AT&T-Time Warner Merger Overview
link to page 1 link to page 2 
Updated January 26, 2018
AT&T-Time Warner Merger Overview
On October 22, 2016, AT&T Inc. and Time Warner Inc.
conglomerates’ cable networks license bundled packages of
announced that they had entered into an agreement under
programs to MVPDs such as Comcast, Charter, DIRECTV,
which AT&T will merge with Time Warner. As of
and DISH.
September 30, 2017, the total transaction value was about
$105.8 billion, including $84.5 billion for the purchase of
Changes in the way consumers watch television are having
Time Warner stock, and $21.3 billion for the assumption of
profound effects on the television industry. Table 1
Time Warner’s debt.
illustrates this trend. Growing numbers of households have
dropped their MVPD service or chosen not to subscribe in
The U.S. Department of Justice (DOJ) filed a civil antitrust
the first place. Instead, many are subscribing to SVODs
lawsuit in the U.S. District Court for the District of
and/or other online video services, which, even after the
Columbia to block AT&T’s proposed acquisition of Time
cost of separately purchasing broadband service, can be less
Warner on November 20, 2017. The trial, overseen by U.S.
expensive.
District Judge Richard Leon, is set to begin on March 19,
2018. Judge Leon said the trial would last about three
Table 1. Television Distribution Sources
weeks.
(% of U.S. television households)
The Two Companies
2014
2015
2016
2017
AT&T is the largest U.S. multichannel video program
Broadcast only
10%
11%
12%
13%
distributor (MVPD). It provides programming to
subscribers through three subscription services: (1)
MVPD
88%
86%
85%
82%
DIRECTV, a satellite-based service with 20.6 million
subscribers, (2) U-Verse, a service that uses the AT&T
Broadband only
2%
3%
4%
5%
fiber optic and copper infrastructure and has 3.7 million
Total number of
115.5
116.4
116.4
118.4
subscribers, and (3) DIRECTV NOW, an online video
TV households
mil ion
mil ion
mil ion
mil ion
service with 787,000 subscribers. (Subscriber figures are as
of June 30, 2017.) AT&T is also the second-largest wireless
Source: CRS analysis of data from the Nielsen Company.
carrier in the United States, and has a substantial, although
Notes: Television household estimates are as of January of each
diminishing, wireline telephone business.
year. Distribution source estimates are as of the second quarter of
each year.
Time Warner’s three operating divisions, Home Box Office
Inc., Turner, and Warner Bros. Entertainment, create
Consequently, MVPDs have lost subscribers. As subscriber
television programs and movies as well as operate cable
numbers fall, networks such as Time Warner’s HBO, TBS,
networks. The company sold its music division, Warner
and CNN earn less revenue from MVPDs, which pay them
Music, in 2003; spun off its MVPD service, Time Warner
on a per-subscriber basis to carry their programming, and
Cable (now owned by Charter Communications Inc.), in
from advertisers, which pay them fees based on the number
2009; and spun off publisher Time Inc. in 2014.
of viewers. To combat this trend, Time Warner has
launched its own SVODs, including HBO Go and
Consumer and Industry Trends
FilmStruck. It also has 10% ownership of Hulu.
The television industry is in the midst of structural changes
driven by a combination of competitive pressures,
Moreover, several firms, including the parent companies of
technological developments, and consumer preferences.
MVPDs, have launched or intend to launch “virtual service
providers” (VSPs). VSPs deliver feeds of scheduled or
Time Warner is one of four major U.S. media
“linear” packages of television programs at the same time
conglomerates that own film studios, television studios, and
as they air on cable or broadcast networks. Some may offer
cable networks. The others are Comcast, 21st Century Fox
programming on an on-demand basis as well. They mimic
(Fox), and the Walt Disney Company (Disney). On
traditional MVPD services, but are generally less expensive
December 14, 2017, Disney announced an agreement to
and do not require long term commitments. Table 2
purchase Fox’s movie and television studios and several of
describes these services.
its cable networks. Government approval of that transaction
DOJ’s Concerns with Merger
is pending.
The Antitrust Division of the DOJ reviewed the transaction
The conglomerates’ studios license movies and television
to determine whether it would substantially reduce
programs to cable networks, broadcast networks, MVPDs,
competition, as prohibited by Section 7 of the Clayton
and subscription video on demand (SVOD) services such as
Antitrust Act of 1914. DOJ sought to stop the transaction
Netflix, Amazon Prime Video, and Hulu. The
by requesting a preliminary injunction, claiming that the
transaction would violate Section 7.
https://crsreports.congress.gov
AT&T-Time Warner Merger Overview
Table 2. Virtual Service Providers
industry’s transition to new video distribution models,
specifically virtual service providers, which DOJ claims
Parent/
Includes Time AT&T views as “threat[s] to the traditional pay-TV model.”
