POV: AT&T and Time Warner Deal

Mindshare Point of View

What would you do if you were sitting on $85.4B and looking to strengthen your position in the world of premium content and cross-screen viewing? Well, if you’re AT&T, you put out a bid on Friday and close a deal on Saturday to acquire Time Warner in what is being called the landmark acquisition of 2016.

Details and Implications:
The news of the acquisition is dominating talks today in the market place. Unfortunately, that does not mean good things for the stock price of either AT&T or Time Warner, as the deal faces stiff regulatory concerns and will increase their debt to an estimated $170B. The deal has also made it to the forefront of the upcoming US presidential election, as Donald Trump says that if elected, he will not approve the deal, “because it’s too much concentration of power in the hands of too few.”

On the positive side, the news of this deal has done wonders for some of AT&T’s competitors as investors are seeing two upsides for the telecom category – (1) AT&T might lose focus on its core business opening up doors for the competition, and (2) the possibility for other telecoms to jump into the media space through acquisition.

Currently, AT&T is about four times the size of Time Warner, and a deal like this seemingly dwarfs many recent transactions in the telecom plus media space – e.g. Verizon & Yahoo for $4.8B earlier this year, adding to the acquisition of AOL in 2015. What we are seeing with this acquisition is no longer about the giants buying up the little guys – this deal is of epic proportion, and one that starts to drive the convergence of technology & media.

For AT&T, they end up with some of the hottest programming on television today via Warner Brothers, Hulu, HBO, and CNN just to name a few. For you Game of Thrones fans, it’s as if House Targaryen and Greyjoy are joining forces to gain your loyal viewing habits. This could serve as a major boost to both the wireless business for AT&T subscribers, as well as original programming for DirecTV subscribers. For Time Warner, they gain access to 142M wireless customers in the AT&T network, as well as the 45.5M video connections via DirecTV.

None of this will be a silver bullet, but the idea of simplifying some of the media industry’s main challenges – cross-device measurement, audience fragmentation, and addressable media – is quite attractive.

Fragmentation is not just about what shows we are watching, but also about the devices we are watching them on. AT&T began tackling the device challenge a few years ago with the acquisition of DirecTV; with this acquisition they add a wealth of premium content, which won’t end the fragmentation challenges, but should help marketers in their quest to simplify buying & measurement.

Additionally, Mergers & acquisitions are not new – especially in the digital media space. But in a few rare occasions, like this one, they are huge. If we step back and look at the acquisitions as a whole one of the most notable trends is the merging of telecom, media, and technology – Verizon with Yahoo & AOL, Google with Fiber & Loon, Facebook with & Aquila, and now AT&T with Time Warner. Maybe it’s time that we stop treating them separately and talk about them as the Super Category they are becoming – Telecom, Tech, and Media.