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Time Warner Bought by AT&T

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Large corporations seldom make such important decisions quickly. They announce potential mergers and buyouts months in advance. Last week, though, we witnessed a rare exception. Late in the week, the TV industry press was abuzz with speculation that AT&T would buy Time Warner, Inc. On Saturday, AT&T acknowledged that it was considering the purchase. On Sunday, both parties confirmed that they had come to agreement on a merger. AT&T would buy Time Warner, Inc. for $85.4 billion in cash and stock.

When rumors of the impending merger first surfaced, many old hands in the industry called them unrealistic. AT&T didn’t have much cash on hand after its purchase of DirecTV. For another major buyout, it would have to take on heavy debt, which it wouldn’t be willing to do. The telecom giant, though, apparently thought the risk was worthwhile.

Time Warner, Inc. has no direct relationship with Time Warner Cable. They were under the same corporate umbrella, AOL Time Warner, for several decades, but TWC spun off AOL and Time Warner in 2009.

With the purchase, AT&T will acquire a dominant position in the pay TV industry. With its massive telecom system and its ownership of DirecTV, America’s largest satellite TV system, AT&T already has the most extensive video distribution system. With the purchase of Time Warner, it will also maintain a heavy presence in content creation.  The programmer’s assets include Warner Brothers Entertainment, Home Box Office, Turner Broadcasting, DC Entertainment, DC Comics, New Line Cinema, CNN, half of the CW Network, and 10% of Hulu. Its channels include HBO, CNN, Cartoon Network, Turner Classic Movies, HLN, TBS, TNT, TruTV, and Turner Sports.

With its own content pipeline, AT&T has acquired more leverage in negotiations with programmers. This should enhance its ability to hold down the prices charged to consumers.

The merger is still subject to approval by the FCC and the Department of Justice. If they approve it, the deal is likely to become final late in 2017.

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