The Perils of an AT&T-Time Warner Merger

Last time a communications giant acquired Time Warner, it was an unprecedented disaster. Here’s what is likely to go wrong this time—for them, and us.

Shannon Stapleton / Reuters

With the news that telecom giant AT&T has agreed to buy Time Warner for $85.4 billion, Frank Sesno might as well be having an acid flashback.

Sesno was CNN’s Washington bureau chief back in January 2000, when Time Warner, the cable network’s parent company, triumphantly announced its acquisition by AOL. Like the latest proposed megamerger, it was supposed to be a marriage of premium content and digital distribution, potentially prompting an earth-shattering revolution in which the resulting media behemoth would be lord of all it surveyed.

Or, as an analyst for the Wall Street investment bank Bear Stearns put it at the time: “Together, they they represent an unprecedented powerhouse.”

That wedding, however, proved to be the most disastrous corporate transaction in recent history, vaporizing more than $100 billion in shareholder equity; Bear Stearns no longer exists—a casualty of the 2008 economic meltdown. The once-mighty AOL is today a tiny subsidiary of Verizon. And critics of the latest merger plan are warning of escalating monthly rates for consumers, a terrifying loss of personal privacy, a threat to competition, and even, despite assurances to the contrary, the possibility of bad outcomes for Time Warner’s premiere journalism division.

“I was at CNN when we were taken over by Time Warner [in 1996] and then by AOL,” recalled Sesno, now director of the school of media and public affairs at George Washington University. “Time Warner was comforting in a strange way, because we were being taken over by a company that had a deep journalistic tradition. ‘Time’ was its first name. I remember the visits by Gerry Levin who talked to our newsroom and cited Henry Luce,” the legendary founder of Time magazine.

In 2000, Time Warner’s CEO, Gerald Levin, and AOL’s then-chief executive, Steve Case, had made soothing noises about how highly they valued and supported the journalism of CNN. Sixteen years later, Randall Stephenson, the top executive of AT&T, and Jeffrey Bewkes, his counterpart at Time Warner—who this week are jointly barnstorming media outlets to sell the deal to the public at large—have given similar assurances, singing paeans to CNN’s independence and financial wellbeing.

But, Sesno continued, “When AOL came along, the relative role of CNN in the larger corporate structure had shrunk, and for the first time senior executives told us that our job was to ‘make the numbers.’ It was not a good day for CNN… One of the first things I did at the bureau was lay off ten percent of the staff. That’s one of the reasons I left CNN [in 2005]. That’s not what I was there to do—to preside over deconstruction.”

Seven years after Time Warner spun off AOL into a separate company, the transactional equivalent of removing a diseased organ, several industry experts can’t resist contrasting that misguided corporate consolidation—which happened back in a less jaundiced age, when fabulous fortunes were being quickly made on the internet bubble—to the widespread skepticism that has greeted Time Warner’s proposed merger with AT&T.

Everyone from Democratic Sen. Al Franken to Republican presidential nominee Donald Trump has thrown cold water on the merger plans, and both Disney and 21st Century Fox, Time Warner’s biggest direct competitors, promptly signaled their opposition, calling for rigorous government scrutiny of the merger.

Indeed, various industry experts—recalling how the Justice Department and Federal Communications Commission thwarted Comcast’s 2014 purchase of Time Warner Cable, once considered a sure thing—have warned that AT&T-Time Warner faces possibly insurmountable regulatory hurdles.

One veteran analyst of the media industry even told The New York Times that the merger has no better than a 50-50 chance of approval.

Washington-based privacy advocate Jeffrey Chester, executive director of the Center for Digital Democracy, opposes the merger because, among other reasons, it will allow AT&T to use Time Warner’s content as bait to invade every aspect of the lives and habits of its nearly 30 million wired customers of its broadband and television services, many through its DirecTV subsidiary, and its more than 100 million wireless subscribers.

