DOJ Puts Oscars on Notice Regarding Streaming Video

The Justice Department reportedly has contacted the Academy of Motion Pictures Arts and Sciences — the organization that runs the Academy Awards — about potential new rules that would restrict original movies distributed via streaming video channels (i.e. Netflix) from awards consideration.

First reported by Variety, DOJ antitrust boss Makan Delrahim March 21 sent a letter to Academy CEO Dawn Hudson saying any new rules put in place to restrict streaming video services from consideration could be viewed as anticompetitive.

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“In the event that the academy — an association that includes multiple competitors in its membership — establishes certain eligibility requirements for the Oscars that eliminate competition without procompetitive justification, such conduct may raise antitrust concerns,” Delrahim wrote, as reported by Variety.

At issue are select original movies from Netflix, which the streaming pioneer submits for awards (including Best Picture) without a traditional 90-day theatrical release.

Netflix’s Roma was nominated for 10 Academy Awards, winning three, including Best Director, but losing Best Picture to Green Book.

The Oscar organization, in a media statement, confirmed receiving correspondence from the DOJ and responding accordingly.

“The Academy’s Board of Governors will meet on April 23 for its annual awards rules meeting, where all branches submit possible updates for consideration,” a representative from the Academy said in a media statement.

Delrahim previously tried unsuccessfully to quash AT&T’s $85 billion acquisition of Time Warner, which led to the formation of WarnerMedia.

 

 

 

 

 

Appeals Court Denies DOJ Bid to Block AT&T’s $85 Billion Time Warner Purchase

A federal appeals court Feb. 26 ruled against the Justice Department’s attempt to block AT&T’s $85 billion acquisition of Time Warner, which led to the formation of WarnerMedia.

The court found that a lower court judge’s decision last summer approving of the transaction did not violate antitrust guidelines.

“The judgment of the district court appealed from this cause is hereby affirmed,” the court wrote in its ruling.

The Justice Department had argued that the merger would enable AT&T, which also owns DirecTV, to leverage its stake in the satellite operator to force pay-TV competitors to pay more for content from Warner Bros., HBO and Turner, which includes CNN.

Some observers speculated the government’s attempt to block the deal revolved more around President Trump’s openly hostile approach to CNN, which he has labeled “fake news,” and, along with other media outlets not named Fox News, an “enemy of the people.”

Indeed, the DOJ’s legal challenges represented the first to a corporate vertical merger in four years.

 

Nexstar Media Group Acquires Tribune Media Company for $6.4 Billion

Nexstar Media Group Dec. 3 announced it has entered into a definitive merger agreement with Tribune Media Company to acquire all outstanding shares of Tribune Media in a cash deal valued at $6.4 billion, including the assumption of Tribune Media’s outstanding ($2.3 billion) debt.

The transaction makes Irving, Texas-based Nexstar the largest local TV station owner in the country, including 216 stations in 118 markets – reaching approximately 39% of U.S. television households. Tribune also owns 31% stake in Food Network.

The combined entity will be one of the nation’s leading providers of local news, entertainment, sports, lifestyle and network programming through its broadcast and digital media platforms with annual revenue of approximately $4.6 billion.

Notable Tribune stations include WGN America in Chicago and KTLA in Los Angeles. WGN became one of the first local broadcasters to ink production deals for original (now cancelled) series, including “Salem” from 20thCentury Fox, “Manhattan” (Lionsgate), and “Underground” (Sony Pictures), among others.

The deal is expected to close by the third-quarter next year following regulatory approvals.

“Nexstar has long viewed the acquisition of Tribune Media as a strategically, financially and operationally compelling opportunity that brings immediate value to shareholders of both companies,” Perry Sook, CEO of Nexstar, said in a statement.

Sook said the transaction offers synergies ($160 million in the first year) related to the enhanced scale of the combined broadcast and digital media operations and increases the company’s audience reach by about 50%.

The deal follows the scuttled $3.9 billion merger attempt between Tribune and Sinclair Broadcasting Group, which imploded following allegations the politically conservative Sinclair would have positioned Tribune stations as far-right partisan mouthpieces.

The new transaction reflects a 15.5% premium for Tribune Media shareholders and a 45% premium to Tribune’s closing price on July 16, the day FCC Ajit Pai issued a statement regarding his intention to hold a hearing on the Sinclair offer.

