JR409 Final

[G] 4b. The anti-competitive concerns for AT&T/TW company, list the ones she gave and explain

**This question basically asks "what bad can they do?"** In terms of the anti-competitive behavior, how can AT&T hurt their competitors and possibly the public? - If they keep HBO from other competitors - Charge more - Refuse to take junk channels and only use the good ones >>RIVAL MVPDS (distributors of video content) - Competitors in the satellite and cable distributors -Verizon/ tmobile/netflix teaming up with other providers to offer streaming services to customers o disney co(disney +) and apple - what does this do with att if they have an apple iphone ? o online video programming distributors: amazon , hulu, netflix -Justice Dept. concerned that combined ATT/TW will have the leverage to force other pay TV providers to pay higher prices for TW owned channels such as TNT and CNN... these costs would then be passed on to consumers. ATT/TW have countered this by saying it has no incentive to withhold content from rival providers >>RIVAL PROGRAMMERS (producers of video content) -Rival production companies like Paramount Pictures, Sony, Lionsgate, MGM >>DOWNLOAD/STREAMING SPEEDS -Really of concern because now they could slow down Netflix and speed up HBO with their broadband. Which would force the consumers to stop using Netflix and force them over to HBO. Without the streaming service that they just got, AT&T was on a decline but will now be saved. They say that they have access to over 170 million people so they have a ton of data and that could help them out a ton when it comes to making deals through their wireless, satellite, or broadband. -Can bandwidth accommodate THAT MANY users on a single platform? More people = slower speeds

[F] 4a. The competitive advantages for AT&T/TW company, list the ones she gave and explain

**This question basically asks "what good will this cause"?** >>competitive landscape of wireless industry -The top 4 wireless providers have been locked in a price war for years, carriers continually have to lower their prices to try to steal customers away from one another which has reduced profits and prompted new strategies. One of which is why ATT decided to buy TW in a bid to try to hold on to customers by offering added products like HBO and other video services either at discounted rates or as part of a package -They are in a very mature business. If you come over to ATT from somewhere else, we will give you x, y, and z. Basically doing what Verizon is doing. -Att = free content through bundles and streaming but also high quality content through time warner o Time warner will now become more expensive for competitors (higher fees for other popular networks like tnt tbs, cnn and cartoon network) o ATT will have free reign to use popular Time Warner movie/TV content and characters in its advertising efforts. o The AT&T/Time Warner merger puts pressure on other wireless providers to be able to offer similar compelling wireless/video bundles >>product differentiation It can differentiate its fast-commoditizing wireless network by offering customers deals on its proprietary content. It can expose its content to vast audiences through all its networks. Because it collects staggering volumes of customer data through its wired, wireless, and satellite networks, it can enable advertisers to target their messages with new precision and, in some cases, even track customers who have seen specific ads and thus gauge how the ads performed—services for which advertisers will gladly pay a big premium. Adding strength to the whole proposition is AT&T's unique aggregate customer data trove and its value in addressable advertising over DirecTV and AT&T's direct-to-consumer streaming services; ads can also be directed less precisely through the former Turner networks. "Say you and your neighbor are both DirecTV customers and you're watching the same live program at the same time," says Brian Lesser, who oversees the vast data-crunching operation that supports this kind of advertising at AT&T. "We can now dynamically change the advertising. Maybe your neighbor's in the market for a vacation, so they get a vacation ad. You're in the market for a car, you get a car ad. If you're watching on your phone, and you're not at home, we can customize that and maybe you get an ad specific to a car retailer in that location." o Content on premium channels is not interrupted by commercials o AT&T's satellite distribution technology reaches nearly 100 percent of U.S. households. In acquiring DirecTV, AT&T also acquired ownership interests in video programming services, >>zero rating -(is the practice of providing Internet access without financial cost under certain conditions, such as by only permitting access to certain websites or by subsidizing the service with advertising. Commentators discussing zero rating often present it as a subtopic of net neutrality.) Att can provide zero rating to customers of the provider so they can get Time Warner content on data plans This makes the provider more attractive when it comes to bundles and streaming opportunities for consumers AT&T's wireless customers can already stream unlimited DIRECTV content over the AT&T network without eating into their monthly data allowance. In the immediate future, expect HBO streaming to join the zero-rating list. Additionally, as AT&T expands its own streaming video portfolio, these services will be zero-rated, too. With the repeal of Title II net neutrality rules, AT&T won't have to worry about government push back for zero-rating its content, or for giving it away for free to those who choose AT&T wireless. >>streaming products The immediate next step in the transformation, likely the biggest and most visible step, will be to introduce a video-on-demand Internet streaming service—a Netflix competitor—in this year's fourth quarter. AT&T says the new service eventually will include original content, HBO, movies from multiple studios, and library content from HBO and Warner Bros. Video is becoming the most desired application on mobile devices. With the merge of ATT wireless company and entertainment media TW, it can make that happen and offer the best video content out of all wireless providers he also decided he wanted to do more than just offer a wireless network that could handle video; he wanted to offer video itself. But there was a problem: "We couldn't get the rights to do any of it." The solution: "DirecTV was available," and like cable companies, it had rights to carry a lot of video programming. So AT&T bought DirecTV in 2015, and "within months we were able to take that full portfolio of content that DirecTV had the rights to, and we were porting it to the mobile device." Thinking about the future, his team concluded that if the coming 4G and 5G networks would be mainly vehicles for delivering video, then "controlling your destiny to some degree would be really important—that is, owning premium content," he says. "And that's what took us down this path of desiring to own a big portfolio of premium content." He may find further comfort in knowing he can combine WarnerMedia's killer content with something no other media company has or is likely to have, a nationwide wireless network that will be 5G in a few years. But three other wireless networks (two, if Sprint and T-Mobile merge) are available for rent, and in a fluid, digital world, who knows what Buffett's "very smart people with lots of resources" might do? Att provides free services and bundling discounts to qualifying unlimited att wireless customers without any add on prices (ex: hbo channels getting permanent fixtures in Directv packages// 15 a month sports free streaming video which wireless customers would get for free Att watch TV ) o Att has become the largest multichannel video programming distributor in a single vertically integrated firm crossing over all 3 layers of media

