AT&T-TW Not A Big Deal, But DirecTV Now Is

Other then diverting money that might have gone to buying TV spectrum, the proposed AT&T merger should not have much impact on broadcasting. Of more concern is AT&T's announcement on Tuesday that its DirecTV will offer a not-so-skinny bundle of more than 100 channels for $35 a month. That's the challenge for broadcasters. They have to make sure they're included in DirectTV Now at a fair price.

It’s been nearly a week since AT&T announced its $85 million buy of Time Warner, and you’re probably still thinking: What does this mean to me, the great American broadcaster?

Well, I’ve thought about it, and the answer is not much — unless you were among those who thought you were going to make a big killing in the FCC incentive auction.

AT&T hasn’t been bidding aggressively in the auction to scoop up as much TV spectrum as it can, depressing the amount of spectrum that will be sold and the prices paid for what is sold.

I suspect its courtship of Time Warner, which began just as the forward auction was getting underway last summer, explains why. It decided it had other things to do with its cash and borrowing power — namely, diversifying into TV content.

But, in terms of impact on broadcasting, that’s about it.

Broadcasters’ dealings with AT&T have primarily involved negotiating for retrans fees from DirecTV, which hasn’t exactly been a pushover, but hasn’t been the pain that, say, Dish Network and some of the cable operators have been.


Nothing I see in the Time Warner deal will markedly strengthen DirecTV’s bargaining position.

For AT&T, it’s a smart move.

Haven’t we heard a thousand times that content is king? Now, if the regulators don’t foul things up, AT&T will have some of the best content and content production resources on the planet.

The only question is did it overpay at $107.50 a share. That’s a question for the Wall Street investors and analysts and so far it’s been getting mixed reviews from them.

Actually, there is one other question. Can a company with industrial-era DNA like AT&T actually manage a programming company in the digital era? General Electric never quite figured it out with NBCU, which is why it finally unloaded it to Comcast in 2011.

This week, former Disney lobbyist Preston Padden reminded the world in a Tweet of former FCC Commissioner Ervin Duggan’s great line when Bell Atlantic shook up the established order in 1993 by agreeing to buy Tele-Communications Inc., then the biggest cable operator. “Relax, the telco guys wear pajamas to bed.”

The Bell Atlantic-TCI deal never came off, done in by the culture clash and the threat of federal cable rate regulation.

No word yet on AT&T CEO Randall Stephenson’s bedroom attire.

To be fair, unlike the innocent Bell Atlantic of 1993, the AT&T of 2016 knows a little something about the TV business. It bought DirecTV last year, making it the biggest MVPD in the land, and it’s been a minor TV distributor since launching U-Verse in 2006. Its vast wireless network is also increasingly a TV medium.

Before AT&T can close the deal, it will have to win the approval of the antitrust regulators in Washington. It will be forced to spend millions of dollars and countless man-hours to reassure regulators and their congressional overseers that the Republic will not fall and the consumers will not be screwed if the deal goes through.

Somewhat surprisingly, the task will not get easier if the Republicans somehow manage to win the White House in a couple of weeks. No sooner had AT&T announced its intentions, then Donald Trump vowed to block the deal if elected. Somebody must have told him that Time Warner owns CNN.

That may be AT&T’s best argument. If The Donald is against it, it must have merit.

But it will have to do better than that. There is a cottage industry of self-appointed, knee-jerk, left-wing watchdog groups that will rally like-minded Democratic lawmakers and bureaucrats to drag out the approval process. They might even succeed in derailing it, although that seems unlikely.

Good old Bernie Sanders — remember him? — is apparently ready to lead the charge. The Democratic senator and would-be president called on the Justice Department to stop the merger, claiming it would “shrink our media landscape, stifle competition and diversity of content.”

Hillary Clinton weighed in, too, saying on cue that the deal “raises questions and concerns” and promising intense scrutiny.

(Is there any better example of the different personalities of the two presidential candidates? Even before it is officially announced, impulsive Donald says he would kill the deal; cautious Hillary says she would send it to committee.)

This may be impulsive, too, but I don’t see any more danger for other TV companies and the public than I do for broadcasters.

The deal doesn’t really change the mediascape in any meaningful way. This is a diversification play, a way for AT&T to be a TV player far into the future as distribution becomes increasingly commoditized.

After the closing, I will have no fewer programming choices, no fewer MVPD choices, no fewer wireless phone choices.

AT&T will have no incentive to deny Time Warner programming to other distributors. It will have no greater incentive to deny other programmers access to DirecTV and U-Verse.

In essence, AT&T is trying to do what Comcast did when it bought NBCU from General Electric in 2011. That one has worked out well for all involved, including viewers, who have benefitted from a resurgent NBC.

Among other things, Comcast promised to rebuild the NBC O&Os and it has done just that — literally. You can read all about it in TVNewsCheck this week.

And with one possible exception, Comcast has not abused its ownership of cable and TV stations in the same market. The possible exception is Boston where the cable and broadcast sides of Comcast have teamed up to boot out the longtime NBC affiliate there, Ed Ansin, and launch a new O&O that will be heavily dependent on cable — that is, Comcast — for distribution.

Let’s look at the big picture.

