[It’s important to focus on the budgets that the OTT services are spending on original programming and animal spirits being targeted on creators in a positive way for once. That is at least nominally driving the competitive incentives for the AT&T/Time Warner merger. May not be smart to be too quick to judge.]
[AT&T CEO Randall] Stephenson tried to show that the ability to gain increased leverage in distribution was never the rationale for the merger. In notes he wrote after his initial lunch conversation with Bewkes, Stephenson described the potential merger as a “vision deal,” and said that he didn’t want to give the AT&T board of directors “the expectation that there would be these significant cost synergies” if they paid a premium for the company. He explained that he wrote the note before his team did a full study of the transaction, and savings have since been identified.
On Sept. 1, 2016, the board gave him the greenlight to pursue the merger, and approved the transaction in a unanimous vote on Oct. 22 that year.
He said AT&T, starting in 2016, set out to pursue the acquisition of a content company, given the changes taking place in the media business, citing Netflix and Amazon, and their ability to gain valuable consumer data on what their subscribers are watching, as well as Google and Facebook and their offering of targeted advertising tied to a specific consumer’s likes and dislikes.
The CEOs of those companies, Stephenson said, say that their businesses are “all about engagement” with the consumer.
He talked of the benefits of AT&T’s wireless and DirecTV’s set-top box data in creating a new targeted advertising platform for Turner’s channels, with the ability to deliver “three, four, five” times the return on what traditional spots currently get.
He said the merger represented a “significant shift in strategy” for AT&T, as it had previously tried to buy two smaller content businesses but “to no avail.” The merger with Time Warner, he said, would allow AT&T to make a giant leap into the content business more quickly.
“We knew we had to have scale,” he said.
He pointed out the decline in subscribers to DirecTV and U-verse, as younger consumers in particular migrate to cheaper platforms or go without pay-TV subscriptions altogether.