Time Warner (TWX) Chief Executive Jeff Bewkes says its $85 billion deal with AT&T (T) is designed to help it better compete against the likes of Facebook (FB) and Alphabet’s (GOOG) Google, both of which have been pushing into original content.
During an interview at the Code Conference in Ranch Palos Verdes, California hosted by Recode, the CEO said Time Warner doesn’t have a direct connection with viewers of its shows because they are distributed via cable providers, which puts it at a disadvantage to internet companies. AT&T has that direct line to customers, which was one of the reasons for the deal.
“It’s hard to get on equal footing with them,” Bewkes said during the interview. Combining with one of the leading wireless carriers in the U.S would put the media company in a better position, or at the very least give it the foundation to take on the advertising juggernauts, he said. (See more: HBO to Remove Shows From Amazon Streaming by End of 2018)
But it’s not only the internet companies’ ability to work directly with its customers that gives them an edge. Bewkes also argued that net neutrality favors Internet firms at the expense of others, which is another reason it needs AT&T. "You have the FCC putting regulations on cable and telco companies, you have the FTC putting regulations on Facebook that are much more lax. I'd like to see it be even," Bewkes said according to a CNBC report. "We're increasingly competing with West Coast global businesses that want to get in the video business.” Time Warner may not have to wait too long for relief at least on the regulatory front. President Donald Trump’s appointment to head the FCC, Ajit Pai, is opposed to net neutrality, a principle that telecom providers should allow equal bandwidth access to established companies and startups alike, and has vowed to overhaul it. (See more: FCC Chairman Fires Opening Salvo Against Net Neutrality)
Ahead of last year's U.S. presidential election, Time Warner agreed to sell itself to AT&T in the multi-billion dollar deal that gives the telecom giant access to a slew of content including shows from CNN, HBO and Comedy Central. The wireless carrier wants to use Time Warner’s programming for its over-the-top streaming service DirecTV Now which competes against the likes of YouTube, Amazon, Netflix, and more recently, Facebook and Twitter (TWTR). With the number of consumers opting to cut the cord and stream their shows online growing, social media companies have been racing to own that market. Twitter has inked deals with a slew of sports and media companies while Facebook is on the lookout for original content and is reportedly paying up to get it. According to Kleiner Perkins partner Mary Meeker’s state of the Internet report, Facebook and Google control 85% of the online advertising dollars, an area Time Warner wants more of. In order to get that it needs to collect an increased amount of data on who is watching its shows, said the executive.