AT&T has carried out what is being touted as the biggest acquisition in history. The telecom giant announced on Saturday that it will be buying Times Warner, including HBO, CNN and movie studio Warner Bros. The total value of the deal is said to be around Rs 5.7 lakh crore. HBO and CNN are hugely popular in the west. In India, as per latest BARC numbers, HBO stands fifth in terms of viewership among English Movie channels, while CNN News18 was second in terms of viewership among English News channels, behind Times Now.
In India, CNN has a tie up with TV18, a subsidiary of Network18, which was bought by Mukesh Ambani’s Reliance Industries in 2014 for over Rs 4,000 crore.
The acquisition of Times Warner is part of an increasingly seen trend of non-media companies making inroads in the content domain either through acquisitions or through organic development. We have seen the likes of Facebook, Twitter, Yahoo and Google take pains to increase their content portfolio, through partnerships, new products, etc.
Reliance Jio has expressed interest in acquiring digital rights for the IPL by purchasing the ITT documents for the property, though the tender process has now been delayed due to the ongoing struggle between the BCCI and Lodha Panel. Other telcos such as Airtel and Vodafone are also increasing their content footprint, especially when it comes to entertainment content.
“This is a vertical integration,” said Frank D’Souza, Senior Tax Partner at PwC. “For AT&T, there is not much growth in the telco market. If you want to give value to the consumer, you need to add value by providing them exclusive content. This is a scenario that is going to play out increasingly. Either content or connectivity will rule the roost,” he added.
What this could mean is that we could see more deals like that between AT&T and Times Warner in the future, though perhaps not of the same scale. As D’souza says, “Either telcos will buy media companies or media companies will buy telcos to increase their reach.”
However, he does not feel that the India will see this type of consolidation for some time. He credits this to the fact that there is still a lot of scope for growth in the Indian market at individual levels. “Horizontal integrations are themselves quite difficult, vertical ones are even more so,” he explains. D’souza further points out that though there could possibly be similarities between telcos in India and more mature markets like in the US, media companies like Times Warner, Walt Disney, etc. operate at an altogether different scale as compared to their Indian media counterparts.
“We will see niche pickings now and then but not like this one,” he said.
Raghav Anand, Head (Digital Media, Media and Entertainment) at EY said, “Original content, bundled advertising and consumer data provides interesting opportunities for technology companies, telecom players and digital platforms. While cross ownerships and content exclusivity will be difficult in India given the regulatory restrictions, players in the area are actively looking at equity deals in content houses. Additionally, the content license costs in India will continue to go northwards with OTT, telecom players, broadcasters and digital companies vying for the rights. This could provide further impetus for distribution content integration.”
When asked about the short-term and long-term impact of the Times Warner acquisition, given the success of channels like Cartoon Network, HBO and CNN, D’Souza believes that there would be no disruption of any plans that Times Warner already had in place for India. “Any changes will obviously be at the discretion of the new owners but looking at how different the two businesses are, you would typically run with things as they were,” he added.