Why AT&T wants Time Warner

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"Harry Potter, Anthony Bourdain, Superman, Bill Simmons, and Charles Barkley are all going to work for a phone company," said Mike Snider and Roger Yu at USA Today. AT&T made a surprise announcement last weekend that it intends to buy Time Warner for $85.4 billion — a deal that promises to utterly reshape the media landscape, by combining some of the world's most lucrative entertainment and news brands with a company that partly controls how that entertainment is delivered. If the merger is approved by regulators, AT&T will own HBO, CNN, TNT, and the Warner Bros. film studio, guaranteeing that top-rated content will appear on its DirecTV satellite TV service "without cumbersome negotiations." The telecom giant could also waive monthly data limits for customers who watch certain shows and movies over the internet and on their mobile devices. This deal is a way for both companies "to get a grip on a rapidly changing future," said Farhad Manjoo at The New York Times. AT&T's wireless business faces slowing growth and a saturated market. Time Warner, meanwhile, is struggling to adapt its content for a cord-cutting future in which consumers turn up their noses at traditional cable. In such uncertain times, the thinking goes, "bigger is better."

"Time Warner chief executive Jeff Bewkes has seen the writing on the wall for legacy media," said Ashley Rodriguez at Quartz. Even though Time Warner owns the rights to some of the most-watched shows on television, the company's long-term growth prospects look slim as long as it has no control over how its content is delivered, or "more importantly, over the troves of data that come along with that access." With consumers fleeing restrictive cable packages for on-demand content, and ad dollars shifting to mobile devices along with them, the time to sell is now. This is a risky deal for AT&T, said Miriam Gottfried at The Wall Street Journal. The company hopes to use Time Warner content to launch its own internet TV service. But there is no guarantee that a future in which most people watch streaming TV on mobile devices "will be as lucrative as pay TV's past." The terms of the deal have AT&T paying about 12 times what analysts estimate Time Warner will earn next year. "That isn't crazy," but it's a lot in an industry experiencing disruptive and speedy change.

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"Apparently we're supposed to sympathize" with giant conglomerates now, said Michael Hiltzik at the Los Angeles Times. Both AT&T and Time Warner say they are buffeted by so much change that this deal is essential to their survival. But while a mega-merger that "keeps their fleeing customers corralled" may be good for them, it's terrible for their competitors, who will face a disadvantage getting their products to AT&T's millions of wireless and broadband customers. That's why the future of this deal "looks very much in doubt," said Timothy B. Lee at Vox. Both Hillary Clinton and Donald Trump have expressed skepticism about the merger, amid a growing bipartisan consensus "that major media conglomerates are becoming too concentrated." Unfortunately for AT&T and Time Warner, the best business arguments for their marriage — that combining will boost profits and make it easier to deliver certain content — "are also the arguments that are most likely to attract skepticism from regulators."