AT&T obviously didn’t read the recent, depressing, report from Citi that says telcos are going to find it tougher to invest in a climate of increased regulation, competition and thinner margins.
Or, like us, they read it and laughed.
AT&T just announced that they are going to buy Time Warner for $85 billion, subject to the consideration and permission of a range of regulators, including the Department of Justice, who will be looking at it closely. “Such a massive consolidation in this industry requires rigorous evaluation and serious scrutiny,” said US Senator Richard Blumenthal, Senate Judiciary Committee member and former attorney general of Connecticut. “I will be looking closely at what this merger means for consumers and their pocketbooks.”
For a couple of decades we have been saying that telcos need to be able to deliver content effectively. And, to an extent, they have. But you have to wonder why the US mega telcos have decided to buy their own content, rather than continue to partner or distribute on content providers’ behalf.
Is it because they are afraid that if they do not actually buy huge content providers they will be in danger of being elbowed out of the way by other telcos, and end up with none?
Is it because they seriously believe that they can effectively fund such vast deals with the ability to “offer more relevant and valuable addressable advertising; innovate with ad-supported content models; better inform content creation; and make OTT [over the top] and TV Everywhere products smarter and more personalised” (as the formal statement put it)?
If so, then they are delusional.
And we are back to advertising. And consumer behaviour. And whether the pretty poor track record of telcos at commercialising their ‘value added offerings’ can be turned around.
And whether the Millenials and others who want to watch cartoons, or Harry Potter on their phones will not download ad blocking software so they can, er, watch cartoons or Harry Potter in peace.
The jury is out.
In fact, these recent mega deals involving telcos buying media companies looks like a strategy based on fear rather than opportunity. And when mega deals begin to heat up, the hot air rises and bubbles begin to form.
It is an interesting move and, without doubt, there will be other interesting, similar moves in the next few months.
The other issue is that the companies are saying that the deal will be finalized by the end of 2017, which isn’t exactly in the spirit of the fast-moving world of digital disruption.
We will be watching this space with interest.