The Nexstar/Tribune deal faces its own regulatory hurdles under the current FCC and Department of Justice, which together under the direction of the Trump Administration, have taken stronger approaches toward media mergers as seen in the DOJ’s ongoing appeal of the AT&T/Time Warner pact.

Indeed, Nexstar said it intends to divest certain TV stations necessary to comply with regulatory ownership limits and may also divest other assets it deems to be non-core.

 

 

WarnerMedia OTT Video Platform to Offer Three Service Tiers

WarnerMedia’s much-anticipated over-the top video platform launching in the fourth quarter of 2019 will include three levels of service: an entry-level movie-focused package; a premium service with original programming and theatrical movies; and a third service that bundles content from the first two plus an extensive library of Warner Bros., HBO and Turner programming and licensed content.

Speaking Nov. 29 at the telecom’s analyst day event in New York, CEO John Stankey, CEO of WarnerMedia said the company’s unnamed/unpriced SVOD service would complement existing business (i.e. HBO Now with 5 million subscribers); benefit current distribution partners; expand the audience and increase engagement around content; and provide data and analytics to inform new products and better monetize content.

Stankey said the SVOD service would be a combination of original content, movies, TV shows, library fare and third-party programming.

“It’s a software experience wrapping creative excellence, that we’re going to showcase specific brands … to help the consumer find the right kind of curated content they want,” he said. “It’s gotta be a great value proposition.”

Separately, CEO Randall Stephenson said the merger with Time Warner continues to take a lot of time …”Unfortunately, a lot of it involve[s] litigation with the government.”

The CEO was referring to the Justice Department’s decision to appeal an unfavorable federal judge’s antitrust decision approving AT&T’s $85 billion acquisition of Time Warner.

The U.S. District Court of Appeals in the District of Columbia is expected to rule early next year.

“We are well positioned for success as the lines between entertainment and communications continue to blur,” said Stephenson. “If you’re a media company, you can no longer rely exclusively on wholesale distribution models. You must develop a direct relationship with your viewers. And if you’re a communications company, you can no longer rely exclusively on oversized bundles of content.”

Indeed, AT&T’s core DirecTV pay-TV service suffered through one of its worst fiscal quarters, losing nearly 350,000 subscribers. The losses were offset to a degree by DirecTV Now, the standalone SVOD service with about 1.8 million subs.

AT&T warned that elimination of promotional pricing at DirecTV Now would likely result in negative net sub adds in the fourth quarter of 2018 and in 2019.

WarnerMedia Alleges Politics in Dish Network Dispute

WarnerMedia is accusing the Department of Justice of using a carriage disagreement with Dish Network as leverage in its appeal of a federal judge’s favorable verdict in AT&T’s $85 billion acquisition of Time Warner.

AT&T’s WarnerMedia — which includes HBO, Turner and Warner Bros. — for the first time (Nov. 1) pulled HBO and Cinemax from Dish Network after it claimed the satellite operator refused to negotiate. The move reportedly affected about 2.5 million of Dish’s 13 million pay-TV subscribers.

“Dish’s proposals and actions made it clear they never intended to seriously negotiate an agreement,” Simon Sutton, HBO president and chief revenue officer, said in a statement as reported by Reuters.

While carriage disagreements and negotiations aren’t uncommon, the AT&T/Time Warner merger is different. The deal has been entangled in partisan politics since the election of President Donald Trump.

Trump’s ongoing characterizations of certain media outlets — notably Turner’s CNN — as fake news and biased against him has prompted allegations the Justice Department’s last-minute objection to the merger was more about politics than antitrust issues.

The DOJ contends AT&T has too much power owning and controlling major content creators and distribution channels — leverage it claims hurts consumers. The carriage dispute, says the government, offers a blueprint example of that.

“This behavior, unfortunately, is consistent with what the Department of Justice predicted would result from the merger,” said a DOJ representative. “We are hopeful the Court of Appeals will correct the errors of the District Court.”

WarnerMedia says Dish is using the current political environment to extract more favorable contract terms. Indeed, it alleges Dish is collaborating with DOJ on the issue.

“That collaboration continues to this day with Dish’s tactical decision to drop HBO — not the other way around,” said a WarnerMedia rep. “DOJ failed to prove its claims about HBO at trial and then abandoned them on appeal.”

Andy LeCuyer, SVP pf programming at Dish, argues otherwise.

“It seems AT&T is implementing a new strategy to shut off its recently acquired content from other distributors,” he said.

