Gerald Levin, former CEO of Time Warner, died March 13. He was 84 and had battled Parkinson’s disease.

Levin ran Time Warner when it merged with AOL in 2000, a partnership that brought together the world’s largest media company and its largest internet company in a $350 billion deal. AOL Time Warner was hatched, but the merger ended up a disaster. The dot-com bubble burst, and the marriage of traditional media and online cultures did not go smoothly. 

Levin retired in 2002. 

Time Warner dropped AOL from its name in 2003 and sold AOL to shareholders in 2009. 

Levin was born in Philadelphia in 1939. He studied biblical literature and Christian philosophy at Haverford College in Pennsylvania, and got a law degree from the University of Pennsylvania in 1963. After graduation, he worked at a law firm, then moved to the Development and Resources Corp. 

Also Read: The Technological Legacy of Time Warner Cable

Levin’s career shifted when he joined cable company Sterling Communications in 1972. Sterling launched Home Box Office, and Levin became the network’s CEO. Levin pushed Sterling parent Time Inc. to transmit regional Home Box Office via satellite, giving it nationwide reach and changing the way cable networks were distributed. 

Time Inc. merged with Warner Communications in 1989, and Time Warner was born. 

Levin was named co-CEO of Time Warner alongside Steven J. Ross in 1992. He became the sole CEO following Ross’s death that same year. 

While he was CEO, Time Warner acquired Turner Broadcasting System, which included CNN, TBS and the Cartoon Network. 

Levin was married three times, each one ending in divorce. He is survived by four of his five children. Son Jonathan, who was a teacher in the Bronx, was murdered by a former student in Manhattan in 1997. 

Richard Parsons, who succeeded Levin as AOL Time Warner CEO in 2002, told The New York Times that Levin was “one of the smartest guys in the media and entertainment space” and a “visionary” who saw media trends before most everyone else did. 

With the hours running out on the current Republican FCC, Charter has asked, and the FCC has granted, the request that it withdraw its petition that the commission sunset two conditions on its Time Warner-Bright House Networks merger.

That petition was one of the issues that appeared to be left hanging as FCC chairman Ajit Pai's tenure draws to a close. Pai has never been a fan of merger stipulations he sees as attempts to regulate via condition. 

Also Read: FCC Watch

"At this time, the Bureau will no longer consider filings specific to this petition," said the Wireline Competition Bureau, "but the docket will remain open for additional filings, such as those required by Charter or the Independent Compliance Officer.

Charter has been looking to get out from under the "no charging for interconnection" and "no usage-based/data caps pricing conditions." A court threw out the first, so that request was essentially moot, but the second is still in force. Those conditions were set to expire in May 2023 but Charter wanted them to end in May 2021.

Also Read: New York Approves Charter/Time Warner Cable

FCC approval could have had a major impact on Charter's over-the-top video strategy. The FCC, in imposing the conditions, said they were to ensure Charter could not “hamper or prevent its current and future online video rivals from expanding, becoming more competitive, or starting up in the first place.” Charter had suggested those OTT rivals hardly need protection from the company given that rival internet service providers have not had similar conditions and the over-the-top marketplace is flourishing.

“The withdrawal of the Charter data caps petition is good news for consumers and open internet advocates," said Incompas CEO Chip Pickering. "Pressure from Congress, consumer groups and small business leaders helped walk back the cable giant, but it’s a clear sign for why we need strong interconnection and open internet policy on the books to prevent these attempts to raise prices and inflate consumers’ bills.” 

In a big win for M&A and another loss for the Trump Administration, a second federal court has ruled that the Justice Department did not make its antitrust case for blocking the AT&T-Time Warner merger.

A three-judge panel of the U.S. Court of Appeals for the D.C. Circuit refused to unwind the merger Tuesday (Feb. 26), upholding a D.C. District Court decision. That panel had comprised Judges Judith W. Rogers, Robert L. Wilkins and David B. Sentelle.

Because the Justice Department was challenging the district court's denial of a permanent injunction of the deal, the court confined itself to the question of whether the lower court's factual findings were clearly erroneous. The conclusion was that they were not.

"[T]he government’s objections that the district court misunderstood and misapplied economic principles and clearly erred...are unpersuasive, accordingly, we affirm," Rogers wrote for a unanimous court.

