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Free Minds & Free Markets

Good News: AT&T and Time Warner Get Judge's Approval to Merge

This is not an antitrust case and the Justice Department shouldn't have been trying to block it.

Time Warner officeRichard B. Levine/NewscomAn ill-advised effort by the Department of Justice to stop AT&T from buying out Time Warner for more than $85 billion was rejected by a federal judge today. The merger will move forward. In fact, the judge even warned the Justice Department away from further meddling.

The New York Times reports:

The merger would create a media and telecommunications powerhouse, reshaping the landscape of those industries. The combined company would have a library that includes HBO's hit "Game of Thrones" and channels like CNN, along with vast distribution reach through wireless and satellite television services across the country.

Media executives increasingly say content creation and distribution must be married to survive against technology companies like Amazon and Netflix. Those companies started making their own programming in just the last several years, but they now spend billions of dollars a year on it, and users can stream their video on apps in homes and on mobile devices, pulling attention from traditional media businesses.

The Times further notes that typically when the Justice Department attempts to use antitrust rules to block a merger, it's because of a large corporation buying out a competitor. That's not the case here. AT&T is a service provider buying up a content producer, making a single, stronger company that's better able to compete. This doesn't produce less competition in the marketplace.

Last December, Reason Foundation Vice President of Research Julian Morris explained that blocking the merger would actually be what hurts competition:

Consumers are shifting away from the kinds of access and content bundles that so concern the DOJ. And they are doing so because such bundles poorly match their preferences. AT&T recognizes the trend of falling subscription rates for its traditional TV bundles. That's why it wants to expand into content. It could have done that by licensing legacy content from others, arranging syndication deals for new content, and building its own studio, as Netflix and Amazon have done. It chose instead to merge with Time Warner.

At the heart of the DOJ's complaint is an assumption that the merged entity would use its market power to raise the price of content currently owned by Time Warner, or threaten to withhold programming, including hit shows such as Game of Thrones and NCAA March Madness. Time Warner could already make such threats, but the DOJ claims it would have greater incentive because it could benefit from some subscribers switching over to AT&T's networks (DirecTV, U-verse and DirecTV Now).

A merged AT&T-Time Warner could, in principle, refuse to supply content to some distributors in order to drive consumers to purchase its own access and content bundles, but it would not be in the merged company's financial interest to do so. As Geoff Manne notes in the WSJ:

"More than half of Time Warner's revenue, $6 billion last year, comes from fees that distributors pay to carry its content. Because fewer than 15% of home-video subscriptions are on networks owned by AT&T … the bulk of that revenue comes from other providers. In other words: Calculated using expected revenue, AT&T is paying $36 billion for the portion of Time Warner's business that comes from AT&T's competitors. The theory seems to be that the merged company would simply forgo this revenue in a speculative hope that withholding Time Warner content from distributors would induce masses of viewers to switch to AT&T—and maybe, one day, put competitors out of business. That this strategy would actually work is unfathomable. Game of Thrones is good, but it isn't that good."

The merger had also been heavily politicized due to President Donald Trump's feud with CNN, so we'll see if the Justice Department attempts to appeal. The head of the antitrust department said he'd have to read the 170-page ruling first.

The Times also notes that the companies have a June 21 deadline to merge and that the judge, Richard J. Leon, of the United States District Court in Washington, flat out told the feds not to try to seek an emergency stay of the decision due to the harms on the defendants who have battling for 18 months to get the merger approved.

Photo Credit: Richard B. Levine/Newscom

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  • Rev. Arthur L. Kirkland||

    CNN with even deeper pockets?

    Great for America!

  • Half-Virtue, Half-Vice||

    I don't get this fetish?

  • Sevo||

    If you mean the annoying asshole, he's a typical, elitist lefty, claiming to have some sympathy to libertarianism.
    Looks like a pile of crap, smells like a pile of crap: a pile of crap.

  • Eric||

    A Trump supporter calling someone out on their libertarian bonafides? smh...

