Monday, 31 October 2016

Time Warner: A Bold move by AT&T

By: Gursahib Singh Buttar

AT&T agreed to buy Time Warner for $US 85.4 billion ($112 billion) proving to be the boldest move yet by a telecommunications company to acquire streaming content and attract a growing number of online viewers. This could be the biggest deal of this year, if regulators approve it, which will give AT&T control of cable TV’s great channels HBO and CNN, film studio Warner Bros and other ”yet to discuss” media assets.
The tie-up could see AT&T gaining ownership over an array of household names like “Game of Thrones,” “Westworld” and “True Detective.” It would control some of the most successful TV content in history, such as “The Sopranos” and “The Wire.” It could also benefit from all the subscription revenue from HBO, the most profitable cable subscription business in history, whose 130 million subscribers on cable and on HBO's online streaming app are paying about $15 a month. Also potentially falling into AT&T's hands would be the news channel CNN and its multinational operations. From political debate coverage to on-scene reports about hurricanes, tuning into CNN would mean more revenue for AT&T.
AT&T could come to own all of Warner Bros., which includes not only the Warner Bros. movie studio (which include the hit “Harry Potter” films, “Inception” and “American Sniper”) but also New Line Cinema (which is responsible for the “Lord of the Rings” films). Warner Bros. also controls DC Comics, meaning AT&T would have the rights to Batman, Superman, Wonder Woman and a whole host of other pop culture icons, means more revenue and content control.
Time Warner was the fourth-largest media company in America last year, with roughly $28 billion in revenue. Its film division has averaged roughly $4.5 billion in annual box office sales over the last five years. This year, it is the second-highest-grossing studio, behind Disney, having pulled in more than $1.5 billion from movies such as “Batman v. Superman,” “Suicide Squad” and “Central Intelligence.”
The New Company will have complementary strengths to lead the next wave of innovation in converging media and communications industry—combination unlike any other –the world’s best premium content with the networks to deliver it to every screen, however customers want it.
The company will deliver significant benefits for customers like being a stronger competitive alternative to cable & other video provider, will provide better value, more choices, enhanced customer experience for over-the-top and mobile viewing. With ad-supported model in place the cost of content creation will shift more from customers to advertisers, which gives customers the largest amount of premium content at the best value.
Even after so much promising this deal may look but it can fail miserably just like the Facebook zero project of Mark Zuckerberg on the basis of content biasing and other allegations of network neutrality. It all depends now on the telecom regulators as it’s unlikely they would let AT&T put Time Warner's content on its wireless or home Internet platform on an exclusive basis, analysts say. Nor would the government be eager to allow AT&T to exempt Time Warner programming from cellular data caps. A merger like this have 50-50 odds of coming upon to the final stage.

Even if AT&T doesn't buy Time Warner, it could buy other programming companies over the next three to five years, to become a producer of programming, shifting its business model so that it owns some of the content it distributes.

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