Thrones. However, as OTT (over-the-top) services such as Netflix (NFLX) and virtual MVPD (multichannel video programming distributors) such as Dish Network’s (DISH) Sling TV become increasingly popular, the company is looking at new ways to monetize its content.

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Time Warner stated that the acquisition by AT&T would enable the company to deliver its content on multiple platforms. Earlier this year, its CW Television Network (or the CW) signed an agreement with Netflix (NFLX). Under the terms of the agreement, Netflix becomes the exclusive SVOD (subscription video on demand) service for earlier seasons of television shows broadcast on the CW.

The CW is a joint venture between CBS (CBS) and Time Warner’s Warner Bros. network. Beginning with the 2016–2017 broadcast season, Netflix subscribers will be able to stream full seasons of shows from The CW eight days after the broadcast of the show’s season finale.

Rising trend of online television services

One reason for Time Warner’s interest in making its content available on online platforms is that viewers, particularly Millennials, are increasingly watching content online due to the low cost of viewing content and the ease of watching anytime, anywhere. According to a Digitalsmiths 2Q16 video trend report, Netflix leads the OTT market with 54.0% share, followed by Amazon.com (AMZN) at 24.0%.

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