  • Rev. Arthur L. Kirkland||

    Why sugarcoat it with "Trump supporter" when referring to a bigoted, disaffected, no-count, stale-thinking, right-wing authoritarian?

  • Chipper Morning Baculum||

    I have never seen Kirkland call for any government intervention. Can someone point me to a comment where he does something like that? Otherwise, STFU about him being a typical leftie.

  • Sevo||

    Oh, no! He's never so honest as to suggest any real 'actions' against the 'poor, benighted fly-over country bumpkins', but the suggestions are there for those who might look:
    "Red Famine", Anne Applebaum, pg 186:
    "Like the Jews that Moses led out of Egyptian slavery, the half-savage, stupid, ponderous people of the Russian villages ….. will die out and a new tribe will take their place – literate, sensible, hearty people"
    Maxim Gorky, "On the Russian Peasant", 1922.
    Gorky, Stalin apologist and dimwit, believes his elitist crap will be 'voluntary'; I doubt the Rev is under such illusions, dimwit as he is.

  • Chipper Morning Baculum||

    So no.

  • Rev. Arthur L. Kirkland||

    These faux libertarian goobers can't handle a genuine libertarian. Check the reactions to Prof. Somin (the lone libertarian at the Volokh Conspiracy).

  • Sevo||

    Rev. Arthur L. Kirkland|6.12.18 @ 9:28PM|#
    Why sugarcoat it with "Trump supporter" when referring to a bigoted, disaffected, no-count, stale-thinking, right-wing authoritarian?"

    Why sugar-coat it when referring to the lefty asshole recently arrived, lefty asshole.

  • Sevo||

    Eric|6.12.18 @ 9:22PM|#
    "A Trump supporter calling someone out on their libertarian bonafides? smh..."
    OK, one more dimwit.
    No, I am not a "trump supporter" you idiot. I don't like the guy, but unlike assholes who suffer from TDS, I can separate what he's done from the person. You know, kinda like "Principles"
    Want a list? Well, here:
    "1) DeVos
    2) Gorsuch
    3) Ajit Pai, end net price fixing
    4) Major reduction in the growth of regulations
    5) Dow +30%
    6) Unemployment at 3.8%
    7) The US Manufacturing Index soared to a 33 year high
    8) Got repeal of the national medical insurance mandate.
    9) Withdrawal from Paris climate agreement.
    10) Not sure about the tax reform; any "reform" that leaves me subisdizing Musk's customers is not what I hoped for. Let Musk run a company for once.
    11) In the waning days of 2017, the Trump administration pulled its support for the $13 billion Hudson Tunnel project.
    12) More than 16,000 jobs have been cut from the federal leviathan
    13) MIGHT have a deal to de-nuke NK.
    And finally:
    14) Still making lefties steppin and fetchin like their pants is on fire and their asses are catchin'
    To repeat, I did not vote for the guy; he's a blow-hard and a loose cannon, but by accident or design, he's doing better than any POTUS I can remember"

    OK, dimwit, tell me how that isn't libertarian and how that makes me a Trump supporter. I'll be waiting for the TDS bullshit.

  • Chipper Morning Baculum||

    You are not exactly a libertarian yourself, Sevo.

  • Sevo||

    "You are not exactly a libertarian yourself, Sevo."

    I'm sure you know what the term means, right, irrelevancy? and you can cite where I've stepped over the line, right, irrelevancy?
    I'll wait.

  • Tony||

    Sucking Trump's shriveled flaccid little penis ≠ libertarianism. In case you were wondering.

  • Sevo||

    Tony|6.12.18 @ 11:33PM|#
    "Sucking Trump's shriveled flaccid little penis ≠ libertarianism. In case you were wondering."
    Beating on those strawmen = idiocy, in case you were wondering, you fucking idiot.

  • Chipper Morning Baculum||

    Defending a sitting president has never been libertarian.

  • Get To Da Chippah||

    When the president does something to advance the cause of liberty or reduce the size or scope of government, then, yes. Yes it actually is. News flash: Defending a sitting president is not the same as defending every action that president makes.

