Time Warner always seems to be at the center of the media industry’s most important deals.

The union of Time Inc and Warner Communications in 1990 kicked off a decade of merger mania by challenging the long-held belief that journalism would suffer at an entertainment company. When AOL and Time Warner combined a decade later it became a symbol of corporate hubris, and one of the worst deals ever with a loss of $54 billion of its asset value.

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Time Warner

Now Time Warner seems to be signaling that the journey has run full course with its decision to accept $85.4 billion in cash and stock to join AT&T. If the deal closes — which the companies expect to happen by the end of 2017 — then assets including HBO, CNN, TBS, TNT and Warner Bros will become a small part of a company that profits from the sale of phone and TV subscriptions.

Everyone today is trying to figure out what the deal says about the state of the media business, and how it will affect others. Here are some early impressions:

Q: Time Warner CEO Jeff Bewkes didn’t see much value in having content and distribution under the same roof in 2009 when he spun off Time Warner Cable. Does the AT&T deal mean he now considers that a mistake?

A: The companies say that a lot has changed since then — particularly with the growth of mobile and streaming video. Bewkes also notes that Time Warner Cable was limited because it served a collection of communities, but not the whole country the way AT&T does via its wireless service and DirecTV.

Q: So why is Time Warner selling?

A: Execs offer a lot of reasons. The most prominent one is that the content operations will find it easier to keep up with the digital revolution as part of a wireless giant. For example, they can collect a lot of data about viewers and use that to decide what programs to produce, and sell premium-priced ads that will go to specific people — not just broad demographics.

Q: That seems like thin gruel for for a deal this size.

A: It might make better sense over time as companies look to escape what Harvard Business School Prof. Bharat Anand calls the “content trap.” Instead of trying to attract big audiences by taking big risks to create the best content, he says, tomorrow’s winners will be those who use data to help them target specific niches and connect customers with each other.

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HBO

Q: That’s an interesting theory. But why make a deal now?

A: Time Warner is getting out at the top of the market, several analysts say. About 85% of its operating profits come from TV networks — HBO and ad-supported ones at Turner. Those businesses will find it hard to grow as cash-strapped consumers look to cut their entertainment spending, and advertisers find less expensive ways to reach buyers online. Just six years ago more than 87% of all occupied households subscribed to pay TV. That’s down to about 81%, and continues to fall.

Q: If that’s the case, then why would AT&T buy Time Warner?

A: The telco is has problems of its own, which its latest quarterly report — released this weekend with the deal announcement — seemed to underscore. Just about everyone who wants wireless phone service has a subscription, and T-Mobile and Sprint are becoming more competitive. Meanwhile, DirecTV appears to be growing at the expense of AT&T’s U-verse: The two video services lost 3,000 subs in Q3, and AT&T expects full year results to “decline slightly.”

MoffettNathanson Research’s Craig Moffett sees the decision to buy Time Warner as “old-fashioned diversification” because “things may be deteriorating faster than [AT&T] had expected.” Cowen & Co’s Colby Synesael gives AT&T “credit for likely ensuring the company’s survivability [as] opposed to going the way of Kodak” — but calls Time Warner “too much too soon when the explicit strategy/business model in which to increase shareholder value does not seem at this point clear.”

Q: Can’t AT&T make a deal pay off by limiting CNN or HBO to its customers, give them big discounts for the programming, or keep competitors off its platforms?

A: Antitrust officials would object to most, if not all, of those options. They’ll probably restrict AT&T from playing favorites as a condition for approving the deal — if they don’t decide to bar it outright.

Q: There must be something AT&T can do with programming.

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AP

A: If the deal is approved, then don’t be surprised if AT&T becomes a bold bidder for NFL rights. Negotiations for the different TV packages “will likely begin in 2019” and if the recent decline in football TV viewing doesn’t accelerate “we assume the NFL just got more expensive in 2022/2023 for CBS, Disney, Fox and NBC and one of them could potentially be shut out,” Brean Capital’s Alan Gould says. Nomura’s Anthony DiClemente also believes that with wireless, DirecTV and networks including TNT “AT&T can offer its video subscribers a highly immersive customized sports viewing experience, likely unmatched across most video distributors.”

Q: How likely is it that the government will approve the deal?

A: Investors are wary. Time Warner closed today at $86.74, which suggests they doubt that they’ll see the $107.50 in cash and stock that AT&T says it will pay at the end of next year when it expects the acquisition to close.

Q: The government usually approves vertical mergers, including Comcast’s acquisition of NBCUniversal. What would make this any different?