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“It’s commercial surveillance,” Chester told The Daily Beast, noting that through mobile devices, AT&T can even pinpoint the geographical locations of users.

“AT&T is going to become much more powerful in your daily life,” Chester said, “and based on data collection will make a host of decisions on how to charge more, better sell information to junk food companies, pharmaceutical manufacturers, credit card companies, and with [Warner Bros. Looney Tunes star] Bugs Bunny and a host of other popular Time Warner brands, AT&T is going to be better positioned to lure you to buy its service and begin to collect huge amounts of data in your TV, on your mobile device, what you buy in the store, etc.”

Chester couldn’t resist adding: “Bugs Bunny is going to be AT&T’s digital Trojan Horse: ‘Come on, watch me on your mobile device, and that’s not a carrot I’m selling, it’s a Barbie Doll or a video game or a Big Mac.’ AT&T needs alluring content to draw eyeballs… Daffy Duck is protesting this deal!”

Los Angeles-based media consultant Arthur Greenwald, expressed skepticism that, despite the policy chops of a small group of elected officials like Franken of Minnesota and Sen. Ed Markey of Massachusetts, the proposed merger will receive the necessary vetting in Congress.

“It’s historically true that elected officials are sensitive to anything that might make monthly rates go up on cable or cell phones because it results in a flurry of complaints to their offices in Washington,” he said. “They are extremely sensitive to being blamed, either directly or by future political opponents. It’s not entirely fair, but it’s Politics 101.”

Yet Greenwald predicted: “The congressional committees will make a show of considering the issues…but other than vaguely understanding that it might mean jobs for their districts or that their constituents’ rates might go up,” the discussion won’t be serious. “It provides an opportunity for Washington and critics of the technology to stick up for their worries and begin a discussion about privacy protection and consumer protection, but I’m not optimistic that will happen in this polarized Congress. With the kind of bullshit and one-upmanship we see, no matter who’s in charge, it will not get discussed.”

Meanwhile, filmmaker Cullen Hoback—whose 2013 documentary Terms and Conditions May Apply revealed how corporate monoliths like AT&T are collecting so much personal data on Americans that they’re essentially destroying any concept of privacy—predicted that CNN won’t escape the merger’s inevitable fallout.

“It’s mostly bullshit,” Hoback said about AT&T’s and Time Warner’s promise of CNN’s immunity from the impact of the merger. Instead, he argued, the journalistic outlet will likely become just another marketing tool to micro-target individual viewers with personally tailored advertising.

“They have every incentive in the world to increase how much they’re collecting data on their customers and all their online activities, and now they can target them better with the content they’re creating, and the movies that they’re making,” Hoback said. “Think about CNN. They could be tracking online response to the news feed that CNN is generating, and concluding, ‘It’s not hitting. Let’s fine-tune what we’re sending to the public on CNN.’”

Noting the behavior of Facebook and Google, which have publicly claimed to safeguard personal privacy while vacuuming up every molecule of potentially marketable data, including from private emails and messages, and selling it to advertisers, Hoback warned: “So you can’t trust these companies for what they say for squat. They’ll say something, and then they wait a couple of years, and then they completely pivot.”

Hoback added: “CNN will have their own sort of independent ability to do journalism. But if you’re a producer, maybe you’ll think it’s good to have real-time analytics tracking of AT&T customers online” to see what stories viewers like and rapidly react to that information. “That might not negatively influence their ability to do independent journalism, but it will change customers’ ability to have a private experience online.”

Former CNN journalist Sesno, for his part, is hopeful that the AT&T-Time Warner merger will end up in better shape than the one he suffered under.

“I don’t think it’s a parallel situation,” he argued. “AT&T is a mature business. AOL was an adolescent. They were completely unpredictable…It was a fundamental cultural misfit.”

He added, however, that the test will be whether AT&T realizes that a journalistic enterprise cannot be treated in the same way as any other corporate commodity, and that the profit imperative should take a back seat to the old-fashioned idea of journalism as a public good.