Why AT&T Needs Time Warner

While AT&T needs content to continue its business, Time Warner may have been able to survive on its own — and some experts fear the telecommunciations giant may not have what it takes to run a media company, according to an analysis at cnbc.com.

Time Warner doesn't have direct distribution to consumers, save a few small products like HBO Go. But it can negotiate deals with cable providers, thanks to its wealth of premium content, which includes Turner channels such as CNN, Cartoon Network and TNT as well as Warner Bros. films.

"AT&T needs Time Warner more than vice versa," said Forrester senior analyst Jim Nail. "The Netflix example shows us that content is more powerful than distribution. With all the good content that Time Warner has, they'll be able to get better distribution [on their own] than AT&T."

AT&T and Time Warner announced on Saturday that the telecommunications giant was purchasing the media company for more than $85 billion. The deal amounts to about $107.50 per share in a cash and stock transaction. It will still have to pass U.S. regulators, and AT&T is planning to argue the two are complementary businesses and not be a monopoly.


There are some benefits for Time Warner by partnering with AT&T, Nail said. For one, it can get more involved in the digital advertising industry. It can also have an easier path for mobile distribution. Time Warner has patents on short and long form video technology to aid in the transfer of content to mobile and other devices, but partnering with AT&T can improve that, according to analytics firm MCAM.

On the other hand, AT&T is facing a dwindling cable subscriber problem as people cut the cord. Even though it is the largest pay TV operator in the U.S., it needs to diversify its revenue streams.

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