Time Warner will be fine even if the AT&T acquisition doesn’t go through

Time Warner will be fine even if the government blocks the bid from AT&T to buy the company.

That’s the word from John Martin, the free-wheeling chief executive of Time Warner subsidiary, Turner Inc., who was speaking at the Code Media conference in Huntington Beach.

For the record, Martin says that the government’s position on the acquisition offer is “stupid” and that it will likely lose its case. “It is a massive misallocation of resources and capital to fight this thing,” Martin said.  “They are going to lose.”

Martin argued that while the value of AT&T had remained flat after news of the acquisition broke, Amazon and Google added roughly the equivalent of the telecommunications company’s market cap over the same period. Meanwhile Facebook’s valuation grew to the size of two Time Warners, Martin said.

“So if you’re the government and you’re worried about fixing the competitive landscape, what are you worried about?”

His point was that the competitive landscape would not be harmed by a merger of the two companies.

“In the history of the country, what vertical merger has tilted the landscape of the competitive environment? Let me give you the answer: Zero.”

Still, should for some reason the government make its case, Time Warner could survive… for a time. The company is coming off of its best year across most of its media properties, according to Martin.

“Time Warner is a pretty, stable, big successful company. So I mean, HBO is on fire right now. Warner Brothers had the most successful year in its history in 2017. We did too. Whatever happens happens,” said Martin. “The future is really bright.”

That said, consolidation is the name of the game, and should Time Warner not be bought by AT&T it would need to find another acquirer eventually.

Martin and his fellow panelist, A+E Networks chairman and chief executive Nancy Dubuc noted that in this new media landscape size does matter. They both expected that Viacom would have to reintegrate with CBS — and that observation matters for Martin’s own assessment of Time Warner’s stability.

Ten predictions for digital media in 2018

1. There will be blood in the escalating battle amongst premium OTT video giants, as the market becomes over-saturated, early winners and losers are declared, and Netflix finds itself increasingly in everyone’s lines of sight — including Disney’s and Apple’s.

Originals continue to be the primary weapon used on the OTT video battlefront, extending digital media’s “New Golden Age” for creators.  We already know that traditional pay TV providers like Comcast will enter the fray in 2018, as will Disney when it launches its own pair of “Netflix Killers.”

But, Apple almost certainly will also join the premium SVOD fray in 2018.  It’s all-out war in the premium OTT video world, as cord-cutting accelerates and traditional cable and satellite providers shed more paying subs.

2. Most other new premium OTT video market entrants in this beyond-crowded premium OTT video space – including so-called niche-focused OTT video services — will be swallowed up or simply languish, squeezed out by market leaders and the sheer scale of Google and Facebook, with which they simply can’t compete for ad dollars.

Google and Facebook already own about two-thirds of that global digital advertising market.  That means that most OTT video players simply cannot succeed on ad dollars alone — and other means of monetization will be beyond their reach because they fail to deliver a sufficiently compelling, differentiated and emotionally connected media experience.  Winners will swallow up losers in an environment of accelerating M&A.


3. The Hollywood community will begin to increasingly understand the power of new cost-effective technology-driven ways to test and measure new characters, stories and engagement in order to more smartly and efficiently place their big expensive bets. 

Innovative new services like comics-driven motion book company, Madefire; mobile-first horror-focused company Crypt TV; and mobile-focused text storytelling company Yarn point the way.  Meanwhile, Netflix, Amazon and Facebook will continue to mine their deep data about all of our hopes and dreams to maximize “hits” and minimize “misses” as compared to traditionalists.  And, they will increasingly do a good job at it, as they become more confident in their creative pursuits.  

4. Spotify will go public at a lofty valuation, but those numbers and overall investor confidence will decline throughout the year, together with Pandora’s, as these two pure-play global streaming music leaders find it increasingly difficult to compete against “big box” behemoths Apple, Amazon and Google/YouTube. 

Yes, Spotify and Pandora boast massive scale.  Yet, scale alone does not financial success make.  In fact, pure-play distribution success leads to higher and higher losses due to sobering industry economics these pure-plays can’t stomach, but the behemoths can due to their multi-pronged business models.  These harsh realities mean that investors of many pure-play streaming services will take a hard look at themselves in 2018 as they contemplate their strategic next steps.  Many will realize that they can’t go it alone.  And that leads to M&A, which brings me to …

5. One company’s struggles are another company’s opportunity, and successful “bigger fish” will step up their M&A efforts to acquire those companies that see no long-term path to making it on their own.

