• by Wayne Friedman , July 13, 2018

AT&T’s long and successful federal court defense to buy Time Warner might not be a green light for “anything goes” in the media industry when it comes to mergers and acquisitions, according to one media industry analyst.

Craig Moffett, senior research analyst of MoffettNathanson Research, said the court case against AT&T by the Department of Justice -- and now an appeal by the DOJ of the Judge’s approval decision -- shines light on possible problems. Specifically, what a big media or communications company might face when it comes to owning both a pay TV distributor and a TV network group.

He refers to the DOJ’s original court argument: AT&T could force higher fees for those that want to carry the Turner networks, or take the TV network group to a competing pay TV distributor. AT&T owns pay TV satellite provider, DirecTV.

Helping AT&T's efforts was Matt Bond, a Comcast Corp. executive. He was questioned by AT&T’s defense council about possible conflicts with Comcast’s NBCUniversal networks,  a programmer, and Comcast’s cable systems.

Moffett cites Judge Leon’s 172-page decision concerning Bond’s testimony:

“When questioned by defense counsel about his prior negotiations on behalf of NBCU, Bond testified that he ‘never once took into account the interest of Comcast cable in trying to negotiate a carriage agreement.’  Consideration of potential Comcast gains during an NBCU blackout ‘doesn’t factor at all’ into his negotiations.”

Moffett says this persuaded the judge in AT&T’s favor.

All this, says Moffett, could have an effect on another potential mega-merger media deal: If Fox’s businesses are bought by Walt Disney, versus Comcast. The later’s ownership of cable systems and TV networks could make for more problems.

He says it “is a clear gift to Disney,” which unlike Comcast, doesn’t have any equity interest in a traditional pay TV network. Moffett: “We’ve argued all along that Fox’s board has been looking for a justifiable reason to choose Disney over Comcast.

“Whether this puts a damper on all vertical M&A remains to be seen. But this is certainly not the ‘anything goes’ M&A regime that many thought we had, shortly after the 2016 election.”