Media industry’s own ‘Game of Thrones’ is marked by twists

Regulators have cast critical eyes over proposed marriages triggered by rise of Big Tech

Cersei (Lena Headey) is in the ascendancy in HBO’s “Game of Thrones”. AT&T’s proposed acquisition of HBO parent Time Warner is up in the air after the US department of justice moved to block the deal.

Cersei (Lena Headey) is in the ascendancy in HBO’s “Game of Thrones”. AT&T’s proposed acquisition of HBO parent Time Warner is up in the air after the US department of justice moved to block the deal.

 

At the start of 2017, I forecast that the media year would be like 2016, only more so, with the themes of consolidation, convergence and digital transition returning for another sequel.

Yes, the old astrologers’ trick of making predictions that are so broad they can’t fail to come true, is much copied by journalists.

The media market’s urge to consolidate – driven by technological change, the desire to survive and the creation of shareholder value (aka potential executive bonanzas) or sometimes all of the above – was indeed a regular feature of 2017.

But a lot can happen between announcing a deal and actually closing one. If there was one lesson to be drawn from the year, it was the one to be found in Donald Trump’s regular walk-out music: you can’t always get what you want.

AT&T’s proposed acquisition of Time Warner, announced in October 2016, reflected all three themes of consolidation, convergence and digital transition.

AT&T is a US telecoms company turned satellite pay-TV operator that wants to get its claws on Time Warner’s content jewels and put it in a stronger position at a time when the television business is shifting further to online video streaming.

Antitrust lawsuit

However, in November, the US department of justice filed an antitrust lawsuit against AT&T to block the $85.4 billion deal, saying it could force rivals to pay more for Time Warner content, increase prices for pay-TV subscribers and hamper the transition to online video.

AT&T’s battle to own the conglomerate behind Game of Thrones and Wonder Woman has been enlivened by the fact that Time Warner, as well as owning HBO and the Warner Bros movie studio, is the parent of CNN, the news network close to the top of Trump’s ever-lengthening hate list.

The deal is “not a good deal” the US president stated on the lawn of the White House, obliging justice officials to stress that its action against AT&T was “a law enforcement decision, not a political one”. It’s a showdown between government and big business that is now heading for court, though for AT&T, the clock is ticking loudly and expensively.

In Ireland, meanwhile, the length of the new media mergers regulatory process was the subject of criticism from the parties that were involved in its first full testing: Independent News & Media (INM) and regional newspaper group Celtic Media.

INM, having announced its plan to buy Celtic Media in September 2016, walked away from the acquisition in June just before Minister for Communications Denis Naughten was due to make his ruling, the recommendation on his desk being that the purchase should only be permitted if no jobs were lost.

Reverse the trend?

For as long as Communicorp-owner Denis O’Brien remains INM’s largest shareholder, the media group may find it incredibly difficult, amid serious news plurality concerns, to boost its revenue through acquisitions. And in a declining market, how else can it reverse the trend?

December brought the announcement of two proposed media industry acquisitions, one local, one multinational, that qualify for true “end of an era” status.

As Ted Crosbie said to the newsroom floor of the Irish Examiner, the newspaper survived the Famine, the War of Independence, the Civil War, two World Wars and several recessions. But the last of these recessions, which followed a period of overspending on acquisitions, coincided with the rise of digital news consumption, spelling the end for the Crosbie family’s five-generation involvement. The company behind The Irish Times will buy Examiner parent Landmark Media Investments if it receives the regulatory approval to do so.

Then, in what may or may not be the last significant deal to be unveiled this year, Disney has signed up to pay $52.4 billion for the film, television and international businesses of Rupert Murdoch’s 21st Century Fox, potentially uniting Star Wars with The Simpsons.

Proposed acquisitions

The deal includes Fox’s 39 per cent shareholding in Sky, creating a Russian doll of proposed acquisitions, as the UK’s competition watchdog is in the middle of assessing Fox’s pre-existing bid for the 61 per cent of Sky that it doesn’t own.

With that nice Disney set to be the ultimate owner, rather than newspaper-owning, Westminster-watching Murdoch, approval may be more readily forthcoming, though the fate of loss-making Sky News must now be considered more uncertain than before.

Such global deals are often described as mega-mergers. But their size and potential impact can be in the eye of the beholder. As AT&T boss Randall Stephenson made sure to say during an initial hearing on the AT&T/Time Warner deal, the combined entity would still be “about half the size of the companies that present the real competitive threat” – in other words, Big Tech.

There is a new world order. A critical question for competition regulators in 2018, therefore, is not whether media mergers should be allowed to go ahead, but whether certain big tech players should be broken up – and, if so, how?