Netflix and Amazon are often portrayed as death knells for traditional media companies.
They have upended the traditional cable and TV model that has existed for decades by providing programs on demand, over the internet and typically at a lower price point.
But the existence of these two tech companies, along with others such as Hulu, YouTube TV and Apple’s soon-to-be announced streaming service, is one of the reasons why a three-judge panel from the US Court of Appeals for the DC Circuit approved one of the biggest media mergers in decades – one that is between two traditional companies, AT&T and Time Warner.
The justices said the government failed to prove that the newly-merged company would raise prices or harm competition, but they did acknowledge that new competitors in the media landscape means that incumbents like AT&T would have to up their game.
“[T]he industry is continually changing and experiencing increasing competition,” the three appellate judges wrote in their opinion on Tuesday.
Citing the gaining market share of services like YouTubeTV and Netflix, the judges wrote that “increasingly, cable customers are ‘cutting the cord’ and terminating [Multichannel video programming distributors] service altogether. Often these customers do not exit the entertainment field altogether, but instead switch to [streaming services] for entertainment service.”
It took 15 months, but the legal saga between the Justice Department and AT&T over whether the telecom giant’s acquisition of Time Warner violates antitrust rules is now over. Time Warner, which has since been renamed WarnerMedia, is the parent company of networks such as CNN, TNT and HBO.
An appeals court declared on Tuesday that the deal did not prove to be anti-competitive and rejected the Justice Department’s second attempt to stop the transaction. A few hours after the appellate court ruling, the Justice Department said it’s done fighting the merger.
The judges pointed out that streaming services on the market are “vertically integrated,” meaning they distribute the content they create. This is essentially what AT&T wants to do by owning companies such as HBO, Warner Bros. and TNT.
AT&T said in its original bid and in court that this was one of the reasons the merger is necessary. The main draw is the need for more customer data: Netflix gets reams of information on what their consumers watch and why – down to the second. That data can be used to determine what shows and movies to make next, how to market its content and for the services that sell ads, how to better tailor their commercials.
“The market we are competing in is for time and attention,” WarnerMedia chief John Stankey said on the witness stand during the trial. “Facebook, Google, Netflix — they are all distracting people from other things they used to do … That’s the battle here.”
AT&T wasted little time in jumping in the streaming wars. Five months after the deal closed, AT&T announced that later this year the company would launch their own, as of yet unnamed, service from WarnerMedia.