M&A is a hallmark of today’s overall digital, multi-platform tech-infused transformation of the media and entertainment business.  Just like AT&T made its move to acquire storied traditional Time Warner in 2016 and Verizon closed its acquisition of Yahoo! in 2017, expect some more massive deals in 2018.  Right now, Fox is reported to be chased by Disney, Comcast and Verizon for OTT video-driven reasons.  And don’t just look within U.S. borders.  There is no virtual wall in our borderless digital media world.


6. Data finally becomes a high profile, high priority “missing link” in the strategies of most media and entertainment companies that will try to correct course.

Virtually all traditional media and entertainment companies now openly covet Netflix’s, Amazon’s and Facebook’s user data, as well as how those services leverage that data to their seemingly-untouchable advantage.  The quest for data – and the services that provide, analyze and inform – take on new urgency amongst the traditional media and entertainment ranks.

7. Brave new technologies like AI (via virtual assistants Alexa, Siri and Google) flood the mainstream and increasingly impact the worlds of media, entertainment and advertising, while blockchain technology captures industry mind-share and begins to infiltrate mainstream conversations.

The soothing voices of Alexa and Siri guide us through this AI revolution.  “Virtual assistants,” “smart speakers” (or whatever you want to call them) will increasingly populate our homes – improve significantly over time – and serve up our favorite content (as well as increasingly targeted and hoped-to-be “welcomed” incentives, promotions and ads).

At the same time, the voice of blockchain technology – barely acknowledged in media and entertainment circles in 2017 – will increasingly be heard and respected at the water cooler.  Blockchain technology conceptually holds revolutionary and industry-transforming new offensive and defensive power.  On the offensive front, blockchain will enable completely new ways to monetize content and direct creator-to-consumer distribution.  And, on the defensive front, blockchain promises to eradicate piracy.


8. Behemoths Apple, Google and Facebook will increase their already-massive investments in immersive technologies, and 2018 will be AR’s break-out year in terms of mass adoption via ARKit and ARCore which  give our mobile phones real “spatial sense” as true AR systems.

VCs and strategic investors will also continue to throw boatloads of cash into the overall immersive space.  AR’s gold rush also means continued growth in the related “wearables” market and early, very early, consumer adoption of AR-driven eyewear.  And, when a market together invests so heavily, a market becomes our consumer reality.

9. Basic rudimentary text-based services and audio podcasts will continue to astound in terms of both scale and counter-programming success. 

These forms of media face no significant licensing or royalty headwinds, unlike video and music streaming services.  That means that all money that flows from them, flows directly into the pockets of service providers.  And, the most successful of these services can scale massively, meaning that monetization can be significant.  Very.  That’s why text-centric storytelling apps like Yarn are on fire right now.

10. The too often-overlooked, yet potentially game-changing, live event and venue plank of truly 360-degree multi-platform strategies increasingly becomes noticed and offline experiments build.

Call this the “Amazon Effect,” as players across the digital media ecosystem stop scratching their heads about, and rather begin studying, Amazon’s direct-to-theater motion picture releases, brick and mortar retail stores, and Whole Foods super-stores.  Amazon understands what most still haven’t even considered – that direct, non-virtual offline consumer engagement may be the most impactful plank of them all, bringing online engagement into the real world (and then back again to create a virtual cycle of brand engagement and consumer monetization every step of the way).

RELATED BONUS PREDICTION — In reaction to 2017’s sobering and frequently shocking negative societal forces, many digital media companies will take things even further by infusing their offline efforts with social impact, an inspirational and motivational element that is already proven to be commercially smart.

Such fully-realized efforts hold the tantalizing power to transform digital media’s virtual cycle into a fully-realized multi-platform virtuous circle.  Double bottom-line – profitable both commercially, and socially.  Hey, digital media companies.  Don’t underestimate the power of humanizing your efforts with a healthy dose of offline “soul.”

Featured Image: Atlas social media/Flickr UNDER A CC BY 2.0 LICENSE

Time-Warner’s Turner opts for AWS as its preferred cloud provider

All of the hyper-scale cloud providers love to tout their new customer acquisitions: Google talking about Spotify; Microsoft signing up various Adobe services for Azure; or AWS working with the likes of GE. That’s a sign of how competitive this market is, despite AWS’s continuing market share leadership.

