AT&T is betting $85 billion that video is the future of mobile with its deal to acquire Time Warner, and the competition could also be catching on.
In a mega-merger agreement announced on Oct. 22, AT&T seeks to own and operate Time Warner’s cable network and content segments including Turner Broadcasting, HBO and Warner Bros. The deal epitomizes a time when technology, telecommunications and media companies are all exploring innovative ways to deliver content in the mobile-dominated world.
Despite the widespread criticism directed at AT&T since the deal was announced, Time Warner’s strong third-quarter financial results, announced Wednesday Sept. 2, show the opportunities in mobile and the strength of the company’s businesses. Time Warner’s revenue beat market watchers’ estimates, showing growth of 9 percent to $7.2 billion, up from about $6.7 billion this period last year
Time Warner CEO Jeff Bewkes, underscored positive performance in the company’s content arms and spoke confidently about moving forward with AT&T’s acquisition in the earnings conference call.
“This is where we see enormous opportunity from joining forces with AT&T because it brings us closer to consumers and allows us to go where they’re going,” Bewkes said. “That is increasingly mobile, it’s increasingly multi-platform, increasingly on demand.”
Though this merger may be the biggest of its kind in a transitional period of content consumption, Comcast was the first company to make headway by investing in NBCUniversal in 2011. Since finalizing this acquisition with NBC in 2013, the company has invested millions of dollars in online publishers such as Buzzfeed and Vox.
With this year’s onslaught of mobile-minded mergers, Comcast may find itself in the competition to take its content to wireless platforms.
“What Comcast doesn’t have is a wireless network to distribute,” Jim Nail, principal analyst at Forrester, said.
In Comcast’s third-quarter earnings conference call, CEO Brian Roberts hinted at a potential wireless agreement with Verizon in the upcoming year. However, industry analyst Craig Moffett of MoffettNathanson wrote in a note that the media company may want to strategize its own mobile network option before considering an acquisition.
“I think they’ll have to acquire,” Nail said in contrast. “That’s too big a task to take on from ground zero.”
In efforts to contend with its rivals, Verizon is working on its own mobile content strategy. By joining its acquisition with AOL and its most recent purchase of Yahoo, the telecom company intends to create a digital advertising platform to compete with Facebook and Google. Verizon is additionally combining these two mergers with a push of its mobile video app go90.
Amidst the wave of media mergers, the next avenue of investment in content distribution may explore automated and personalized advertisements.
“After talking to different people in the industry it seems one of the things that we need to be thinking about is artificial intelligence and bots penetrating the space,” Richard Tullo, an analyst at Albert Fried and Company, said.
Tullo also highlighted that ad bots and AI could be a $36.8 billion industry in 2025, according to market intelligence firm Tractica’s forecast.
“Both deals, Verizon and AOL as well as AT&T and Time Warner should leverage to exploit [this] market if these bots are really addressing the advertising needs that people really want,” Tullo said.