Launch Provider
Funding
Where
Warner
According to DOJ, Time Warner’s networks are “extremely
Date
Name
Sources
Available Networks?
important for many emerging video distributors.” DOJ
Jan.
fuboTV
Funding
nationwide no
states that prior to the announcement of the merger, Time
Warner “secured a position for its networks as ‘anchor
2015
from 21st
tenants’” for virtual service providers.
Century
Fox and
Parties’ Response
Scripps
In their response to DOJ’s complaint, AT&T and Time
Networks
Interactive
Warner contend that “Time Warner’s networks are not, in
any antitrust sense of the word, essential to attracting and
Feb.
Sling TV
Dish
nationwide yes; in
retaining [video] subscribers.” They note that when Google,
2017
Network
entertainmen
which they claim is “one of the most well financed and
Corp.
t and news
sophisticated companies in the world,” launched YouTube
tiers
TV as an alternative to MVPD services, it did so without
any Time Warner networks.
Mar.
PlayStation Sony
nationwide yes
2015
Vue
Corp.
They argue that rather than reducing competition, the
Nov.
DIRECTV
AT&T Inc.
nationwide yes
transaction is “necessary to allow the combined company to
2016
NOW
keep pace in an environment where cable is the incumbent
market leader and viewer preferences are rapidly tilting
Apr.
YouTube
Alphabet
84 local
no
towards the direct-to-consumer platforms of Netflix,
2017
TV
Inc.
television
Google, Amazon Prime, Facebook, Apple, Hulu, and
(Google)
markets
others.”
May
Hulu with
Disney
nationwide yes
2017
Live TV
(30%);
Structural vs. Behavioral Remedies
Comcast
For many proposed transactions, rather than seeking to stop
(30%); Fox
the deal completely, DOJ and the parties reach consent
(30%);
agreements containing conditions to alleviate competitive
Time
concerns. The agreements are subject to court approval.
Warner
When Comcast, a distributor of video programming,
(10%)
merged with a supplier of video programming,
NBCUniversal, in 2011, both DOJ and the FCC reached
June
Century
Century
nationwide no
agreements with the parties that imposed behavioral
2017
Link
Link
conditions, including binding arbitration in the event of a
Stream
dispute related to those conditions.
Sept.
XFINITY
Comcast
select areas yes
2017
Instant TV
(XFINITY
In their response to DOJ’s suit, AT&T and Time Warner
Internet
offered, in lieu of a consent agreement, to extend arbitration
customers
protections to third-party video programming distributors,
only)
similar to those adopted in the Comcast-NBCUniversal
transaction. They contend that “this contractual regime is
Sources: SNL Kagan, Ian Olgeirson and Deana Myers, The State of
self-executing” and would not require government or court
Online Video Delivery, 2017 Edition, S&P Global Market Intelligence,
monitoring.
Charlottesvil e, VA, October 2017, pp. 14-15. Company websites.
DOJ’s suit appears consistent with the philosophy
In its complaint, DOJ alleges the combined company would
expressed by Makan Delrahim, Assistant Attorney General
use its control over Time Warner’s valuable and popular
for the Antitrust Division. In a November 2017 speech,
television networks to hinder its rivals by “forcing” them to
Delrahim stated that he viewed behavioral conditions as
pay hundreds of millions dollars more per year for the right
“fundamentally regulatory, imposing ongoing government
to distribute those networks. DOJ claims that if the
oversight on what should preferably be a free market.” He
competing video distributors refused to pay the higher price
added that he expected “to return to the preferred focus on
and subsequently dropped the Time Warner networks,
structural relief [e.g., divestitures] to remedy mergers that
AT&T would nonetheless benefit, because its competitors’
violate the law and harm the American consumer.”
subscribers would switch to AT&T’s own video services.
Dana A. Scherer, Specialist in Telecommunications Policy
In addition, DOJ maintains that the combined company
IF10526
would use its increased power to slow the television
https://crsreports.congress.gov
AT&T-Time Warner Merger Overview
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.
https://crsreports.congress.gov | IF10526 · VERSION 6 · UPDATED
Updated January 26, 2018
AT&T-Time Warner Merger Overview
On October 22, 2016, AT&T Inc. and Time Warner Inc.
conglomerates’ cable networks license bundled packages of
announced that they had entered into an agreement under
programs to MVPDs such as Comcast, Charter, DIRECTV,
which AT&T will merge with Time Warner. As of
and DISH.
