The FCC in action on Thursday, November 16

Acknowledging the rapidly changing competitive landscape, the FCC, in a split vote along party lines (3-2), removed the long-standing ban on cross-ownership of a newspaper and TV station in a major market and made it easier for media companies to own multiple TV stations in the same market.  The changes should spawn consolidation deals among media outlets and pave the way for Sinclair Broadcast Group’s $4 billion purchase of Tribune Media Group.  If this particular deal goes through without divestitures, the combined firm would own 233 stations and cover over 70 percent of the country.

“Trumping” the deal

He hates CNN so maybe President Trump has more influence with the Department of Justice than he admitted a week or so ago.  (See link to CNN article.)

It was announced today that the DOJ is offering AT&T two asset sale options in order to gain approval of its merger with Time Warner – one is to sell off its TV assets (e.g. CNN) and the other is to unload DirecTV, an asset it has only owned for two years but has fully integrated into its packages and marketing efforts.  With declining viewership and a Trump-bashing “agenda”, unloading CNN is the more likely of the two options for AT&T to choose.

http://www.cnn.com/2017/11/02/politics/donald-trump-justice-department-fbi/index.html

Could it be...

..that two media powerhouses, particularly in the area of content creation (versus distribution) might combine?  According to news reports, Disney and 21^st Century Fox have held talks that involve 21^st Century Fox selling its cable networks, TV and movie studio, and international distribution operations to Disney while retaining its broadcast network business.  The motivation for the merger is for Disney to bulk up its content, but to remain fairly agnostic regarding distribution (with the exception of its direct-to-consumer streaming service planned to launch in 2019 using its newly acquired BamTech platform).

Once again, we wait and ponder if a media deal might happen, and if it did, how might competitors, on all fronts (MVPDs, content owners, OTT providers, telecoms), respond.

 

We often worry about regulatory approval too when deals are huge and horizontal.  But, content is so fragmented these days, I imagine this deal will not get much regulatory attention. 

Four is better than three

Sprint and T-Mobile announced today that they have decided to end recent merger talks and continue to go their separate ways in the U.S. wireless telecom market.  This is good news for consumers.  

According to research firm, Mosaik (and cited in the WSJ, 11/4/2017), two-thirds of U.S. counties would have lost a provider if the merger went through.  With one less competitor in the market, the three remaining firms would have benefited from an increase in market power – possibly resulting in higher prices and less innovation.

The Art of the Deal

On Thursday, the Department of Justice (DOJ) signaled that they might sue to block the AT&T-Time Warner mega merger.  Does this put in question the high probability that analysts place on the likelihood that the vertical merger will be approved or is it a ploy by the DOJ to extract rents from the firms?  For sure, it is the latter.

 

While there are anticompetitive concerns with the size and scope of this merger (e.g. foreclosure, vertical price squeeze, and higher entry barriers), regulators typically approve vertical mergers.  But, more likely than not, AT&T will have to commit to “good behavior” and some other minor concessions so that the DOJ gets a “win” too when they approve the deal.

Disruption is all around us!

Congratulations to Richard Thaler of the University of Chicago for winning the 2017 Nobel Memorial Prize in Economics.  Thaler is being recognized for his important work in Behavioral Economics, which arguably has upended mainstream economics (and its assumptions), as much as Amazon and Netflix have disrupted brick-and-mortar retail and traditional Pay-TV, respectively.

https://www.nytimes.com/2017/10/09/business/nobel-economics-richard-thaler.html

Is it time for some football?

For the right to stream the broadcast feed of eleven NFL games to its Prime Video Service subscribers this fall, Amazon paid the League $50 million or $4.55 million per game.  For the Thursday night game (9/28) between the Chicago Bears and Green Bay Packers, the streaming service averaged 372K viewers, or .6% of Prime members and approximately 2.5% of the 15M+ in total who viewed the game on CBS, the NFL Network, and other digital platforms.  If you divide the game’s programming cost by the number of viewers, it comes to approximately $12.  

So, what is the per viewer cost threshold that Amazon would have to get to that would support the continuation of paying for and streaming live sporting events? Will this be a short-term (failed) experiment or a long-term winner for the firm?  I’d never bet against Amazon, but I’m not sure about this one.