AT&T-Time Warner may signal start of new media industry consolidation
By David Shepardson and Jessica Toonkel
WASHINGTON/NEW YORK (Reuters) - The tie-up of AT&T Inc (T.N: Quote) and Time Warner Inc (TWX.N: Quote), bringing together one of the country's largest wireless and pay TV providers and cable networks like HBO, CNN and TBS, could kick off a new round of industry consolidation amid massive changes in how people watch TV.
Stocks of some programmers that could attract interest rose sharply on Friday as the deal of the year came together. Discovery Communications Inc (DISCA.O: Quote) gained 3.6 percent, AMC Networks Inc (AMCX.O: Quote) rose 3.9 percent and Scripps Networks Interactive Inc (SNI.O: Quote) jumped 5.6 percent.
Media content companies are having an increasingly difficult time as standalone entities, creating an opportunity for telecom, satellite and cable providers to make acquisitions, analysts say.
Media firms face pressure to access distribution as more younger viewers cut their cable cords and watch their favorite shows on mobile devices. Distribution companies, meanwhile, see acquiring content as a way to diversify revenue.
"The industry needs to consolidate," said Salvatore Muoio, whose firm invests in a number of media companies, including Time Warner. "You have a lot more competition from the likes of Netflix, Amazon and Hulu."
AT&T said late Saturday it will buy Time Warner for $85.4 billion in a combination of cash and stock, forging the biggest deal in the world this year. It expects to close the acquisition by the end of 2017.
AT&T chief executive Randall Stephenson said the deal "is a perfect match of two companies with complementary strengths who can bring a fresh approach to how the media and communications industry works for customers, content creators, distributors and advertisers."
Owning content will help AT&T "innovate on new advertising options, which, combined with subscriptions, will help pay for the cost of content creation," the company said Saturday. Continued...