Essay on AT&T and Time Warner Merger

The media giant AT&T in 2016 agreed to buy Time Warner for $85.4 billion. This would see the renowned television networks CNN and HBO operate under a new leaf. Obviously, this change in operation will have far-reaching ramifications for the business and the media fraternity. The new management of Time Warner will institute some operational changes that will trickle down to service delivery. Other mergers in history have had one or more effect on the business and the society in general. The historic acquisition of Nokia by Microsoft resulted in different reactions from the mobile phone industry players. Soon after this acquisition, Microsoft produced new smart phones with a Nokia Brand but operating on its system. Few months down the line, most of Nokia employees were laid down in a massive workforce downsizing at Microsoft. The scenario with Nokia shows that mergers and acquisition have an assortment of effects, most of which ripple out to the consumers. De La Merced thinks that the AT&T merger will bring a new colossus capable of both producing content and distributing it to millions with wireless phones, broadband subscriptions and satellite TV connections. However, it is also predictable that the merger will result in a variation in the quantity and quality of media content broadcasted by the new company, a move that will significantly affect the media and the society.

The media industry will potentially be invigorated by this merger. According to Dimopoulos and Sachetto (3), mergers promote firm-level productivity and introduce business synergies. They opine that there is a high rate of new mergers as compared to a remarkably lower rate of exit in contemporary businesses. In terms of the industry, the existing competitiveness is altered, where the incumbent firms undertake a strategic shift to cope with the changing business environment. In the light of these findings, the media industry is bound to face enhanced competition from this merger. In particular, AT&T stands at a better competitive point as compared to the media companies in the United States and beyond. Time Warner is the home of the popular Game of Thrones television series and the investigative channel dubbed Vice. Additionally, Time Warner owns one of the biggest cable broadcasters in the United States. The merger means that all the revenue previously generated by this company will be shifted to the new company. Consequently, AT&T will become the biggest media company in the United States. The media services will in turn improve, since the company will strive to prove the usefulness of the merger. In market dynamics, increased inter-competition between companies benefits the consumers in the long run. Therefore, media companies in the United States will up their services to provide consumers with the better broadcasts. With reference to Dimopoulos and Sachetto (1), this merger will set off a cycle of mergers as more companies fight to maintain their positions in the market. However, there is an anticipated exit by some companies who feel outcompeted by this AT&T. The media industry will change drastically, and a rampant reorganization will ensue.

The media outlets housed by Time Warner are expected to experience a boost in their core operations. CNN, for instance, will receive funding from the enlarged company, and in turn expand its territory to cover more regions of the world. The period required by HBO to release a successive season of a television series is also expected to reduce. Companies that produce television series incur a high cost that may cause a venture to take a lot of time to break even. As a result, the release of another season takes a lot of time partially due to these financial constraints. It is anticipated that the merger will strengthen the financial muscles of both companies which will in turn improve the operations of the company.

The above discussion points to the impacts of the merger to the customers and in extension the society. According to MacLelland and Goldsmith (1), consumers are often overlooked in the decision making for a merger. Further, these authors argue that consumers are more likely to shift their loyalty in the case of service failures that may follow a merger, than when such failures occur without a merger. In other words, any compromise that comes after a merger will likely be attributable to the deal than not. Since consumers are not aware of the details of the merger, MacLelland and Goldsmith (5) opine that attribution theory best explains the reaction of the consumers to service failure following a merger. This theory considers the factors such as the cause of the failure, the responsible party, and the likelihood of recurrence. This information points to the reaction of the media consumers following the outcome of the merger between AT&T and Time Warner. The impacts of this merger will be evident after several years. Both outcomes are feasible: the merger may bolster business in the company or lead to a decline in productivity. If the former happens, customers in the US and other countries will shift their loyalty to the competing companies. Even though the failure may arise from any other source, consumers will almost likely attribute it to the merger. However, its the opinion of this paper that this merger will augment the operations at AT&T. the expansion of the CNN and Vice networks beyond the united States will improve news and events coverage. The current coverage of CNN, for example, is limited in some parts of the world. Given that this television channels covers a wide range of news starting from politics to business, the society will become more enlightened regarding these matters. The numerous television series broadcasted by HBO have educative and entertaining roles. Improvement of services will attract a larger audience, which means that the society will advance in terms of information propagated through these media.

In conclusion, the internal operations of the enlarged AT&T Company will trickle down to the society. It has been shown that the impacts of this merger can go either way. In case the services of the company deteriorate after the merger, the consumers will automatically attribute this to the merger and change their loyalty to another brand. However, if the merger improves the company in terms of productivity and expansion, the media services offered by the two companies will reach out to a bigger audience. Due to the immense magnitude of topics covered by media from both AT&T and Time Warner, the society will become more enlightened and aware of a variety of issues like business and politics. In the long run, the company will also record more revenue as a result of increased competitiveness consequent to the merger.

Works Cited

De la Merceid, Michael. AT&T Agrees to Buy Time Warner for $85.4 Billion. The New York Times, 22 October, 2016, https://www.nytimes.com/2016/10/23/business/dealbook/att-agrees-to-buy-time-warner-for-more-than-80-billion.html. Accessed 29, August, 2017.Dimopoulos, Theodosios, and Stefano Sacchetto. "Merger activity in industry equilibrium." Journal of Financial Economics (2017).McLelland, Melinda Andrews, and Ronald E. Goldsmith. "In the wake of a merger: Consumer reactions to service failures." Journal of Applied Marketing Theory 5.2 (2014): 1-25.