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$85.4 billion merger would bring CNN, TNT, HBO under AT&T umbrella.
Proposed AT&T deal still could be rejected by federal regulators.
October 24, 2016

Business media professor Mark Hass says AT&T-Time Warner merger signals big shift

An ASU business media professor says AT&T’s planned acquisition of Time Warner has the potential to change “the competitive landscape of content creation” if federal regulators approve the deal.

Mark Hass, professor of practice at the Walter Cronkite School of Journalism and Mass Communication and the W. P. Carey School of Business, specializing in strategic communications and marketing, provides insight on the deal that he says signals a significant shift in the media landscape.

The $85.4 billion merger would bring CNN, TNT, HBO and superhero franchises such as Batman and Superman under the AT&T umbrella, making them available on DirectTV and its streaming services.

Critics have argued the proposal could raise prices, limit choices and pose risks to consumer privacy.

The deal is expected to face scrutiny from regulators, who have the power to strike it down. Other media and tech companies could also emerge and usurp the potential merger.

Hass, with more than three decades of experience as a journalist, entrepreneur and strategic communications professional, helps sort these and other implications.

Question: Why is this deal happening now?

Answer: The media is being caught by digitization, and this is just another in a seriesComcast acquired NBC Universal in 2011. Verizon this year purchased Yahoo and AOL. of deals. All of the traditional telecom and wireless carriers are trying to own content.

As content moves to a small screen, they want to control content, not just access to the content. The Verizon’s and AT&T’s are generating a lot of cash, and they’re using it to get into the content business.

Q: Is this a big deal within the industry, and if so, why? 

A: This is a big deal because AT&T is a big carrier. They had their last deal blocked when they tried to buy T-Mobile, and I also believe this will be the largest merger of the year based on value.

It’s big in that regard, but more importantly it’s going to change the nature of AT&T and make them one of the worlds, if not the world’s largest content provider.

They’re going to control both the creation and delivery of media to the small screen. I think it’s a much better powerful position to be in.

Q: How should the consumer view this merger? 

A: If you’re an HBO or Showtime subscriber, it’s a big deal. If you’re an AT&T subscriber, it’s a big deal. That probably covers a lot of people. It changes the competitive landscape of content creation, assuming it is approved by the federal regulators.

Q: What are the potential benefits to the consumer? 

A: It may make it easier for you to cut the cord with your current carrier if that’s what you want to do. Ironically, Time Warner Cable was spun out of a trend where people wanted to rely less on wire cable connection and more on a cordless connection — the idea that if you buy the content you want and delivered on any device you wanted, most likely your small screen rather than your TV, is a powerful trend that’s rolling over the cable industry, and the content creation industry. If you’re an AT&T subscriber, I can imagine a time when a channel like HBO and Showtime were just rolled into your subscription for a relatively small additional fee.

Q: What could be some potential drawbacks? 

A: Something like this always raises the question of cost. If AT&T, and this is what the federal regulators will be looking at — is, will this hurt competition? If you’re not an AT&T, will it cost you more to subscribe to a cable channel? Or will you get second-rate content? It raises those kinds of anti-competitive questions because AT&T has a specific delivery platform that now has control of content. What they do with that content is another big question. Will they allow it to be deployed elsewhere? Will they charge differently if it is deployed elsewhere? This is unknown.

Q: How long will it be before we see the effects?

A: It’s still an open question whether or not the deal will be approved. I think it will receive a lot of regulatory scrutiny. AT&T already owns Direct TV, so there will be a period of scrutiny whether the deal will happen. But if it happens, then I think you’ll see the changes occur pretty quickly.

The trend to consume content on your mobile device instead of a wired device is very powerful. The growth is huge.

The bandwidth we’re consuming on video is big, and that’s only going to continue to get bigger. If the deal goes through, AT&T subscribers will see changes very quickly, making it advantageous to them to subscribe to other content channels that will be available to them through this deal. For people who are not subscribers, it’ll be longer before they see any changes.

Q: Any big-picture or long-range concerns?

A: I’m pretty calm about these types of mergers. I’m old enough to remember the furor over the AOL/Time Warner deal. There was so much concern that it would create an anti-competitive situation, and far from it.

