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AT&T, Time Warner Merger Banks on Mobile Video, Multiplatform Growth

Analysis: The merger of two media giants is pitched as necessary means to find a way to get the economics behind TV and movies to work again

Entertainment Dealmakers Impact report
Courtesy of Randall Stephenson

In a famous advertising slogan, AT&T once urged customers to “reach out and touch someone.” Now the company once known as Ma Bell is facing a time when connecting with people has become increasingly more difficult. So it’s betting that a tie-up with Time Warner will put it in a better place to reach as many consumers as possible.

AT&T and Time Warner believe they must merge to bolster new business models at a time when the old methods of selling and packaging TV shows and movies are less tenable. Speaking on a call with reporters Saturday night, AT&T CEO Randall Stephenson and Time Warner CEO Jeff Bewkes made the case that in an era when more people are gaining access to their favorite video content via streaming video, mobile devices and on-demand technology, the two corporations would do better together than apart.

“If you put these two together, you can begin to innovate these types of new services much faster, and get this to market much faster,” said Stephenson. “That’s what this is all about.”

The two companies – one a giant in the world of connecting people through telecommunications, the other a stalwart maker of content often distributed through those means – are grasping for solutions in an industry that needs to come up with answers. As more consumers gain comfort using mobile tablets and watching TV series and movies at times and in situations of their own devising, the current media ecosystem is eroding. The business remains based on scale – reaching millions of people in a single window – but consumers are starting to fall into niches.

To be sure, many companies are trying new methods. Viacom has built an entire unit devoted to helping advertisers isolate particular swaths of audience across its TV networks using various streams of data. At 21st Century Fox, executives are crafting new kinds of commercials that ask on-demand viewers top interact with them. Comcast’s NBCUniversal has offered to sell set-top box audience data to advertisers to help them make pitches in more targeted fashion.

Time Warner, too, has tried new things. For several years, it has urged the media business to consider an idea known as “TV Everywhere” that would allow viewers to watch programming on-demand as long as they could prove they were subscribers to a cable, satellite or telecommunications provider of programming. It has also pushed its HBO unit into new frontiers, including a stand-alone broadband service that makes the programming it shows on its premium-cable outlet to so-called “cord cutters” and “cord shavers” for a fee.

But “TV Everywhere” has not caught on as quickly as say, binge-watching the popular TV series “The Walking Dead.” Its success hinges on multiple programmers and multiple distributors of programming to agree upon a single system – never an easy feat to accomplish.

As Bewkes suggested, such ideas might gain more traction more quickly if AT&T and Time Warner were merged. ” If we had the kind of tie up we could have with AT&T,” he noted, it would have had a big footprint of viewers that were more accustomed to “TV Everywhere,” and might have forced rivals to adopt the technique as well. As things stand, he said, implementing “TV Everywhere” “took a long time. A lot of other cable companies and a lot of the media companies did not do that. They basically kept whatever their VOD rights were,” renewing them piecemeal and contract by contract.  “That’s not the way to bring a revolution to the consumer and give them more choice,” he said.

AT&T has in recent years focused on new programming and distribution models. The company operates both the U-verse subscription-video distributorship as well as the DirecTV satellite service, giving it a large base of consumers eager to get video. And the company has experimented with interesting programming models, like its AT&T Hello Lab, a project with streaming-video content network FullScreen that allowed 10 different content creators to develop concepts and distribute them over a longer period of time. The company has supported “@SummerBreak,” an ongoing video series that chronicles the last summer of a group of high-school seniors. Rather than being told in 30- or 60-minute increments on TV, the story unfurls via posts on Twitter in feeds belonging to the show and its teen protagonists, as well as through posts, videos and more. The series is produced by the Chernin Group, along with FullScreen and Astronauts Wanted. AT&T has backed the series since its inception, with an eye toward using the production to tell fans about new services and devices available from the telecommunications giant.

Bewkes sketched out a scenario under which the combined company could work out a system to support new kinds of programming with bespoke content from advertisers, all of it served up to the precise consumer desired by a sponsor. “We all like advertising messages if the thing we see is relevant to us,” said Bewkes, describing a strategy that is also being employed by TV companies ranging from NBCUniversal, 21st Century Fox and A+E Networks to Time Warner’s own Turner, where even CNN has opened a unit to help its advertisers craft special content for news aficionados.

Coming up with new ideas is key at a time when even Nielsen ratings for the TV broadcasts of the Olympics and NFL football have begun to decline. Many media companies are testing new ideas and will continue to do so even as AT&T and Time Warner work to gain approval to merge sometime in 2017. What techniques and formats gain traction by that time will be anybody’s guess.

(Pictured: Randall Stephenson)