At its annual re:Invent conference in Las Vegas, Amazon’s cloud service today announced that Turner, Time-Warner’s entertainment, sports and news company, is making AWS its preferred cloud provider. Turner’s brands and partners include channels like TBS, TNT, Cartoon Network, CNN and Adult Swim.

Turner says that it is bringing “decades of content” to the AWS cloud, including CNN’s 15-petabyte video archive. The company is also moving thousands of virtual machines to AWS and expects to use a wide range of Amazon’s AI technologies to better analyze and extract video metadata to offer its viewers enhanced personalized experiences and, of course, to help its advertisers, content creators and analysts better understand viewing trends (the emphasis here is probably on the advertisers).

“We’re changing our entire broadcast technology stack to a fully digital, cloud environment built on AWS, which will enable us to adapt to new video delivery models, as well as provide our viewers with more personalized content and advertisement,” said Turner CTO Jeremy Legg in a canned statement. “Our relationship with AWS and the services they provide are essential to our success. Given that we reach over 80 percent of adults and 70 percent of millennials every month, we needed a cloud provider that has the ability to support massive-scale media businesses like ours which often have spikes in demand across our diverse portfolio.”

AWS stressed that Turner isn’t the first media company to make the move to its cloud. Others include the BBC, C-SPAN, Hulu, Netflix, PBS, GoPro, Lionsgate and Spotify (which still keeps a presence on the AWS platform).

Featured Image: John Greim/Getty Images

The DOJ sues to block AT&T’s Time Warner deal

On Monday, AT&T confirmed the U.S. Department of Justice’s decision to sue in order to block the company’s plans to purchase Time Warner for $85.4 billion. Earlier reports suggested that the DOJ would move against the deal if AT&T did not intend to sell CNN.

CNN has a famously fraught relationship with the Trump administration which has gone out of its way to attack the news source throughout both campaign season and Trump’s first year in office. It’s not immediately clear why the Trump administration would oppose the AT&T deal, a vertical merger that would not eliminate a competitor and was not expected to generate antitrust controversy.

AT&T’s Senior Executive Vice President and General Counsel  David R. McAtee issued a statement speaking out against the news as it broke:

“Today’s DOJ lawsuit is a radical and inexplicable departure from decades of antitrust precedent. Vertical mergers like this one are routinely approved because they benefit consumers without removing any competitor from the market. We see no legitimate reason for our merger to be treated differently.

“Our merger combines Time Warner’s content and talent with AT&T’s TV, wireless and broadband distribution platforms. The result will help make television more affordable, innovative, interactive and mobile. Fortunately, the Department of Justice doesn’t have the final say in this matter. Rather, it bears the burden of proving to the U.S. District Court that the transaction violates the law. We are confident that the Court will reject the Government’s claims and permit this merger under longstanding legal precedent.”

Report: U.S. will only approve AT&T-Time Warner deal if CNN is sold

The U.S. Department of Justice may block Time Warner’s sale to AT&T if it doesn’t sell CNN first, according to a report from the Financial Times. The $85.4 billion deal was proposed last year, just weeks before the U.S. presidential election.

After Donald Trump was elected, some wondered if his disdain for the cable news channel would somehow thwart the deal. The FT is now reporting that this may actually happen.

The report says that AT&T is opposed to selling CNN and plans to fight this in court.

It’s typical for large deals to undergo antitrust review to avoid unfair competition or monopolies. It’s not typical for the President to weigh in on a deal, due to a personal grudge against a company.

Shortly before the election, Trump promised to block the deal if he were elected into office.

CNN declined to comment on the potential sale. AT&T has not yet responded to comment.

TechCrunch is owned by Verizon, a competitor of AT&T. The author of this story previously worked at CNN.

Featured Image: KENA BETANCUR/AFP/Getty Images

The merger between AT&T and Time Warner is a raw deal for the rest of us

It’s long been impossible to imagine a family budget that doesn’t include line items like electricity, gas, and groceries.  Today, it’s impossible to omit digital communications services like cable or satellite TV and high-speed broadband — both in your home and on your phone.

The typical American household spends $2,700 on these items each year – despite the fact that many Americans often complain about the service they receive from their cable, internet, or cell phone provider.