  • Rev. Arthur L. Kirkland||

    Sevo will have you know he is a chapter officer in Libertarians For Bigoted, Authoritarian Immigration Policies!

    That makes him immune to your 'you're not a libertarian, you right-wing yahoo' taunts.

    Just ask him!

  • Sevo||

    'Tap, tap' (toe tapping).
    Waiting for all you (somethings) to answer the questions...

  • Sevo||

    Aw, gee! Bedtimes for liars has passed!

  • Homple||

    Nothing like ever-bigger content plus distribution conglomerates to keep our minds and markets free.

  • DenverJ||

    Panem et circenses, Homple, panem et circenses.

  • Sevo||

    "Nothing like ever-bigger content plus distribution conglomerates to keep our minds and markets free."
    Did you have a point, or just random idiocy?

  • BestUsedCarSales||

    Bell Labs will rise again!

  • Chipper Morning Baculum||

    I am a big fan of Peter Klein's theory that the bigger a corporation becomes, the less competitive it becomes. This is especially true when integrating a supply line in the structure of production, such as in this case, content production and delivery. Why? Because whenever you internalize a transaction, you are losing a price signal. Thus, instead of having to pay a price, or see how much someone is willing to pay, you are forced to estimate. You can estimate based on costs, perceived demand, or what a competitor charges, but that is never as accurate as actually having to pay a price. Thus, the more internal transactions, the less accurate the accounting. There are other problems, of course, such as the inertia of many people used to doing things a certain way, which stifles innovation. Eventually, the discrepancies become too much and a smaller, innovative competitor is able to outcompete you. That is why big corps always seek regulation to restrict new entrants into the market.

  • Sevo||

    "That is why big corps always seek regulation to restrict new entrants into the market."
    And ultimately the reason they collapse; the market solves the problem.

  • JeremyR||

    I think "content wars" will be the thing of the future, which every media company starting their own streaming service, essentially.

    So eventually instead of just paying $10 to netflix a month, you'll be paying $10 a month to a dozen companies. Better than having ot pay $100 a month for cable/satellite, since you have some choice

  • BestUsedCarSales||

    And, honestly, you'll probably see a lot of pressure of these against each other that will lead to each being cheaper.

    Though you'll probably also see a lot of turnover. A true entertainment creative destruction.

  • SusanM||

    Fuck it, let's just go back to books.

  • SusanM||

    Fuck it, let's just go back to books. Although, they'll probably adopt the business model where you pay full price for them but just can't take them home.

  • SusanM||

    The squirrels are getting fancy now.

  • widget||

    It's Spectrum now, not Time Warner, and has been for about 2 years now. Seems like the judge is ruling on water under the bridge. And in Hawaii, the pay phones still work.

    Really. I am not worst the vacation companion to Maui, but I not could help noticing this. The pay phone still work there. Pick one up and a dial tone. Casual survey... where else do you get a dial tone on a pay phone?

  • BestUsedCarSales||

    What's a pay phone?

  • Telcontar the Wanderer||

    The place Clark Kent used to change into Superman before he had to start just walking around fully suited-up 24/7 and telling people he was a really method cosplayer.

  • Sevo||

    I haven't seen one in SF in (really can't remember0; there were three in my immediate 'hood, but they're simply gone.

  • BestUsedCarSales||

    I know down in Tucson, at the 7-Eleven I used to manage, people came and took them away in about 2011.

  • Don't look at me.||

    Thank you! Come again!

  • Dan S.||

    There are a few in my neighborhood in the Bronx. There used to be a lot more, of course.

  • AlmightyJB||

    Charter bought Time Warner Cable and became Spetrum. AT&T is merging with Time-Warner (media) which spun off Time Warner Cable years ago. The cable company kept the Time Warner name for some reason. Completely different companies.

  • Rev. Arthur Ꮮ. Kirkland||

    No, two different companies.

