“You had a lot of people saying you should’ve combined a donkey with a rabbit and gotten a flying unicorn.”
That was how Jeffrey Bewkes, the chief executive of Time Warner, once described his company’s colossal failure of a merger with AOL. He spent the last decade dismantling much of his company in the name of “focus,” spinning off his cable business and magazine empire.
And yet over the weekend Mr. Bewkes agreed to sell Time Warner to AT&T for $85 billion in a deal that, if approved by regulators, will vastly reshape the media and telecommunications world — and ultimately the way Americans will consume and pay for their favorite television shows.
There was a good reason that Mr. Bewkes had been skeptical of big mergers that combined distribution and content: They are complex and hard to make successful, and they invariably face enormous headwinds from regulators, who will undoubtedly tie their hands in an effort to protect consumers from anti-competitive behavior.
As The New York Times‘ Andrew Ross Sorkin explains, “The worry among consumer groups and rivals, of course, is that for AT&T to make the deal work strategically and financially…it is going to use Time Warner’s content as a weapon against its rivals by raising the price that they pay for carriage of channels such as HBO and CNN, while integrating those same channels into new AT&T offerings at lower prices. AT&T CEO Randall Stephenson insists that this is not the company’s intention. That instead the benefits of the merger with Time Warner will come from data sharing and the potential for original, interactive content for its mobile customers. “Stay tuned,” writes Sorkin.