Yesterday’s ruling, which sanctioned the $84.5 billion merger of AT&T and Time Warner, is the continuation of a competitive content strategy among the elite telecom companies that control the information super highway. In the U.S. market, those elite companies include (in order of size) AT&T, Verizon, Comcast, Charter Communications, as well as T-Mobile and Sprint, who are in the process of awaiting their own merger (announced last month). What all these companies have in common is that subscribers pay significant monthly fees for access to data. As data becomes faster and easier to deliver, the telecom’s like AT&T, Verizon and Comcast need content to provide to their customers in order to differentiate their services and make them more attractive. Without content, these companies simply become utilities selling a commodity available elsewhere – and for a lower price.
For those who don’t follow the entertainment business closely, Time Warner represents one of the most important entertainment companies in the world – and the following major entertainment licensors: Warner Bros. Consumer Products, which includes D.C. Comics (think Superman, Batman, Wonder Woman and hundreds more comic book characters); The Harry Potter franchise; the Lord of the Rings franchise; Warner Bros. Pictures; Warner Bros.Television, one of the largest producers of television content in the world; WB Games (video games); Hanna-Barbera, including the “Looney Tunes” animated franchise; HBO (“Game of Thrones,” among other premium content); Cartoon Network, owners of Adult Swim and Boomerang; Turner Broadcasting, who have cable networks such as TNT, TBS, Turner Sports, trueTV and CNN; plus a number of sub-brands.
Time Warner holdings represents a treasure trove of content for AT&T. The big question is, then: How does a conservative telecom company like AT&T that is technically focused manage a Hollywood-style, creatively-driven behemoth like Time Warner?
Comcast’s purchase of NBC/Universal in 2011, and later DreamWorks in 2016, would be a good model for AT&T to follow. While Comcast installed Steve Burke as the chief executive officer to run the entertainment business, Burke and Comcast were smart enough to understand the importance of keeping its key dealmakers, executives and creatives in place at NBC/Universal.
What the AT&T/Time Warner deal bodes for the licensing business is that it reinforces what we have always known – content remains king, and aggregators will always need great quality content to attract and maintain consumers.
What we can expect to see is a new bidding war emerge among the other telecoms and other internet-based behemoths like Facebook, Apple, Amazon, Netflix and Google for major Hollywood assets like Paramount/Viacom, Sony Pictures, Lionsgate and even Disney/ABC.
We can safely expect to see Verizon make a run at Viacom when the merger with CBS goes through, and certainly T-Mobile/Sprint will bid as well. Lionsgate is sitting on some really great content and would be a plum takeover target for the likes of an existing studio like Comcast/NBCUniversal or the new AT&T/Time Warner venture. For these guys, now that precedent has been set and the FCC regulatory board has enabled these types of mergers, it becomes all about scale. Who can acquire the most content?
Of course the shiny apple of all content is really the big question for the licensing industry and begs the question: who is big and bold enough to acquire Disney? Apple? Google? Or just maybe Amazon…