Today, TV programming has been dominated by six mega-companies for the past decade: Disney, Comcast, CBS, 21st Century Fox, Time Warner and Viacom. Angling to join this select group are Netflix and Amazon.

All other programmers are bit players.

If AT&T closes on Time Warner, the only thing that changes is that AT&T takes Time Warner’s place on the big board.

It seems to me that regulators should be more concerned with the shotgun marriage of Viacom and CBS. That would reduce the number of major TV “voices” by one. Despite the large common ownership of Sumner Redstone, the two companies have been operated independently since their split in 2006.

What should be of more concern than the merger to broadcasters is AT&T’s announcement on Tuesday: DirecTV will offer next month via the internet a not-so-skinny bundle of more than 100 channels for $35 a month.

That’s cheap. Maybe too cheap. AT&T may not be figuring on including all the local broadcast signals in the package as some of the other skinny bundlers have done or are trying to do. After all, the broadcast signals are relatively pricey, and this is going to be an extremely low-margin business.

Disney and NBCU have programming deals with what’s been dubbed DirecTV Now, but it’s not clear whether they  include the ABC and NBC O&Os, respectively, or whether there is any accommodation for the affiliates of those networks. CBS is still on the outside looking in. I’m not certain where Fox is.

MoffettNathanson Research guesses that the service could attract 11 million subscribers at $35, even without DVR functionality, with two million being cannibalized from DirecTV, six million coming from MVPD rivals and another three million from cord-cutters and cord-nevers.

That’s a lot of homes from which broadcasters should not be excluded. So, my advice to the great American broadcaster is to monitor the AT&T-Time Warner situation, but to work to make sure you’re included in DirecTV Now at a fair price — at a price comparable to what the conventional MVPDs are paying for retrans.

You’ll never have more leverage than you will in the next several months. AT&T will be on its best behavior as it tries to convince Washington that it is a good company and its proposed merger with Time Warner is a good deal for all.

Harry A. Jessell is editor of TVNewsCheck. He can be contacted at 973-701-1067 or here. You can read earlier columns here.

Comments (15)

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Wagner Pereira says:

October 28, 2016 at 4:41 pm

As the 2 Companies are in different businesses with no overlap, while Politicians (and commenters) talk of watching this merger, there really is very little ground for DOJ to deny it. As AT&T is spinning off the Atlanta TV Station that TW owns, the FCC does not have any standing in the merger. Will be interesting to see what grounds the Government could deny on. Could they put constraints on making sure HBO etc is available to other MVPD’s? Sure. But AT&T isn’t stupid enough to pay $105B and make all TW offerings and Channels exclusive to DirecTV. Even Netflix doesn’t spend 5% of that much on Programming!

Andrea Rader says:

October 28, 2016 at 6:14 pm

AT&T might have “industrial-era DNA,” but their roots in content production and distribution run deep. Their Long Lines business was instrumental in bringing about network radio and television broadcasting, and though their tenure in the radio business was relatively brief (their superior distribution infrastructure notwithstanding) they were the first radio broadcaster to accept commercial advertising (WEAF in 1922.)

    Wagner Pereira says:

    October 29, 2016 at 1:16 am

    The current AT&T has NOTHING to do with the ORIGINAL AT&T and the landmarks you speak of.

    Linda Stewart says:

    October 29, 2016 at 7:52 am

    The point is, AT&T’s expertise is in building wireless networks, not producing movies, TV shows and newscasts. They’ve only owned DirecTV for a year.

    Andrea Rader says:

    November 1, 2016 at 3:38 pm

    The current AT&T has its roots in SBC, one of the seven RBOCs (Baby Bells) created in the 1980s from the forced breakup of the original AT&T.

Linda Stewart says:

October 28, 2016 at 7:23 pm

Yeah, but they sold the station to RCA/NBC four years later, according to Wiki.

    Kristen Lynch says:

    October 31, 2016 at 3:58 pm

    That was part of the deal breaking up the Radio Trust, which was done to gain passage of the Radio Act of 1927. AT&T, which was one of the owners of RCA, held many of the key radio patents and only stations licensed directly by AT&T could sell advertising. RCA’s radio station licensees could not.

Veronica Serrano Padilla says:

October 29, 2016 at 7:20 pm

Perhaps DirecTV Now will take the same approach that Dish Network is said to have in the works for their Air TV streaming box, a receiver which combines streaming via internet with OTA combined from a consumer-owned antenna along with abilities to forward the streaming to smart TVs, and other apps on smart phones, tablets, etc. A good plan for consumers since they don’t have to pay for broadcast channels, but a slap at broadcasters who are used to getting retrans money.

Trudy Rubin says:

October 29, 2016 at 11:18 pm

I am not sure the comparison to GE buying NBC, to AT&T acquiring Time Warner is all that fair. GE was the owner of RCA/NBC in the very early years, in 80’s they manage to buy it back. The problem AT&T has to do deal with is thereputations as Ma Bell and as a wireless carrier it has manage to keep that reputation alive with a whole new generation. The deal will probably get approved.

Don Thompson says:

October 30, 2016 at 6:12 pm

AT&T U-verse has about 4.8 million video subscribers, making it the 6th largest MVPD. Sure that’s “a minor TV distributor?” Please Follow Me On Twitter: @TedatACA or @AmericanCable

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