"At trial, the government presented expert opinion on the likely anticompetitive effects of the proposed merger on the video programming and distribution industry as forecast by economic principles and a quantitative model," wrote the court. "It also presented statements by the defendants in administrative proceedings about the anticompetitive effects of a proposed vertical merger in the industry seven years earlier.

"The defendants responded with an expert’s analysis of real-world data for prior vertical mergers in the industry that showed “no statistically significant effect on content prices.” The government offered no comparable analysis of data and its expert opinion and modeling predicting such increases failed to take into account Turner Broadcasting System’s post-litigation irrevocable offers of no-blackout arbitration agreements, which a government expert acknowledged would require a new model. Evidence also indicated that the industry had become dynamic in recent years with the emergence, for example, of Netflix and Hulu."

AT&T was sounding magnanimous in victory, and suggesting this should be the end of the legal story.

“The merger of these innovative companies has already yielded significant consumer benefits, and it will continue to do so for years to come," said AT&T general counsel David McAtee. "While we respect the important role that the U.S. Department of Justice plays in the merger review process, we trust that today’s unanimous decision from the D.C. Circuit will end this litigation.”

A district court judge had ruled against Justice and for the merger after DOJ sued to block the meld. DOJ had argued, and still does, that without programming (Turner) or distribution (DirecTV) divestitures the deal violated antitrust by providing the incentive and opportunity for the combined company to withhold must-have programming, including to over-the-top competitors, or deny distribution shelf space.

The judge said the government had failed to make its case, but DOJ appealed the decision, to the D.C. circuit, which has principal jurisdiction over communications-related merger issues, saying the judge had failed to recognize some basic economic facts.

AT&T countered that DOJ used bad numbers to come to the wrong conclusion about AT&T-Time Warner merger — that it would substantially lessen competition — and a lower court was right to reject that conclusion and allow the deal. It also raised the specter of President Trump's attacks on the deal as a possible motivating factor in Justice's unusual opposition to a vertical merger, though antitrust chief Makan Delrahim has suggested it was a strong preference for spinoffs over behavioral conditions — like access or carriage requirements — that motivated the decision.

Oral argument had been held Dec. 6, with a government shutdown intervening. Although the court was in session throughout the shutdown, it was still a pretty fast turn-around for the appeals court decision.

Also Related: DOJ Slams AT&T Revisionist Defense

The decision was not a big surprise. While judges sometimes play devil's advocate by testing arguments with tough questions, during that Dec. 6 argument they hammered DOJ's argument that a lower court judge exhibited clear error in allowing the deal to go through and rejecting the government's economic analysis that the combined company would use its leverage to raise retail prices anticompetitively.

Again and again the judges asked just how DOJ had met its burden of proof and did not appear to like the answers.

"This should have been been expected," said Adonis Hoffman, chairman of Business in the Public Interest. "The challenge to the vertical merger was based on specious legal rationale and questionable political considerations." Hoffman is former chief of staff to FCC commissioner Mignon Clyburn.

“The court’s affirmance of the AT&T/Time Warner merger is a victory for real-world market analysis over theoretical speculative models and a victory for letting the free market work absent a compelling case for the government dictating market outcomes," said Free State Foundation President Randolph May. "Anyone without blinders on can see that the dynamic video marketplace, with the rise of the Netflixes and Hulus of the streaming world, is changing faster than the government's outdated word processing templates regarding competitive market analysis."

"It is disappointing but not surprising that the D.C. Circuit upheld Judge Richard Leon, as district courts have a great deal of discretion," said Public Knowledge senior counsel John Bergmayer. "While the outcome is not what we would have wanted, the court does acknowledge certain errors and omissions made by Judge Leon, and the opinion's scope is limited to a highly specific set of facts and arguments that were discussed during the trial. The opinion should not be read as a broad endorsement of Judge Leon's rose-colored view of the video marketplace, and it provides guidance for how the government can successfully challenge future anticompetitive vertical mergers."

DOJ could appeal the decision to the full court, or seek Supreme Court review.

WASHINGTON — It’s likely the reason that Supreme Court did not vacate the FCC’s 2015 Open Internet order at the same time it denied internet service providers’ appeal was that two conservative justices recused themselves: Chief Justice John Roberts and new Associate Justice Brett Kavanaugh.

The three other Republican appointees would have vacated the 2015 order.

Not vacating the order means it can be used by net neutrality groups challenging the Federal Communications Commission Republicans’ deregulatory Restoring Internet Freedom Order (RIF).