A: It would hit Washington with a new administration in place — and a lot of public pressure to oppose media mega-mergers (potentially including from rival media and telecom companies).

The Senate Judiciary’s antitrust subcommittee plans to hold a hearing on AT&T-Time Warner in November. Over the weekend, Sen. Bernie Sanders (I-Vt.) tweeted that the administration should “kill” the deal because it would lead to “higher prices and fewer choices for the American people.” Sen. Al Franken (D-Minn.) said the agreement raises “some immediate flags about consolidation in the media market.” And GOP presidential candidate Donald Trump said he’d oppose the deal.

Q: Are there any particular issues that might hang up the AT&T-Time Warner review?

A: The Justice Department will want AT&T to promise that it won’t use its wireless or TV service to favor Time Warner content, and hurt competitors — especially small, independent providers. There are also some specific potential conflicts that would have to be resolved. For example, Time Warner recently bought a 10% stake in Hulu, which plans a live streaming service that will compete with DirecTV Now (which AT&T plans to introduce next month). The FCC could review the merger depending on a few specific terms, including whether AT&T would pick up Time Warner’s independent TV station in Atlanta, WPCH.

Q: What happens if regulators block the deal?

A: AT&T would have to pay Time Warner a $500 million break-up fee. And then it would be just a matter of time before someone else takes a run at the entertainment company.

Q: Could someone try to top AT&T’s offer for Time Warner?

A: That’s possible, but unlikely. Time Warner would have to pay AT&T a $1.725 billion break-up fee — raising the price a rival bidder would have to cover. And analysts don’t see others offering a higher price at a time when the value of pay TV network companies is diminishing. BMO Capital Markets’ Daniel Salmon sees a 20% chance that a counter-bid might come from Apple, Alibaba, Verizon, Comcast, Alphabet, Amazon, or Facebook.

Q: Won’t the mere possibility that AT&T and Time Warner will combine prompt other companies to merge?

A: It takes away almost any doubt that Viacom and CBS will merge, as their controlling shareholder — Sumner Redstone’s National Amusements — has proposed. But opportunities are more limited than you might think. Like Viacom and CBS, Comcast and Fox are controlled by families that appear unwilling to sell. And Disney, with a market value of $150 billion, might be too big for another company to swallow.

Q: Could Disney be a buyer?

A: There’s been a lot of speculation over the last month that CEO Bob Iger has his eye on Netflix. He’d have to write a humongous check, at least $60 billion, that would make Netflix Disney’s most valuable asset: bigger than its studio, its networks, or its theme parks.

Most analysts consider it unlikely that Iger would bet the farm on a company with thin profits, a ton of debt, and that’s facing an armada of growing competitors — including Hulu, which Disney co-owns with Comcast, Fox, and Time Warner. But “if there was ever a time to take this risk, it would probably be now given that technology players are for the first time outlining a real vision around video instead of the small scale experiments thus far,” Barclays’ Kannan Venkateshwar says. He’d consider it “a defining moment for the media industry” if “the company that started the disruption, Netflix, [ended] up potentially running the largest media company and reshaping the industry for decades into the future.”

Q: What deals seem more likely?

A:  Someone eager to challenge or keep up with AT&T could look at major owners of wireless spectrum including T-Mobile, Sprint, or Dish Network.

Q: How about in media?

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Associated Press

A: It’s always smart to keep an eye on Liberty Media’s John Malone, who has said he’d like to bring together smaller companies — which he describes as “free radicals.” He’s already assembling an impressive network. He owns controlling stakes in Charter Communications (the U.S.’ No. 2 cable company), and Liberty Global (the leading cable company in Europe and elsewhere). On the content side, his investments give him a loud voice at Lionsgate (now buying Starz, which he controls), and Discovery. His empire also includes Sirius XM, Live Nation, QVC, and the Atlanta Braves.

Q: What are some of the “free radicals”?

A:  Charles and James Dolan have AMC Networks and The Madison Square Garden Company. Scripps Networks’ name also frequently comes up in talk about potential consolidation deals.

Q: How do other media companies look at the AT&T deal?

A: Most are waiting to see the details, while cheering the high value AT&T put on content. Distributors “are going to need content in order to make their offering special and unique,” Discovery CEO David Zaslav told Fox Business Network. “I think it’s a reinforcement that great [intellectual property] and content is going to be the ultimate winner here and for Time Warner to be getting a healthy price like this reinforces that the environment for content for the long term is going to be very important and needed for these pipes.”