[K] The goal of government regulators when they review proposed mergers. What types of harm are they trying to prevent?

- The main overall goal is consumer protection. They want to prevent consumers from being harmed - increase in price, lower quality goods, lack of innovation, people getting fired and squeezing the job market, and if companies get so big to the point where others can't join the market - barriers are too high. Concerned about consumer welfare, keeping costs low and the quality of product high Substantial lessening of competition that results in Higher prices Lower quality Fewer choices Barrier to entry Reduced wages in the industry

[J] reasons media companies merge

1. Acquire resources they currently do not have 2. Maximize profits from copyrights and trademarks 3. Diversify media products 4. Enter related or emerging industries 5. Acquire a greater share of market and its revenues

[I] Four potential outcomes of a merger review by the Department of Justice or Federal Trade Commission

1. accept 2. accept but with conditions (behavioral conditions, prices and such) 3. accept with structural changes (you have to sell something off) 4. Block

[#E] 3. AT&T's core business and its growth potential.

AT&T is one of the leaders when it comes to wireless phone carriers, in home entertainment with U-verse, huge broadband. The only way that it can really grow is through the streaming wars and joining that race. Doing so will push it ahead of Verizon. ATT mainly just has the cable and the wireless but now it has the streaming. Owns DirecTV which generates $4 billion in annual cash flow US cellphone business provides $70 billion of the company's more than $170 billion annual revenue. It is relatively stable but really isn't growing which explains the company's buying spree to try to improve ATT's stock price and financial future. Stephenson also must think about the phone business, though, because it remains his biggest business by far—and it's not growing, putting AT&T's stock price and its financial future under pressure. That explains the company's buying spree—and its massive debt load. Combine all the elements that Stephenson has assembled, and "AT&T can no longer be called a telecom company," says Moffett. Stephenson doesn't object to the characterization. He now calls AT&T "a modern media company."

[#D] 2. The effect the addition of Time Warner will have on the cost-revenue structure of AT&T. Also think of the expenses associated with entertainment content, especially the cost of premium video content like Game of Thrones. AT&T/TW will now be entering the streaming wars.

AT&T were just basically engineers and now they are a part of the streaming wars. What will they bring to the market - new things. They are going to have massive expenses to just keep up with the other streaming sites. If they want to win or be a viable company in the streaming wars they are going to need to produce rally good and expensive content as well as having a good library for people to look through. Armed with entertainment assets from Time Warner, AT&T is rolling out more streaming-video products to answer Google, Netflix, Hulu and Amazon. Besides DirecTV Now, AT&T has launched a slimmer bundle of channels called WatchTV. In October it disclosed plans to offer an HBO-centered video service with a selection of movies and TV series acquired in the Time Warner deal. It's clear to Martin that WarnerMedia cannot hold a competitive advantage in content creation. "Others are dropping unprecedented levels of spending into the business," he says. Analysts estimate Disney will spend $21 billion on content this year, Netflix $15 billion, and AT&T $14 billion. (None of the companies will comment on those estimates.) "If you're AT&T, where do you stand?" Martin asks. "You're spending less on content than Netflix and Disney, and you won't beat Verizon on 5G. Where does that leave you?"

