AT&T And Time Warner Merger: We’re Making Changes

AT&T Acquisition of Time Warner possess significant changesPhoto By: Mike Mozart/Flickr

The federal court of appeals has approved AT&T’s acquisition of Time Warner for $85 billion, rejecting the Justice Department’s bid to prevent the merging.

Time Warner now called WarnerMedia is the world’s third-largest entertainment company after Comcast and Disney.  It owns Turner, home to cable networks and digital media properties such as CNN, TNT, and Adult Swim. It also includes Home Box Office (HBO), the company’s premium network that airs hit shows such as Game of Thrones; and Warner Bros., which produces and distributes television shows, movies, and video games.

This morning, AT&T spared no time and announced that it would rapidly make changes throughout the company’s entertainment assets.

Bob Greenblatt, NBC’s former executive, will now be the chairman of WarnerMedia Entertainment and Direct-to-Consumer, meaning its streaming services. That division will combine HBO with Turner channels TNT, TBS, and TruTV; plus, WarnerMedia’s forthcoming DTC (streaming) offering.

CNN president Jeff Zucker will oversee WarnerMedia’s News & Sports. That division now includes CNN and all its many sub-brands; Turner Sports; Bleacher Report; and AT&T’s four regional sports networks (RSNs), three of which branded as AT&T SportsNet.

Warner Bros. CEO Kevin Tsujihara will now also oversee Turner’s animation properties, which includes Cartoon Network and its merchandise and licensing arm, plus Turner Classic Movies.

“This change will provide the company with the agility and flexibility needed to build WarnerMedia’s brands across a variety of evolving distribution models with a more coordinated approach to the company’s original programming,” WarnerMedia announced.

AT&T also announced that with every merger, staff lay-offs is expected; now with all of the networks now linked closer together in the name of greater efficiency and streamlined operations. Moreover, AT&T has over $170 billion in debt but has suggested it will be able to pay off a good chunk of that with its usual profits, by cutting costs, and by offloading assets like WarnerMedia’s 10 percent stake in Hulu.

Greenblatt tried to get across that any job reductions won’t hamper WarnerMedia’s creative efforts. However, the changes in company management resulted in some of its previous long-time employees to resign.

HBO’s chairman and CEO Richard Plepler announced he would be stepping down from the position recently. He had been with HBO for 27 years but decided to leave with reports pointing to reduced freedom and autonomy under WarnerMedia

Plepler gave the green light to hits like Game of Thrones and Veep and was widely respected across the entertainment industry for his stewardship of HBO and its prestigious originals.

David Levy, Turner Broadcasting’s president, announced his exit last week as well, after a similarly long tenure with the company. Their departures make it easier for AT&T to focus on consolidation.

The decision to move forward with the merger were presided by a three-judge panel from the US Court of Appeals for the DC Circuit, which said on Tuesday that it does not plan to appeal the ruling. Jeremy Edwards, a department spokesperson, said, “We are grateful that the Court of Appeals considered our objections to the District Court opinion. The Department has no plans to seek further review.”

AT&T first announced its intention to purchase Time Warner, which included HBO, Warner Bros., and the Turner cable networks, in October of 2016. Just over a year later, the Justice Department sued to stop the deal on antitrust grounds, claiming that by owning Time Warner, AT&T would have “both the incentive and the ability to raise its rivals’ costs and stifle the growth of innovative, next-generation entrants.

The Justice Department claimed AT&T would have greater bargaining leverage over rival TV distributors because the company would have valuable live content from Turner’s networks, like the sports that TNT carries and CNN’s news coverage.

The Justice Department contended that AT&T could during negotiations threaten to “black out” Turner’s channels — that is, pull them from the rivals’ lineups — tempting customers to drop their current providers and switch to AT&T services like DirecTV. The Justice Department alleged that AT&T would also have the power to raise the prices its competitors pay for their content.

The companies argued during the trial that they have no incentive to trigger a blackout because they rely on subscriber fees and advertisements to make money, and dropping a distributor would cause their networks too much financial harm.

They also claimed that they need the merger to compete with the likes of Netflix, Google and Facebook, and to bring cost savings and innovations to their customers.

The AT&T acquisition of Time Warner is considered a “vertical merger” because it’s a content distributor, AT&T, buying a content producer, Time Warner. Typically vertical mergers are not given as  scrutiny on antitrust grounds, because unlike a “horizontal merger” in which two competitors are combined, a competitor isn’t being taken out of the market. Time Warner’s business units, like HBO and Warner Bros., all remain in operation.

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