The lure of big content is evident: AT&T grabbing big cable networks HBO, TNT, TBS and the Warner Bros. movie studio, paired with DirecTV, the biggest U.S. pay TV distributor.
By contrast, Comcast has NBCUniversal -- the big NBC network, a movie studio and some 15 cable networks -- and the largest cable pay TV operator, Comcast Cable (and second behind AT&T/DirecTV).
Analyst have one basic problem with the AT&T: Why doesn’t AT&T-DirecTV just license the content? Why spend $90 billion to $110 billion on a TV content provider, after making a $50 billion deal for DirecTV?
Media analysts might have made the same reasoning over the NBCUniversal acquisition by Comcast.
Given what analysts say is little growth for AT&T -- the saturation/maturity of the mobile phone business -- the deal would be the right move, according to other logic. The stock market seems to bear this out: AT&T stock price closed Friday down 3% to $37.49; Time Warner rose nearly 8% to $89.48.
The down side? Comcast bought NBCU at a very low price multiple -- around 9.5 times NBCU’s earnings in 2011; AT&T would be buying Time Warner at a much higher number.
Regulatory concerns? Analysts think it will go through because there is still plenty of competition, which is growing, such as young linear TV content owners and especially new digital media. The Comcast deal seems to set precedent.
In buying NBCU, Comcast had to cede some leverage when it came to giving preferences to owned TV networks on their distribution channels. Also, as part of the FCC agreement for the approval of the NBCUniversal deal, Comcast agreed not to have a say in Hulu operations, including agreements, partnerships, shareholders or board seat matters.
Expect some of the same for AT&T and Time Warner. For example, Time Warner has a 10% stake in Hulu, agreed to earlier this year.
Key question for the FCC -- and the industry going forward -- How is this going to affect new content providers/distributors -- now five years after the Comcast/NBC deal?
Where separation of media content and distribution was a big thing some years ago, now we seem to be going in the other direction. But along with that will come -- almost definately -- bigger restrictions for AT&T. But is the value really there -- for the business, let alone for consumers?