The $85.4 billion buyout of Time Warner Corporation (TWC) by AT&T, if it goes through, is a good omen for the value of content providers, like HBO and CNN.
It is unclear, however, how the ambitious acquisition will affect less well-branded copyright holders like independent film productions, TV studios and recording artists dependent on digital distribution.
If content is now truly king, the tide may rise broadly, and rather rapidly.
If nothing else, the proposed acquisition conveys a heightened respect for content – and willingness to pay premium for it – that Google, its YouTube subsidiary and others have heretofore been reluctant to acknowledge.
“The deal is probably neutral for copyrights, but it has the potential to be positive,” one purveyor of music and the content told me from Los Angeles. “The combined entities will still be about half the size of Google, and will be saddled with $120 billion in debt. With those numbers, AT&T’s 5.1% dividend may longer be a given.”
Time Warner is the world’s largest diversified media company.
AT&T’s $107.50 per share offer is 35% premium over its market value. You have to wonder what the transaction might do to secondary content brands like indie labels and movie producers. It’s not just about having a great lineup, but about the particular content that Internet provides believe audiences will crave, which is currently in flux.
AT&T is betting that premium content will matter deeply. Other streaming services are not so certain.
The Future of TV & Broadband
If all of this sounds a bit speculative,” reported The New York Times, “that’s because it is. What this deal actually symbolizes is that the future of television is increasingly going to be built on lots of bold, possibly speculative, experiments.”
Recent acquisitions by Verizon included AOL and Yahoo, which some view as content. I tend to believe that content protected under copyright, and premium content (HBO, CNN) will certainly benefit.
This chart represents TWC prior to the sale of AOL to Verizon.
Bad Business or Goog Timing?
Is the AT&T-TWC deal inherently anti-competitive or merely timely recognition of undervalued assets? After the deal will all content delivery continue to be treated fairly on the AT&T network so far as delivery speeds are concerned?
Will Disney, Comcast – which had acquired NBC-Universal – and Fox move swiftly to shore up their own content? It’s too soon to tell, but there may be more pressure on Google to become more proprietary with regard to content (and maybe patents) than it has in the past.
It also will be interesting to see if there is a ripple effect on streaming content like music with services like iTunes, Pandora and Spotify.
A list of assets owned by TWC can be found here.
Image source: cnn.com; valuewalk.com
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