[A!] 1. Structure of the merged AT&T/Time Warner company. What will the combined company look like?

ATT and Time Warner content will provide premium content: which combines leading tv shows and content (critically acclaimed) from Warner Brothers, HBO, and Turner PLUS more consumer targeted content from Bleacher Report and ATTS investment in other media properties. o Direct to Consumer Distribution: more D2C relationships across tv, video streaming, mobile, and broadband services worldwide PLUS digital properties like HBO Now, and CNN.COM, addressable platform o High speed network: leading wireless and fiber network including investments in new technology (5G) customers increase engagement with premium video, virtual reality content They've already began to reshape. It's much of the media industry. The merger will reduce competition and hurt consumers. They will be releasing a streaming platform. SYNERGIES. Writing and scripts and producing things and cable channels and broadcast networks and affiliate stations and just a ton of stuff. That will all be distributed by this huge att network Brought together one of the nations largest wireless providers with 153 million subscribers and that owns DirecTV with a vast media business that includes CNN, HBO and Warner Brothers The grand vision begins with combining all the major elements of the media and telecom businesses, which no company has ever done before. Time Warner's film and TV studios make some of the most successful and honored entertainment anywhere. Its cable networks—including TBS, TNT, CNN, Cartoon Network, and Turner Classic Movies—are distribution powerhouses. DirecTV carries those networks and others into homes through its satellite system. Add in AT&T's wireless and landline customers, and Stephenson boasts that AT&T has "170 million distribution points we can push this through." Combining all the media assets/all the major elements of the media and telecom business can achieve unprecedented advantages

[H] Horizontal and vertical mergers

Horizontal is a merger between firms that are selling similar products in the same market while vertical is a merger between companies in the same industry but at different stages of production. In other words, a vertical merger occurs between companies where one buys or sells something from or to the other. For example, Pepsi's merger with restaurant chains that it supplies with beverages is a vertical merger. AT&T-Time Warner is considered a vertical merger, as AT&T is a content distributor and Time Warner is a content creator.

[#C] 2. The effect the addition of Time Warner will have on the cost-revenue structure of AT&T. Think about how media products make money and the programming expenses AT&T has a pay-tv provider. Some expenses will turn into revenue streams.

If you're just a cable company, you have to pay the cable and now they have to pay Turner and CNN and HBO but that's all gone now it's all one. They will be able to sell things to competitors now and that will give them so much money. -more revenue for ATT because of the new control of consumption and premium content to diverse audiences. -more revenue because of cross promotion -improves att dividend coverage -improves att earnings and growth profile - It could make money by licensing shows and movies to other cable companies, and also compete against them by fleshing out the offerings of its own U-verse pay-TV service. -ATT MERGER company will benefit from : subscription revenue , giving customers exclusive, emotional content for their phones to create impactful brand loyalty,

[B!] 1. Structure of the merged AT&T/Time Warner company. What segments of content creation (supply) and distribution will the combined company control?

Mobile, broadband, video, and other communication services to U.S. based communication services to U.S based consumers and millions of other companies increasing revenue. o Att as a media business: the combination of these media industries will increase atts revenue by billions o Valuable brands spanning television, film, sports, news, video games and mobile and residential Internet service. o Control of content and content bundles with att Mobile and international plans o Media spending/media brands/wireless carrier systems o Att could own the rights to "game of thrones" westworld, true detective o Would also control some of the most successful tv content in history o COMBINED company would control: all channels associated with Turner Broadcasting Systems and Turner Classic movies and coverage of Major League Baseball o Sports programming o Warner brothers owns D.C comics which means att will now have the rights to batman, superman, wonderwoman etc o One of the most powerful of content and distribution America has ever seen This will give AT&T and their massive network all of Turner Broadcasting which will result in total domination of the tristate area. Seven areas that big companies could be in. From ground zero all the way to final product. AT&T is considered the content distributor and Time Warner is considered the content supplier. Prior to buying Time Warner, the danger for AT&T was that its revenue declines would accelerate in the age of wireless video. All the previous uses of the cell network—talking, texting, accessing the Internet—are active uses in which customers create their own experiences. Video is different. It's passive; someone else creates the experience, and if it's good enough, customers will pay for it beyond what they're already paying for connectivity. Stephenson and his team feared that the value in the business of wireless connectivity could migrate from the owner of the network to the owner of the content. That's why he framed the purchase of Time Warner as necessary for AT&T to control its destiny.