It turned out to be a really bad deal for Time Warner because they got stuck with AOL when it was in decline, so it’s hard to predict how these things will go. The nature of digital media is to create dynamic opportunities for new business models. I suspect that over the next five years new and very powerful business models will emerge as well that will be competitive with the Comcasts, Verizons and AT&T’s of the world, and what they’re trying to do. Mid-term, there will be new, competitive, entrepreneurial models for receiving content on your mobile devices.

This merger opens up their bandwidth, and so now the structure has to be built up to match that demand. A lot of the current bandwidth is being consumed by third-party advertisers who are gathering data on people who are accessing content online without their knowledge. The privacy issues and who owns the data on those individuals will become a more prominent issue in the future and will emerge on a federal level.

Q: So this is a trend story? 

A: That’s exactly right. I’m calm about it because it’s an inevitable movement. It’s not a good or bad thing; it just is.

 

Top photo by Jennifer Woodard Maderazo from San Francisco, USA (iPhone anticipation) CC BY 2.0 (http://creativecommons.org/licenses/by/2.0)], via Wikimedia Commons.

Reporter , ASU Now

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Amy Hillman, Allen Morrison also say students should learn to embrace change.
October 24, 2016

Leaders at W. P. Carey School of Business, Thunderbird School of Global Management say it’s more important than ever

Companies, like individuals, need to embrace change and diversity in order to innovate — and innovation is the future of business, according to two of Arizona State University’s top business experts.

“It used to be that you could develop a product or service that was world-class and it was hard for others to catch up, but now we’re in a system in which organizations have to constantly innovate to stay one step ahead,” Amy Hillman, dean of the W. P. Carey School of Business at ASU, said.

“The rate of change is quicker than ever before, and you need diversity more than ever. You need people who are saying, ‘Should we be doing it this way just because it’s always been done this way?’ ”

Hillman joined Allen Morrison, chief executive officer and director general of the Thunderbird School of Global Management, in giving a talk titled, “Leading Business Forward: The Secrets of Modern Business Evolution” at ASU’s West campus in Glendale on Monday. The event was sponsored by ASU’s New College of Interdisciplinary Arts and Sciences. Hillman is a professor of management and holds the Rusty Lyon Chair in Strategy. Morrison became CEO in 2014 at Thunderbird, which formed a partnership with ASU in 2015.

Hillman said research proves that companies with the most diversity perform the best.

“We know that when decisions involve strategic issues, having diversity results in better decisions and better brainstorming, more creativity and better results — financial results included,” she said.

Morrison agreed, saying diversity is essential to innovation, but he added that change has been accelerating so rapidly that people can become overwhelmed. For example, the average grocery store has about 40,000 products, with 15,000 new products a year, while the average household buys about 150 products. “Why take a risk on a new kind of shampoo?” he asked.

The most successful businesses will be the ones that not only recognize the need for change, but can get their employees on board, Morrison said.

“Companies need to find ways to engage people to feel comfortable and competent to manage change,” he said. “That’s the biggest challenge for leaders.”

And it takes perseverance.

“Seventy percent of change initiatives in companies fail,” Morrison said.

“Typically, people get lost and tired. It’s the tenacity of leaders after the first six months of excitement and the first year of pain to continue to stick to it month after month after month.”

Morrison said that American companies are already ahead of companies in emerging markets such as China and India because the U.S. has more natural diversity. He said that years ago, he was brought into a huge Japanese company that was having trouble getting results from divisions outside of Japan. But every one of the company’s eight CEOs and 256 division vice presidents was a Japanese man.

“Did they know they had a problem? Yes. How big a challenge was it? Huge,” he said.

Both Hillman and Morrison said that the ability to embrace change is especially important among current students, who likely will have many careers over their lifetimes — some of which haven’t been invented yet.

“The first job you get will not be your last, but you’ll learn a lot and you can get to where you want to get. Don’t overthink it,” Hillman said.

“The path might not be linear, and staying open to new things is critically important.”

 

Photo: Allen Morrison, CEO of the Thunderbird School of Global Management, and Amy Hillman, dean of the W. P. Carey School of Business, discuss the importance of diversity during a special event titled "Leading Business Forward: The Secrets of Modern Business Evolution," at ASU's West campus on Monday. Photo by Deanna Dent/ASU Now

Mary Beth Faller

reporter , ASU Now

480-727-4503