Last week, after a lengthy regulatory battle including a 6-week trial, a federal judge approved the mammoth $85 billion merger between AT&T and Time Warner, a deal that will likely have significant impact on the media industry. But, is the mega merger a good thing or a bad thing for consumers?
WHY DID AT&T WANT TO MERGE WITH TIME WARNER IN THE FIRST PLACE?
Well, simply put, today content is truly king. As the wireless market matures, and nearly everyone has a cell phone, AT&T felt like it needed to diversity its business in order to continue to compete and grow in this business climate.
They stood by and watched similar mergers go through, such as Comcast/NBC Universal, and Verizon/AOL/Yahoo, and decided that they needed to be have a business that was not just in distribution, bit content ownership as well.
OK, I SEE WHY AT&T/TIME WARNER AND THEIR SHAREHOLDERS ARE IN FAVOR OF THIS DEAL, BUT WHAT ABOUT CONSUMERS? IS THIS A GOOD THING OR A BAD THING FOR CONSUMERS?
Well, I think with most deals that are this huge, there are both pros and cons.
WHAT’S THE GOOD NEWS?
Ok, there are some things that are definitely benefits for consumers.
First of all, consumers might see expanded options to consume content, particularly if you’re an AT&T subscriber.
On Friday morning, AT&T CEO Randall Stephenson announced that the company will soon launch a new TV service that excludes sports channels and would be free for AT&T unlimited customers and only $15 for customers on other platforms.
Also, AT&T customers may get access to additional premium content without affecting their data plan. For example, AT&T has already started to offer free HBO subscriptions to it subscribers.
Lastly, the merger may accelerate development of the new 5G network by both AT&T and its competitors which will bring increased speed and new products and services with this enhanced technology.
OK, THAT SOUNDS GREAT MOSTLY FOR AT&T SUBSCRIBERS. WHAT SHOULD OTHER CONSUMERS BE CONCERNED ABOUT?
Well, although the federal judge who presided over the case didn’t buy the argument, there is a chance that the merger could increase cable TV costs over time.
AT&T could decide to charge other providers more to access Time Warner content, and those costs would inevitably be passed on to consumers.
Think about it like this, if one of the largest airlines, bought the largest fuel producer, you could imagine that the merged company would charge the other airlines more to access its fuel. That’s the fear with this merger.
Also, consumers may have fewer options to lower their cable bills.
Consumers have tried to lower their cable bills by increasingly signing up for cheaper streaming services such as PlayStation Vue, Sling, YouTube TV, Hulu etc.
AT&T could restrict those services from accessing the Time Warner content it will now own, or offer it exclusively on the streaming service that it owns (DirecTV Now), which would make the other services less attractive and give consumers fewer choices to lower their cable bills.
Lastly, this may open the floodgates for other deals like this.
This decision immediately led to Comcast making a $65 billion bid for most of the content assets of 20th Century Fox, creating a bidding war with Disney, which had already bid $50 billion for those assets.
This means that we will likely see a ton of consolidation in the media landscape which will seemingly increase costs for consumers over time because there will be less competition.
SO WHAT, IF ANYTHING SHOULD CONSUMERS DO NOW?
Consumers shouldn’t freak out, because any effect of the merger won’t be immediate.
However, I think they should continue to vote with their wallets by cutting the cord and letting these big companies know that they won’t stand for being overcharged for mediocre service or content.
At the end of the day, the customer is always right!
Rob Wilson is a financial advisor, television contributor and new media personality who concentrates his practice on providing advice to, and managing financial affairs for, successful professional athletes, entertainers and other young professionals.
His work providing advice and guidance to prominent young stars has earned him the moniker “Hip Hop’s Financial Advisor.” In addition to working with multiple platinum selling music artists, Rob has worked with world-class athletes that have collectively signed more than a half of a billion dollars of NFL contracts.
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