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AT&T-Time Warner Deal: 5 Big Things to Know About the Proposed Merger

It’s a huge bet on a mobile-first video world, but it might not benefit consumers all that much

On Saturday night, AT&T agreed to acquire Time Warner for $85.4 billion in the biggest media deal since another one involving Time Warner — its 2000 merger with AOL, which also combined titans of content and distribution — and failed epically.

According to the boards of both companies that signed off on the deal, this time it’s different. Wall Street isn’t convinced yet — both companies’ stocks are down in Monday trading.

Regardless of how it turns out — if the merger happens at all — here are five of the biggest questions about the deal, answered.

What is AT&T actually buying?

Time Warner is a media conglomerate that’s been constructed and reconstructed several different times. For example, it no longer owns one of the assets for which it’s named — the company spun off Time and its other magazines in 2014, as well as Time Warner Cable in 2009.

In the present incarnation that AT&T has agreed to buy, the company has three main divisions: the Warner Bros. movie and television studio; Turner networks, including CNN, TNT and TBS, as well as HLN, Cartoon Network, Adult Swim, Boomerang, TruTV and Turner Classic Movies; and HBO. That gives the company ownership of assets ranging from HBO hits like “Game of Thrones” to Warner Bros. tentpoles like “Suicide Squad” and the “Harry Potter” movies, CNN’s election coverage and Turner’s NBA playoff rights.

What does AT&T want with Time Warner, anyway?

Well, if you believe AT&T CEO Randall Stephenson, “premium content always wins,” and Time Warner has plenty of it. And as AT&T builds out a 5G mobile network, and prepares to launch a DirecTV-branded streaming service, it decided to buy a bunch of that content to have plenty of stuff to run through those pipes, whether they feed TV sets or smartphone screens.

On a Monday morning call with analysts, Stephenson said that owning the content creators outright makes it a lot easier to experiment with new ways to deliver it, especially on mobile devices, where AT&T has significant market share and is making major investments.

“Trying to create those capabilities with the current content providers is proving difficult,” he said. “Now in this over-the-top [streaming] environment, we can begin to innovate our content much faster.”

But maybe importantly, AT&T will also get a bonanza of customer data, as it can see precisely what kind of engagement Time Warner’s content is getting with its users. On the call Monday, Time Warner CEO Jeff Bewkes said there are plans to use those “insights” in the content creation process.

Will this help consumers?

Unclear at best. Stephenson and Bewkes said all the right things on a Saturday evening call with reporters and Monday morning’s call, talking about eliminating “pain points” when trying to view subscribed-for content across devices and promising more and better direct-to-consumer offerings.

But the deal would further consolidation in media — which usually raises prices no matter what industry it strikes. It could also offer incentives like allowing AT&T wireless subscribers to watch HBO on their phones without it counting against their data plan — while offering a more limited or expensive menu of options to other cell phone carriers.

What does it mean for advertisers?

On Monday’s call, Stephenson spoke about using AT&T’s data, or “insights,” to create not just customized content but targeted, “addressable” advertising, which would allow companies to better focus their marketing spend — and not waste money showing tampon ads to a bunch of men.

But again, with fewer companies owning media outlets, it could limit the ability of advertisers to pursue more favorable deals by shopping around.

Will it get regulatory approval?

Also extremely unclear. Regulators blessed the union of Comcast and NBCUniversal, which also combined distribution and content powerhouses, but Wells Fargo analyst Marci Ryvicker wrote that “D.C. had many regrets” over that deal in a Friday research note.

And this time, the political climate might be less favorable. The Department of Justice has filed suit to block two mega-mergers between health care companies, and politicians seem to be giving it a jaundiced eye.

Republican presidential candidate Donald Trump pledged to kill the deal at a rally in Gettysburg, and Democratic Sen. Al Franken said it “raises some immediate flags,” while Sen. Bernie Sanders — who won nearly half of Democratic primary votes — came out strongly against it. Even Tim Kaine, the running mate to presumably corporate-friendly Democratic presidential candidate Hillary Clinton, said he shares “concerns and questions” about the deal, and said “less concentration” in media is generally preferable.

But on the call, Stephenson sounded a more optimistic note.

“We don’t know of a situation where vertical integration has been blocked in our sector,” he said.