    Time Warner spun off Time Warner Cable as a separate company back in 2009. When Charter Communication bought Time Warner Cable, the new entity branded itself as Spectrum, but that didn't affect Time Warner (which consists of HBO, the Turner Broadcasting System, and Warner Bros.)

  • Rev. Arthur L. Kirkland||

    Bigoted, Right-wing Mini Me is back!

    In this case, it likely is because this authoritarian goober can't keep his screen names straight.

    Carry on, Clinger Mini-Me!

  • Old Mexican - Mostly Harmless||

    The merger had also been heavily politicized due to President Donald Trump's feud with CNN, so we'll see if the Justice Department attempts to appeal.

    Don't count on it.

    Oh, wait - he tweeted.

    Count on it!

    No, wait - he tweeted.

    Don't count on it.

    Wait, wait.... He tweeted again.

    Count on it then.... Oh, fuck it. I'm already tired of so much winning.

  • BestUsedCarSales||

    Hot
    Erotic
    Revenge
    Perpetrated
    Eternally,
    Sucker

    Ain't no curing it. I call bullshit.

  • AlmightyJB||

    Seems like years ago they had made some promising advances in destroying viruses but hadn't heard anything lately on it.

  • Chipper Morning Baculum||

    Bacteria destroy viruses all the time. That's what CRISPR is. So sooner all later we will see therapies that can target a specific DNA sequence of a virus and cut it up.

  • Sevo||

    "...i have never in my life believed that HERPES could be cure by any herbal medicine...."

    You were right.

  • AlmightyJB||

    Hemlock?

  • Don't look at me.||

    Stops all diseases.

  • DenverJ||

    Also, Doris is not a man's name. Now, Carter is, but in English, the first name is the given name and the second is the family name, unless there is a comma, such as Doris, Carter.
    Spamming in a foreign language is hard. Lemme guess- Persian?

  • AlmightyJB||

    "A merged AT&T-Time Warner could, in principle, refuse to supply content to some distributors in order to drive consumers to purchase its own access and content bundles"

    At which point Congress can decide to fine their giant panties off like they did to Microsoft when they engaged in anticompetitive practices (FYTW). There was no reason to block this merger. It doesn't mean they can do whatever they want without consequence, and being a vertical integration it does not hurt competition.

  • Echospinner||

    Next comes the bidding war for Fox. Will it be Disney or Comcast? From what I read this helps clear the way for Comcast. I am hoping Disney gets the deal.

  • Rich||

    The combined company would have a library that includes HBO's hit "Game of Thrones" and channels like CNN

    So?

  • Chipper Morning Baculum||

    So you will be getting your news from Dire Wolf Blitzer in the future.

  • Tony||

    I laughed at this joke, but I did have wine with dinner.

  • Echospinner||

    I think it is because traditional cable is 2000 channels of mostly crap you don't need. A lot of people are just going with direct streaming. So providers like AT&T want to own content which they can then market. In addition to HBO and CNN I think they get Warner Brothers which includes DC comics, not sure what else.

  • Rich||

    Guess I'll hold out a few years for the personalized AI-generated stories.

  • jdgalt1||

    I propose that the merged company be named T.W.A.T.

  • librich||

    I'm saddened that Reason is oblivious to the underlying issues in this case. We have a telecomm duopoly in America because of our government. The absence of competition in the broadband service sector is one of the most glaring case of crony capitalism in our economy. To assess the impact of a merger by AT&T or Verizon without acknowledging and debating the impact of the government-enforced stranglehold these two companies have on our broadband infrastructure is both foolish and irresponsible.

  • loveconstitution1789||

    So AT&T has for decades been selected by government to be the winner of the landline telephone and DSL market.

    Then AT&T was selected by government to be the winner of the unconstitutional domestic NSA snooping game.

    Then AT&T was selected by government to be the winner of the cell phone market.

    Then AT&T was selected by government to be the winner of the satellite tv market.

    Then AT&T was selected by government to be the winner of the ISP market.

    Now AT&T is selected by government to be the winner of the content market. Good to know.

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