September 30, 2017, the total transaction value was about
$105.8 billion, including $84.5 billion for the purchase of
Changes in the way consumers watch television are having
Time Warner stock, and $21.3 billion for the assumption of
profound effects on the television industry. Table 1
Time Warner’s debt.
illustrates this trend. Growing numbers of households have
dropped their MVPD service or chosen not to subscribe in
The U.S. Department of Justice (DOJ) filed a civil antitrust
the first place. Instead, many are subscribing to SVODs
lawsuit in the U.S. District Court for the District of
and/or other online video services, which, even after the
Columbia to block AT&T’s proposed acquisition of Time
cost of separately purchasing broadband service, can be less
Warner on November 20, 2017. The trial, overseen by U.S.
expensive.
District Judge Richard Leon, is set to begin on March 19,
2018. Judge Leon said the trial would last about three
Table 1. Television Distribution Sources
weeks.
(% of U.S. television households)
The Two Companies
2014
2015
2016
2017
AT&T is the largest U.S. multichannel video program
Broadcast only
10%
11%
12%
13%
distributor (MVPD). It provides programming to
subscribers through three subscription services: (1)
MVPD
88%
86%
85%
82%
DIRECTV, a satellite-based service with 20.6 million
subscribers, (2) U-Verse, a service that uses the AT&T
Broadband only
2%
3%
4%
5%
fiber optic and copper infrastructure and has 3.7 million
Total number of
115.5
116.4
116.4
118.4
subscribers, and (3) DIRECTV NOW, an online video
TV households
mil ion
mil ion
mil ion
mil ion
service with 787,000 subscribers. (Subscriber figures are as
of June 30, 2017.) AT&T is also the second-largest wireless
Source: CRS analysis of data from the Nielsen Company.
carrier in the United States, and has a substantial, although
Notes: Television household estimates are as of January of each
diminishing, wireline telephone business.
year. Distribution source estimates are as of the second quarter of
each year.
Time Warner’s three operating divisions, Home Box Office
Inc., Turner, and Warner Bros. Entertainment, create
Consequently, MVPDs have lost subscribers. As subscriber
television programs and movies as well as operate cable
numbers fall, networks such as Time Warner’s HBO, TBS,
networks. The company sold its music division, Warner
and CNN earn less revenue from MVPDs, which pay them
Music, in 2003; spun off its MVPD service, Time Warner
on a per-subscriber basis to carry their programming, and
Cable (now owned by Charter Communications Inc.), in
from advertisers, which pay them fees based on the number
2009; and spun off publisher Time Inc. in 2014.
of viewers. To combat this trend, Time Warner has
launched its own SVODs, including HBO Go and
Consumer and Industry Trends
FilmStruck. It also has 10% ownership of Hulu.
The television industry is in the midst of structural changes
driven by a combination of competitive pressures,
Moreover, several firms, including the parent companies of
technological developments, and consumer preferences.
MVPDs, have launched or intend to launch “virtual service
providers” (VSPs). VSPs deliver feeds of scheduled or
Time Warner is one of four major U.S. media
“linear” packages of television programs at the same time
conglomerates that own film studios, television studios, and
as they air on cable or broadcast networks. Some may offer
cable networks. The others are Comcast, 21st Century Fox
programming on an on-demand basis as well. They mimic
(Fox), and the Walt Disney Company (Disney). On
traditional MVPD services, but are generally less expensive
December 14, 2017, Disney announced an agreement to
and do not require long term commitments. Table 2
purchase Fox’s movie and television studios and several of
describes these services.
its cable networks. Government approval of that transaction
DOJ’s Concerns with Merger
is pending.
The Antitrust Division of the DOJ reviewed the transaction
The conglomerates’ studios license movies and television
to determine whether it would substantially reduce
programs to cable networks, broadcast networks, MVPDs,
competition, as prohibited by Section 7 of the Clayton
and subscription video on demand (SVOD) services such as
Antitrust Act of 1914. DOJ sought to stop the transaction
Netflix, Amazon Prime Video, and Hulu. The
by requesting a preliminary injunction, claiming that the
transaction would violate Section 7.
https://crsreports.congress.gov
AT&T-Time Warner Merger Overview
Table 2. Virtual Service Providers
industry’s transition to new video distribution models,
specifically virtual service providers, which DOJ claims
Parent/
Includes Time AT&T views as “threat[s] to the traditional pay-TV model.”
