Will AT&T’s acquisition of Time Warner spur innovation or higher costs for consumers?
Randall Stephenson and Jeffrey Bewkes want to convince you that they’re just giving consumers what they want.
AT&T’s $85.4 billion acquisition of Time Warner would merge the telecommunications giant with some of the most recognizable TV channels and films known to consumers.
HBO, CNN and TNT, and Warner Bros. studio would become part of an enormous conglomerate that could both produce content and distribute it to millions of customers.
A byproduct of this merger would be a new live TV streaming service, DirecTV Now, set to launch next month. Sling TV and PlayStation Vue would be its main competitors in the emerging live streaming TV market.
Stephenson and Bewkes are on a media road show this week, making stops at CNBC and the WSJDLive conference in Laguna Beach, Calif. to spread their gospel that consolidation is a good thing.
DirecTV Now is the carrot with 100 channels at $35 per month
Some tantalizing goodies have been bandied about to help get the idea across to consumers. Stephenson, AT&T’s president and CEO, announced at the WSJ digital conference that a DirecTV Now bundle would offer 100-plus channels for $35 per month.
Scott Moritz, a reporter with Bloomberg, got perhaps the bigger scoop roughly a month ago when he reported that DirecTV Now will become the company’s primary video platform in three to five years.
A new, larger AT&T would be the largest company to take up live streaming TV over an app instead of a set-top box commonly used by cable and satellite TV companies.
Assuming that AT&T can clear all regulatory hurdles, the merger could prove to be a major setback for traditional cable giants like Comcast, which seems to treat live streaming TV as a minor anomaly.
News about the merger hasn’t been exciting for everyone. It has already set off some consumers worried about whether they would no longer be able to get HBO Now with competing platforms like PlayStation Vue.
The editorial board of The New York Times quickly weighed in questioning whether the merger was akin to when movie studios owned theater chains and gave rise to the Hollywood studio system. In the 1940s, the Department of Justice forced the studios to sell their theaters. The moment was seen as a key to growth in independent film.
Will DirecTV increase or kill competition?
From a consumer standpoint, the debate may boil down to innovation versus consumer fairness. Everyone is for innovation. Lots of people would like to watch live TV on their smartphones. But they probably don’t want to at the cost of paying more to watch ‘Game of Thrones’ on a version of HBO Now that is paired exclusively with DirecTV Now.
Stephenson and Bewkes, Time Warner CEO, have suggested this week that’s not going to happen.
Among the treasures for consumers, they claim, is increased competition (a suggestion of lower prices) and the ability to take live TV wherever you go.
“We think any of these innovations is going to increase competition and increase adoption,” Bewkes said Monday on CNBC sitting alongside Stephenson. “Consumers are the ones who determine it. When they vote with their eyes, then the media companies and the distribution companies, they follow what the consumers want. That’s what this is about.”
Companies like PlayStation Vue may have paved the way in the marketplace. But a bigger AT&T in control of CNN and HBO could run over their live streaming TV service like a Mack truck smashing an ant.
Here was a great question asked on CNBC: If 5G becomes the new vehicle for transmitting data, you will even need traditional cable anymore? Even before you get to the answer, it implies yet another unasked question.
Could a consolidated AT&T/Time Warner end up wielding even more power over content and its price than anyone ever anticipated?
Could AT&T deal push live streaming TV into the mainstream?
Stephenson and Bewkes appear to be shadowboxing not only fears of consumers and regulators, but with a history of conglomerations that never came to be. Comparisons have been made throughout the week to Comcast’s failed 2015 merger with Time Warner Cable.
Stephenson was quick to point out during his CNBC appearance that while there was never any formal complaint by the government, regulators seemed stuck on the idea of combining two companies that were in the same kind of business.
“This isn’t changing the broadband marketplace in any way, shape or form,” he said referring to his company’s deal. “It’s not changing the television distribution marketplace in any way shape or form. It’s not changing the wireless marketplace. It’s not changing the media marketplace. There’s nothing changing. We’re vertically integrating our two companies.”
You’ll likely hear that argument again and again as the company attempts to gain approval by the Justice Department’s antitrust division and other regulatory agencies.
Honestly, the deal could dramatically change all of the above mentioned markets in a short amount of time. Stephenson gets paid quite a bit of money, so I’m pretty sure he knows it too.
Live streaming TV is in its infancy. Sony is estimated to have 100,000 PlayStation Vue subscribers. Sling TV has 600,000 subscribers.
AT&T has 130 million wireless subscribers and 15 million broadband customers, the Times reported.
According to Bloomberg, there’s an estimated 20 million households that have no cable or satellite service.
The so-called ‘cord never’ generation is where the money is, and will be, in the years to come.
Turning a majority of them into paying customers could completely revolutionize innovation. It could force traditional cable companies like Comcast and Charter Spectrum to upend their business models, which are costly for consumers.
But it could drive up prices for content by prompting more consolidation between content producers and distributors.
Do Stephenson and Bewkes think that’s what we really want?