The summer of 2018 has been a momentous one for media merger mania. Although this sounds like a topic for a high-level economics course, the approved and proposed media mergers involve a number of name-brand companies, and will have a significant effect on media culture, journalism, and what we’ll be watching and streaming on phones and other screens in the coming years.
Among the proposed mergers:
- AT&T’s takeover of TimeWarner
- Disney’s purchase of 21st Century Fox
- Sinclair Broadcasting’s acquisition of Tribune Media,
- a Sprint and T-Mobile merger
- a re-merger of CBS and Viacom
The most recent wave of mergers waited upon the decision of a lawsuit between the U.S. Department of Justice (DOJ) and AT&T over its planned purchase of TimeWarner, which would signal whether the Department of Justice would prevail in enforcing antitrust law. A federal judge approved the merger on June 15, which put Warner Bros. studios, HBO, and Turner under the corporate umbrella of AT&T, one of the two major mobile phone companies. The DOJ decided to appeal the decision, but AT&T still proceeded with its work, renaming its new subsidiary “Warner Media.”
AT&T’s reason for the acquisition was to control a huge flow of media content to stream on its mobile phone network so it could compete with other digital giants like Amazon, Apple, Google, and Netflix. AT&T’s CEO says they want to deliver a “mobile-first entertainment experience.” AT&T has a head start with HBO, which is already streaming premium content, but it will need to continue to produce hits like “Game of Thrones” in the coming years to compete with all of the other digital media companies that have the same idea.
Disney’s purchase of 21st Century Fox (including its movie studio, but not Fox News FS1 sports, or Fox Broadcasting Network), approved in July, was proposed for the same reason. Disney now adds to its roster films like Avatar, Titanic, and the X-Men franchise, along with shows like “The Simpsons” and “This is Us” (broadcast on NBC, but produced by 20th Century Fox Television), along with cable channels FX and National Geographic, and majority ownership of Hulu. Disney reportedly will roll out three streaming offerings: 1) an entertainment channel (with Disney animation, Marvel films, Pixar Films, Star Wars, and everything else in the Disney and Fox film libraries) – people are already dubbing this Disneyflix, 2) a sports stream (Disney owns ESPN), and 3) Hulu, of which Disney now has controlling ownership, for streaming television shows. Disney looks to be a formidable challenger to Netflix.
Still awaiting approval are a Sprint and T-Mobile merger. There are only four main mobile phone companies in the U.S, and these two are the third and fourth largest, after AT&T and Verizon. A&T tried to buy T-Mobile in 2011, but it was rejected by the Antitrust Division of the DOJ on the basis that it would have hurt competition in the business. Will this merger survive the same standard?
After splitting in 2006, CBS and Viacom may re-merge, too, although that story has become complicated by the bad blood between Viacom’s leadership and CBS’s Chairman and CEO Les Moonves, who also became subject to a sexual misconduct investigation this summer after another blockbuster report of a #MeToo case by Ronan Farrow for The New Yorker magazine.
Sinclair, already the largest local TV station owner in the U.S., would have become even larger with the TV station properties of Tribune Media, reaching about 70 percent of U.S. TV households. Of particular concern is that the Sinclair, which has a history of imposing right-wing politics on its local stations’ newscasts, would have created a broadcast version of Fox News. As the FCC began to make regulatory approval more difficult, the deal fell apart in August.
Historically, half of all mergers and acquisitions are failures, and the planned synergies across the various subsidies are never realized. Consider, for example, the disastrous AOL–Time Warner merger of 2001 or News Corp.’s expensive bad bet on the success of Myspace in 2005. Time will tell with the mergers of 2018. Did AT&T and Disney invest billions to create even better (and more profitable) media experiences for the post-cable world, or did they waste their money by misreading the path consumers would be taking in the future? Like with earlier mergers, we should know in a few years.