Fears are growing that the Justice Department’s suit to block AT&T’s proposed takeover of Time Warner could upend business-as-usual in an unexpected place — Silicon Valley.
AT&T CEO Randall Stephenson has repeatedly stressed that his company’s objective in gobbling up Time Warner and its DirecTV subsidiary is to build an advertising platform that can compete with Facebook and Google.
“That’s what this is about,” Stephenson said in defense of the proposed $85 billion deal earlier this month.
Thus far, not everybody in Silicon Valley is alarmed about the plight of AT&T and other legacy media players.
“The tech guys are still chuckling at the trouble the media companies are having merging,” a Silicon Valley banker told The Post.
Indeed, the so-called FANG companies — Facebook, Amazon, Netflix and Google — are laying off any big media acquisitions until a big merger between traditional players goes through and presents a threat, according to the banker.
Nevertheless, Stephenson’s argument is crafted to put tech giants under the spotlight, as research firm eMarketer expects Facebook and Google to account for more than 63 percent of this year’s digital ad market.
That dominance, over what Stephenson called “literally billions of customers,” dwarfs the 25 million (and declining) video subscribers that AT&T reported for its most recent quarter.
It also adds credibility to Stephenson’s plea that AT&T is merely trying to catch up to the FANG gang.
Should the case go to court, legal experts expect AT&T to drive home the traditional telecom’s impotence in the face of FANG, all of which are deep into over-the-top video distribution.
Accordingly, FANG could be the “big losers” of any litigation, according to Mark Cuban, the tech pundit who owns the Dallas Mavericks.
“Their media advertising, content and distribution dominance will be a defense at trial,” Cuban tweeted just hours after Justice filed its suit. “That could create bigger issues for them.”
Indeed, “The bulk of FANG mergers are vertical, so they are not happy to see a vertical merger challenged,” a lobbyist for a FANG company told The Post.
Should Justice fail to make its case that vertical mergers can be noncompetitive, many expect a flurry of M&A activity to ensue.
“It will be all bets off,” the lobbyist said, “and the FANG companies will become more acquisitive.”
In the meantime, the more immediate impact of the waiting game will likely fall on legacy media companies.
“Everyone has to try to understand what the new `rules’ are for anything remotely similar to an AT&T-Time Warner combination,” a Wall Streeter said. “It’s only logical for anyone considering a deal to do.”