Almost seven years ago, Comcast set in motion its ultimately successful $30 billion takeover of NBC Universal. It was a deal designed to prepare both companies for a rapidly approaching future in which fewer people watch stuff on traditional, linear TV.Well, that future has arrived.Following up an earlier Bloomberg story, the Wall Street Journal reports that telecom titan AT&T is in advanced talks with media giant Time Warner in a deal that would reshape the TV landscape. The talks are so advanced, apparently, that the two hope to announce the deal this weekend. After spiking rapidly because of the news, trading on Time Warner shares was halted.
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The motivations for the deal are pretty straightforward. AT&T, which bought DirecTV last year, is now the single largest pay TV provider in the U.S. Time Warner, on the other hand, is one of the biggest players in TV programming. It operates a bunch of cable channels (TNT, CNN, etc.), the Warner Bros. film and TV studio, HBO and other entertainment properties.Both companies face the same fundamental dilemma: the traditional revenue streams from pay TV programming and subscriptions are coming under serious pressure as consumers watch video elsewhere.For AT&T, this deal would be about finding ways for its customers to watch AT&T-owned stuff as fewer and fewer people sign up for traditional TV bundles (either through AT&T or its competitors), instead turning to internet-delivered services like Amazon Prime, Sling TV or Netflix. AT&T can also deliver content wirelessly, as Verizon is now doing with its Go90 service, all the while saving money for both companies through consolidation.Because Time Warner’s networks are must-have by anyone’s measure, anyone launching a newfangled TV service, be it Apple, Google or anyone else, would have to talk to AT&T. Moreover, HBO generates $1.5 billion in global subscriber revenue a quarter and is already delivering its service to an estimated 1 million web-only subscribers of HBO Now.
Of course, the last time Time Warner was acquired by a telecom, AOL, it concluded with one of the largest, and most disastrous mergers of the last two decades. But a lot has changed between 2000 and today. If the Comcast-NBC tie-up is any guide, merging content and the pipes that supply it hasn’t hurt Comcast’s business. Comcast stock has nearly tripled in value since it completed its takeover of NBC in January 2011.The biggest obstacle the deal faces this time around is regulatory. It took more than a year for Comcast-NBC to actually happen, and the federal government previously killed AT&T’s attempt to buy T-Mobile, as well as Comcast’s attempted takeover of Time Warner Cable (a separate company from Time Warner).Disclosure: HBO, which is owned by Time Warner, funds two different news shows for VICE Media.