DOJ Wants Fast-Tracked AT&T-Time Warner Appeals Process

The Trump Administration really doesn’t want a merger between AT&T and Time Warner, whose assets include Warner Bros., Turner (TBT, TNT, CNN) and HBO.

On July 18, the government requested the U.S Court of Appeals for the District of Columbia speed up the process by mandating an October deadline for all legal briefs, with oral arguments to follow. Such a schedule could reportedly see a decision by early 2019.

The DOJ (and AT&T) contend that a drawn-out appeals process “will make it increasingly difficult to unwind the merger,” should the government win.

Indeed, former Time Warner CEO Jeff Bewkes has stepped down and John Martin, CEO of Turner, was let go, among other personnel changes.

The Justice Department earlier this month filed the appeal seeking to overturn U.S. District Judge Richard Leon’s ruling that found the government hadn’t proved its antitrust claims in the $85 billion merger.

The antitrust case marked the first time in 40 years that the government had sought to challenge a vertical merger between two non-competing companies. The DOJ typically might intervene in horizontal mergers between competitive rivals.

Regardless, the government believes Leon didn’t understand the economic ramifications of a combined AT&T/Time Warner when negotiating with pay-TV operators. It contends AT&T could demand higher carriage fees for CNN, TNT and TBS while leveraging satellite-based DirecTV and online TV platform DirecTV Now as competitive threats.

Leon disagreed, ruling pay-TV operators could survive without Turner programming, alleged restrictions to HBO access and thwarting third-party over-the-top video services.

“We are disappointed with the [judge’s] decision,” Makan Delrahim, Trump’s appointed antitrust boss at the DOJ, said in a June 12 statement. “We continue to believe that the pay-TV market will be less competitive and less innovative as a result of the proposed merger between AT&T and Time Warner.”

Some observers contend the DOJ’s opposition to the merger is largely political as Trump in the 2016 election campaign and thereafter has often criticized CNN (and other media outlets critical of his administration) as peddlers of “fake news”.

Indeed, AT&T CEO Randall Stephenson rejected initial government demands calling for the divestiture of select Time Warner assets, including CNN.

 

 

Disney, Fox Shareholders to Vote on Merger July 27

The day after The Justice Department June 27 approved The Walt Disney Co.’s $71.3 billion cash/stock acquisition of 20th Century Fox Film (which includes British satellite TV operator Sky Plc.) both Disney and 21st Century Fox announced their respective shareholders will vote July 27 on the mega-merger.

Both companies canceled previously-slated July 10 shareholder votes after Comcast submitted a rival $65 billion all cash offer that trumped Disney’s initial $52.4 billion bid.

The new vote date gives the corporate parent of Comcast Cable, NBC Universal and DreamWorks Animation less than a month to secure a new bid.

Media reports suggest Comcast – whose cable operations are under threat from over-the-top video services such as Netflix and Amazon Prime Video and needs Fox content – will counter.

“We believe another counteroffer from Comcast for Fox is likely,” John Hodulik, analyst with UBS, told Deadline.com.

Moody’s Investor Service reportedly said Comcast’s current offer would push the company’s debt load to more than $170 billion.

While corporate debt is relative, both Fox and Disney contended their deal would pass regulatory muster more easily than Comcast’s. And apparently it did.

While the antitrust unit of the Department of Justice entered into a consent decree with Disney and 21st Century Fox that allows the acquisition to proceed – mandating the sale of the Fox Sports Regional Networks as a requirement – it has made no ruling on Comcast’s offer.

Regardless, Disney has at least 90 days from the date of closing the transaction to complete the sale, with the possibility that the DOJ can grant extensions of time up to another 90 days. The decree is subject to the normal court approval process.

But first, shareholders have to vote.

 

AT&T Says Divesting Time Warner Assets Would Undermine Merger Value

AT&T reportedly told the federal judge in the AT&T/Time Warner antitrust case any government request to divest DirecTV or Turner would undermine the value of the $85.4 billion merger.

The statement is part of closing briefs submitted by both sides May 3 in the trial Judge Richard Leon is expected to rule on by mid-June.

A lawyer representing the Justice Department told Leon that AT&T should make a “partial divestiture” of either DirecTV or Turner (which includes CNN, TBS and TNT) so it can’t monopolize content and consumer pricing, among other issues.

AT&T said such a move would “destroy the very consumer value this merger is designed to unlock,” while hiking prices for DirecTV subscribers. Divesting Turner, AT&T said, would eliminate “content innovations” and the advertising “benefits” that help reduce consumer pricing.

