How the merger could benefit AT&T and Time Warner
The proposed merger between AT&T (T) and Time Warner (TWX), announced in October 2016 for $85.4 billion, is now being blocked by the DOJ (US Department of Justice), which believes that this “vertical integration” deal might end competition.
The trial’s verdict will come out in March 2018. However, if the deal gets regulatory approval, it would likely mean gains for both AT&T and Time Warner’s businesses.
AT&T’s acquisition of Time Warner would give AT&T access to Time Warner’s media assets, including HBO (Home Box Officer), Turner Broadcasting, the Warner Bros. studio, and cable networks including TNT, TBS, and CNN—in addition to a 10% stake in Internet video provider Hulu. Likewise, Time Warner would gain from AT&T’s extensive subscriber base and its extensive distribution network across the wireless, video, and fixed broadband platforms.
The proposed merger would unite the US biggest pay-TV satellite distributor with media behemoth Time Warner. The combination of Time Warner’s premium media content along with AT&T’s massive subscriber base is also expected to boost AT&T’s advertising business. Besides, the deal will offer new growth opportunities for the telecom company, which is currently struggling in its core phone carrier business.
If the AT&T-Time Warner deal goes through, media company Comcast (CMCSA) will likely seek to buy Twenty-First Century Fox’s (FOXA) assets, outbidding Walt Disney’s (DIS) $52.4-billion offer, according to a recent CNBC report.
SVOD market grows in popularity
Notably, consumers are now shifting away from traditional cable services to online streaming services offered by players like Netflix, Amazon Prime, and YouTube. Recent media deals, including Disney’s acquisition of Fox’s assets and AT&T’s Time Warner merger, show that these companies are looking to expand in the video streaming industry.
According to the predictions of Future Market Insights, the global SVOD (subscription video-on-demand) industry is expected to touch $108.6 billion by 2026—up from $45 billion in 2014.