As earlier teased, the merger acquisition has been confirmed at a speculated price of $85.4million. Potential political and antitrust opposition aside, AT&T and Time Warner are viewing their great coming together as a classic synergistic combination, with a promise of editorial independence of Time Warner’s CNN network and other owned media.
“Premium content always wins,” said AT&T CEO Randall Stephenson, who will lead the combined company, in a video and press release. “It has been true on the big screen, the TV screen, and now it is proving true on the mobile screen.”
As Stephenson pointed out on a latest CNBC appearance with Time Warner CEO Jeff Bewkes “there are no competitors taken out of the marketplace. We compete nowhere. We are not talking about changing how the content is made available to other people or customers or distributors. It’s a pure vertical integration.”
Even so, the deal will face rigorous scrutiny by US regulatory bodies, politicians and competitors. Among others, GOP presidential candidate Donald Trump—who wrote The Art of the Deal —criticized the tie-up “because it’s too much concentration of power in the hands of too few.” On the other end of the political spectrum, erstwhile Democratic presidential challenger Bernie Sanders also criticized the deal as bad for consumers.
Time Warner and AT&T are being proactive, preparing for a future in which people access and consume media in an even wider array of platforms than they do today. Cord-cutting has already spurred other content-communication mergers with Verizon in the midst of buying Yahoo and Comcast owning NBC Universal, both deals in response to the growing dominance of digital and mobile platforms and the growth of Netflix, Facebook, YouTube and Hulu in the video space.
The deal will ensure that any emerging streaming platform will need to license content from the big media conglomerates to survive, and Time Warner already is one of the biggest. One goal of the merger is not only create more targeted advertising and content through data-informed analysis, but to innovate with new subscription and advertising models.
As David McAtee, AT&T Senior EVP and General Counsel, noted in a blog post commenting on the merger deal:
In America today, consumers are enjoying new golden age of television. Choices are expanding, content is being created at unprecedented levels, and on-line distribution of video has become an unstoppable force driven by surging consumer demand. But the next great phase of video innovation is yet to come. As broadband becomes nearly ubiquitous, there are limitless opportunities to innovate in the design and distribution of video. Consumers want their favorite video content anytime, anywhere, and in formats optimized for their own devices.
At the same time, consumers are increasingly calling for interactive programming that they can integrate with other content, such as their own personalized images or commentary, and then share on social media platforms. As a result, the question for the video industry is not what consumers want; it is whether today’s configuration of content creators, aggregators, and distributors can deliver it.
Now, AT&T and Time Warner intend to innovate on the “what” and the “whether” in that last sentence together. As AT&T tweeted in announcing the deal, “The future of video is mobile and the future of mobile is video.) Or as Stephenson noted on CNBC‘s Squawk Box about the rationale for the merger,
So what does change?
Why put the two companies together? It gets back to what Jeff said: speed. The world of distribution and content is converging and we need to move fast — and if we want to do something truly unique — begin to curate content differently, begin to to format content differently for these mobile environments, and this is all about mobility, think DirecTV Now, the new product we’re bringing to market (in November) — what can you do with Time Warner content really fast and very uniquely for our customers? Can we integrate social into that content? Can you have the capability to, (if) I’m watching content, I want to clip it and I want to send it via social media to my friends? Can we iterate on that quickly, and can we give a unique experience to our customers? That is what we are after — speed of execution and changing the game.
Stephenson also stressed that a new AT&T-Time Warner company would not withhold content from other distributors. “The idea that we’re going to come along and start to constrict the distribution of this content makes no economic sense. That would be a crazy idea. So the idea that is going to be a byproduct of this (deal), it doesn’t make sense.”
The merged company also vows to produce advertising opportunities differently, including addressable, targeted advertising based on customers’ data and preferences across new TV and mobile platforms, so viewers would see products and messaging they’re interested in.
“That means more consumers get a better experience viewing,” Bewkes told analysts on a conference call with Stephenson on Monday morning. “They get less interruptions, and it means that more of the cost of programming can then be borne by advertisers and consumers get a break.”
“So the benefit for consumers is pretty good, very good, and the benefit for advertisers is terrific because if you look at what’s happening in that world, advertisers need more competition and this will give another outlet, not just Google and Facebook, which have been gaining all of the traction. Now you have yet another advertising choice that’s equally efficient.”
Stephenson added that the feedback its millions of customers will help shape and fuel innovation.
“We’ll use those insights from our TV, mobile and broadband subscribers to inform what content we create. We’ll develop content that’s better tailored to what specific audience segments want to watch, when and on which device,” he said.
“And we’ll use the insights to expand the market for addressable advertising, and addressable advertising is far more effective and more valuable both to the advertiser and to our customers,” he added. “Owning content will help us innovate on new advertising options, which combined with subscriptions will allow us to grow a two-sided business model to help pay for the cost of content creation.”
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