Indeed, Time Warner cited advertising revenue from the recent March Madness Men’s College Basketball National Championship tournament for upping Q1 revenue 10% to $3.34 billion.

“The government did not even begin to make a credible case that the merger would likely harm competition, substantially or even just a little,” AT&T said in the brief, as reported by Reuters. “This is not a close case. The government failed to meet its burden for multiple independent reasons.”

The divestitures, in addition to the DOJ lawsuit itself, took on political overtones when President Trump, campaigned against the merger during the election. More importantly, Trump has called out CNN – a frequent critic of the president – as “fake news” and part of the “dishonest media.”

Judge Leon previously denied an AT&T request forcing the DOJ to turn over records to determine whether Trump pressured the Justice Department to file litigation – after the merger had met regulatory approval.

AT&T has to pay Time Warner $500 million should the merger fail.

 

 

AT&T Planning $15 Online TV Service

On the witness stand defending his company’s $85.4 billion acquisition of Time Warner as pro consumer, AT&T CEO Randall Stephenson took the opportunity to announce the pending roll out of a $15 monthly online TV service.

Dubbed “AT&T Watch,” the platform would be the cheapest online TV service on the market — $5 less than Dish Network’s Sling TV. It will be marketed as a cheaper version of $35 DirecTV Now with fewer channel selections and no access to live sports, among other restrictions.

The Justice Department last year filed an antitrust lawsuit against the merger, claiming the deal would be bad for consumers. AT&T and Time Warner say the merger helps them stay competitive in the rapidly changing home entertainment market driven by over-the-top video.

AT&T currently offers DirecTV Now at reduced rates, including HBO, in select markets. Sprint Wireless and T-Mobile include free Hulu and Netflix, respectively.

Stephenson said “Watch” would be available free to wireless subscribers – underscoring the probability the platform would be ad-supported and geared toward mobile users.

The platform was hinted at during a pretrial brief.

“The merger will enable AT&T to transform the mobile video marketplace by combining Time Warner’s content assets with its wireless platform to develop new and more valuable services especially for mobile video devices,” AT&T wrote in the brief, as reported by CNN Money. “For example: AT&T would launch a new service with Turner and a small number of popular cable networks, which would be made available for free to AT&T’s wireless customers on unlimited plans and for a nominal price to anyone else.”

 

Judge in AT&T/DOJ Trial Ups Questioning

U.S. District Court Judge Richard Leon April 4 questioned witnesses for the government in the AT&T/Time Warner antitrust trial probing questions about negotiations involving programing distribution.

At the center of the government’s regulatory concern is the contention that a combined AT&T/Time Warner, whose assets include DirecTV, AT&T U-verse, Turner (TNT, CNN, TBS), HBO, Warner Bros., could unfairly leverage content access to pay-TV distributors in favor of its own distribution channels.

With Tom Montemagno, EVP, programing acquisition at Charter Communications, on the stand for the government, Leon asked details about Turner’s revised arbitration rules to pay-TV operators – updated after the DOJ filed the lawsuit – guaranteeing against blackouts and content disruption to consumers in the event of an impasse in license negotiations.

Specifically, Turner’s so-called “blind” arbitration rules enable each side to make an offer with the arbitrator deciding which offer to accept. Distributors such as Charter have expressed concern that a combined AT&T/Time Warner would have an unfair advantage in arbitration since it is party to fiscal information on both sides of the issue.

Under questioning by Leon, Montemagno agreed that a more transparent “mutually beneficial, mutually fair” process would be better for all parties involved.

The matter is significant, reports CNN, as it is reminiscent to 2011 when Leon presided over the antitrust settlement agreement between the DOJ and Comcast, which was acquiring NBC Universal.

In that case, which Leon ruled in favor of Comcast, the judge ordered the cable giant and government to collect data on arbitration cases involving digital distribution services such as Netflix, Hulu and Amazon Prime Video.

“Since neither the court nor the parties has a crystal ball to forecast how this final judgment [Comcast/NBC Universal] … will actually function, I believe that certain additional steps are necessary,” Leon wrote in a memo accompanying his order, according to CNN.

Leon’s skepticism about the arbitration process suggests the judge could either allow the AT&T/Time Warner acquisition to close without conditions, or rule against it unless additional guidelines are put in place. There is no jury in this case.