AT&T-Time Warner Decision: Either Way, Media Is Ailing

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In a ruling Tuesday, a federal judge cleared AT&T's path toward becoming a major player in entertainment and shut down the government's attempt to block the legacy telecom's merger with Time Warner.

"This decision from Judge Leon will have broad ramifications for the tech, telecommunications and media sector for decades to come", said Daniel Ives, the chief strategy officer at GBH Insights. But Comcast has said it's prepped to top Disney's bid for the 21CF assets - and it's widely expected that Comcast will pull the trigger now that the AT&T-Time Warner merger has the go-ahead.

Leaving the courtroom, Makan Delrahim, head of the Justice department's antitrust division, said that he would read the judge's opinion before making a decision on an appeal.

The decision by the Justice Department to sue to block the merger caught AT&T and many others in the media industry by surprise. 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.

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"I conclude the government has failed to meet its burden of proof", Leon said. Judge Richard Leon ruled the deal is legal and he did not impose any conditions on the merger.

The Justice Department has not brought a suit seeking to stop a vertical merger - whereby companies operating in different spaces combine - since 1979.

In after-market trading following the ruling, shares of Time Warner rose almost 5 percent and AT&T shares fell 1.6 percent.

Because of AT&T's ownership of DirecTV, it can drive a harder bargain with other distributors that want Time Warner content, the government's lawyers argued during the trial. It is, he said then, "a deal we will not approve in my administration because it's too much concentration of power in hands of too few". The loss is a black eye for the Justice Department. Disney has a deal to buy the bulk of Fox, but Comcast is now expected to make a counterbid, especially with the favorable ruling for AT&T.

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Trump's frequent attacks on CNN led to much speculation, including from AT&T Chairman and CEO Randall Stephenson, that the president's opposition stemmed from anger over the network's coverage rather than concern over greater corporate consolidation. The company said in a statement that it plans to complete the takeover on or before June 20.

The government's case hinged on an economic model produced by Carl Shapiro, an economist at the University of California at Berkeley, who predicted an annual price increase to consumers of at least $285 million.

Judge Richard Leon said the USA government failed to meet the burden of proof that the tie up between the largest United States pay TV operator and media entertainment giant Time Warner would harm competition.

AT&T, which has invested heavily in a streaming video service called DirecTV Now, is free to bulk up its original programming with Time Warner content.

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