Launch Provider
Funding
Where
Warner
According to DOJ, Time Warner’s networks are “extremely
Date
Name
Sources
Available Networks?
important for many emerging video distributors.” DOJ
Jan.
fuboTV
Funding
nationwide no
states that prior to the announcement of the merger, Time
Warner “secured a position for its networks as ‘anchor
2015
from 21st
tenants’” for virtual service providers.
Century
Fox and
Parties’ Response
Scripps
In their response to DOJ’s complaint, AT&T and Time
Networks
Interactive
Warner contend that “Time Warner’s networks are not, in
any antitrust sense of the word, essential to attracting and
Feb.
Sling TV
Dish
nationwide yes; in
retaining [video] subscribers.” They note that when Google,
2017
Network
entertainmen
which they claim is “one of the most well financed and
Corp.
t and news
sophisticated companies in the world,” launched YouTube
tiers
TV as an alternative to MVPD services, it did so without
any Time Warner networks.
Mar.
PlayStation Sony
nationwide yes
2015
Vue
Corp.
They argue that rather than reducing competition, the
Nov.
DIRECTV
AT&T Inc.
nationwide yes
transaction is “necessary to allow the combined company to
2016
NOW
keep pace in an environment where cable is the incumbent
market leader and viewer preferences are rapidly tilting
Apr.
YouTube
Alphabet
84 local
no
towards the direct-to-consumer platforms of Netflix,
2017
TV
Inc.
television
Google, Amazon Prime, Facebook, Apple, Hulu, and
(Google)
markets
others.”
May
Hulu with
Disney
nationwide yes
2017
Live TV
(30%);
Structural vs. Behavioral Remedies
Comcast
For many proposed transactions, rather than seeking to stop
(30%); Fox
the deal completely, DOJ and the parties reach consent
(30%);
agreements containing conditions to alleviate competitive
Time
concerns. The agreements are subject to court approval.
Warner
When Comcast, a distributor of video programming,
(10%)
merged with a supplier of video programming,
NBCUniversal, in 2011, both DOJ and the FCC reached
June
Century
Century
nationwide no
agreements with the parties that imposed behavioral
2017
Link
Link
conditions, including binding arbitration in the event of a
Stream
dispute related to those conditions.
Sept.
XFINITY
Comcast
select areas yes
2017
Instant TV
(XFINITY
In their response to DOJ’s suit, AT&T and Time Warner
Internet
offered, in lieu of a consent agreement, to extend arbitration
customers
protections to third-party video programming distributors,
only)
similar to those adopted in the Comcast-NBCUniversal
transaction. They contend that “this contractual regime is
Sources: SNL Kagan, Ian Olgeirson and Deana Myers, The State of
self-executing” and would not require government or court
Online Video Delivery, 2017 Edition, S&P Global Market Intelligence,
monitoring.
Charlottesvil e, VA, October 2017, pp. 14-15. Company websites.
DOJ’s suit appears consistent with the philosophy
In its complaint, DOJ alleges the combined company would
expressed by Makan Delrahim, Assistant Attorney General
use its control over Time Warner’s valuable and popular
for the Antitrust Division. In a November 2017 speech,
television networks to hinder its rivals by “forcing” them to
Delrahim stated that he viewed behavioral conditions as
pay hundreds of millions dollars more per year for the right
“fundamentally regulatory, imposing ongoing government
to distribute those networks. DOJ claims that if the
oversight on what should preferably be a free market.” He
competing video distributors refused to pay the higher price
added that he expected “to return to the preferred focus on
and subsequently dropped the Time Warner networks,
structural relief [e.g., divestitures] to remedy mergers that
AT&T would nonetheless benefit, because its competitors’
violate the law and harm the American consumer.”
subscribers would switch to AT&T’s own video services.
Dana A. Scherer, Specialist in Telecommunications Policy
In addition, DOJ maintains that the combined company
IF10526
would use its increased power to slow the television
https://crsreports.congress.gov
AT&T-Time Warner Merger Overview
Disclaimer
This document was prepared by the Congressional Research Service (CRS). CRS serves as nonpartisan shared staff to
congressional committees and Members of Congress. It operates solely at the behest of and under the direction of Congress.
Information in a CRS Report should not be relied upon for purposes other than public understanding of information that has
been provided by CRS to Members of Congress in connection with CRS’s institutional role. CRS Reports, as a work of the
United States Government, are not subject to copyright protection in the United States. Any CRS Report may be
reproduced and distributed in its entirety without permission from CRS. However, as a CRS Report may include
copyrighted images or material from a third party, you may need to obtain the permission of the copyright holder if you
wish to copy or otherwise use copyrighted material.
https://crsreports.congress.gov | IF10526 · VERSION 6 · UPDATED