I think they’re getting a raw deal.  And I worry it’s about to get even worse.

Over the past two decades, the handful of massive corporations that dominate this sector have consolidated their grip on the market.  Effectively dividing up the country to protect regional monopolies, they’ve conspired to limit direct competition, and thus consumer choice: few Americans have more than one or two real options for cable or broadband service.

Meanwhile, they’ve engaged in a practice known as “vertical integration.”  Eight years ago, cable TV giant Comcast purchased NBCUniversal, a major content provider, thus giving Comcast the ability to control both the programming and the pipes that carry it.  I objected to the deal at the time, concerned that Comcast would have strong incentives to favor its own programming over other content creators’ offerings, and then restrict access to its own programming by competing distributors.

In order to get the deal approved by regulators, Comcast agreed to conditions that would have protected content neutrality and limited its ability to lock consumers into high-priced TV/broadband “bundles” — but it promptly violated those conditions, engaging in exactly the kind of behavior I warned about.

For example, the new Comcast/NBC placed MSNBC and CNBC (channels it now owned) near other news networks on its TV channel lineup, while consigning competitor Bloomberg News to the outer reaches of the dial.  Since buying NBCUniversal, Comcast has served its own bottom line well, but consumers and competitors have paid the price.

Now AT&T — which, having already gobbled up satellite giant DirecTV, is the nation’s largest pay-TV provider — is attempting to purchase one of the world’s largest content producers, Time Warner.

This $85 billion deal dwarfs even the massive Comcast-NBCUniversal merger.  And so do its implications: AT&T’s subscriber base is more than four times the size of Comcast’s at the time it purchased NBCUniversal.

Any day now, the Department of Justice will announce whether this mega-merger will be permitted.  And anyone with a cell phone, a cable subscription, or an internet connection has a huge stake in this decision.

A combined AT&T-Time Warner could pass along the massive acquisition costs, which include billions of dollars in Time Warner debt, to consumers, just as AT&T did after acquiring DirecTV.  Even if you subscribe to a different service for cable or satellite TV, you could wind up paying more, because AT&T could raise the prices it charges competitors for HBO, CNN, and other highly desirable Time Warner programming.

Meanwhile, AT&T-Time Warner would have every incentive to favor its own content over that of others, meaning that AT&T users might not have access to the programming they want – like the competing content of Netflix and Hulu – on the same terms.  Because of AT&T’s large footprint in the wireless internet market, their acquisition of a massive content provider poses a serious threat to net neutrality.

And that’s not all.  Should regulators sign off on this deal, it could have enormous long-term implications for the media landscape, as other major industry players — of which there are fewer and fewer — will increasingly argue that greater scale or their own vertical deal is necessary in order to compete with the behemoths of AT&T and Comcast.

In fact, the next big wave of consolidation may already have begun.  A few weeks back it was reported that T-Mobile is seeking to acquire Sprint, in a deal that would merge the third and fourth largest carriers in the U.S. wireless market.

Unlike the cable market, competition among wireless carriers is relatively robust, and consumers are reaping the benefits.  In June of this year, the Wall Street Journal reported that cell plan prices were down 12.5 percent since April of 2016, the largest decline in 16 years, and attributed the drop to “intense competition” among the top four cell-service providers.

But a deal between T-Mobile and Sprint would curb this considerable progress and result in higher prices for consumers.  It could also disproportionately impact lower-income families and communities of color, many of whom rely on mobile broadband as their primary internet connection.  I urge both companies to reexamine the anticompetitive and anti-consumer effects — effects that regulators publicly acknowledged just a few short years ago — and refrain from finalizing a proposal.

Take a step back, and the implications of the rapidly accelerating trend of media consolidation are clear and concerning.  Time and time again, deals like the proposed AT&T-Time Warner acquisition result in even higher prices, even fewer choices, and, as tends to follow the elimination of real competition, even worse service for American consumers.  That’s reason enough for the DOJ to block this deal.

More broadly, as someone who used to work in the entertainment industry, I worry about the chilling effect this trend could have on independent creators and producers whose work is at the heart of the American tradition of creativity.  And as a citizen, I worry about the distortive effect media consolidation has on the free flow of information in America, and what it means for our democracy.

But as a Senator representing more than five million Minnesotans, I know that this is a pocketbook issue first and foremost, one that affects nearly every American family.