Justices don’t have to explain their recusals. But Kavanaugh was a judge on the U.S. Court of Appeals for the D.C. Circuit who participated in the en banc decision on whether to review the panel decision to uphold 2015 order. He dissented from the decision not to hear the appeal. This was before the 2015 order was mooted by the new FCC order.

Roberts’s 2017 financial disclosure statement included stock in Charter Communications and Time Warner, which would have become AT&T stock after the merger if Roberts still held it, which court transparency group Fix the Court says was the case. That would almost certainly explain his recusal, though Fix the Court said Roberts participated in the June decision to deny cert in the case of AT&T Mobility’s advertised service plans, four days after the AT&T-Time Warner deal closed, so theoretically Roberts should have recused himself. That was likely an oversight, as last term Roberts recused himself from two Time Warner-related cases.

If Roberts continues to own the stock, that could take him out of play if the Justice Department’s appeal of the AT&T-Time Warner merger gets that far. Currently it is before the D.C. Circuit, which last week picked the three-judge panel that will hear the appeal Dec. 6.

Attorneys general from nine states have filed an amicus brief with the U.S. Court of Appeals for the D.C. Circuit asking that court to uphold a district court decision that the Justice Department DOJ did not make its case for blocking the deal.

The AGs pointed out that not only do they not support DOJ's appeal, but not a single state joined Justice's original unsuccessful antitrust suit to block the deal, an absence of state participation they say is a rare occurrence. 

For example, states weighed in on the Comcast-NBCUniversal deal--though Justice did not sue to block the meld.

The state AGs said the district court's decision that DOJ's case against the deal was without merit validated the absence of State support for the suit.

Related: AT&T Says DOJ's Fragile Case Against Time Warner Merger Doesn't Hold Up

They said the appeals court now hearing the DOJ challenge to the district court decision should affirm the lower court.

“State attorneys general play an important role in merger antitrust enforcement, and none joined DOJ’s effort to block our merger," said AT&T general counsel David McAtee. "Now, we are honored that a bipartisan group of these enforcement officials have affirmatively stepped forward in support of the District Court’s decision rejecting DOJ’s claims.”

Joining the brief were Wisconsin AG Brad D. Schimel (R); Kentucky AG Andy Beshear (D); Alabama AG: Steve Marshall (R); Georgia AG Christopher Carr (R); Louisiana AG Jeff Landry (R); Oklahoma AG Mike Hunter (R); New Mexico AG Hector H. Balderas (D); South Carolina AG: Alan Wilson (R); and Utah AG Sean Reyes (R).

AT&T has already closed on the deal.

AT&T chairman and CEO Randall Stephenson played the role of proud content parent at an industry conference Wednesday, patting his own HBO premium channel on the head while tweaking the nose of rival Netflix, calling the SVOD pioneer the “Walmart” of video streaming.

"HBO is a very, very unique asset," Stephenson said at the Goldman Sachs Communacopia Conference Sept. 12. "I think of Netflix kind of as the Walmart of SVOD; HBO is kind of the Tiffany. It’s a very high-end brand for premium content."

AT&T finalized its purchase of HBO parent Time Warner Inc. in June, and the telco has been vocal in its plans to increase audience engagement with its new content assets.

WarnerMedia chief John Stankey has spoken previously about increasing programming investments at HBO, which currently spends about $2 billion year on original programming. Netflix, in contrast, spends about $8 billion on original shows.

Stephenson echoed Stankey’s strategy, adding that the idea is to spend wisely.

“You’d like to fill out the schedule with a lot of other premium content,” Stephenson said. “We’re not talking about Netflix-like investments. Something that retains the quality of the brand, retains the quality of the content, but just gives a little more fulsome lineup and schedule of content.”

Stephenson called HBO chief Richard Plepler a “master” at identifying and programming this type of content.

“He is very bullish to have a modest amount of additional investment that he can really begin to do what we’re talking about here,” Stephenson said of Plepler. “This is not about getting to Netflix-level of content investment on HBO itself, but really just kind of filling out the schedule.”

The AT&T chief didn’t put a number on how much HBO’s budget would increase, but said the additional funds would mostly come from synergies in putting together the businesses.

“There’s a lot of opportunity at Warner Media to mine out some overhead costs,” Stephenson said.

While AT&T continues with its integration of the Time Warner assets, the federal government is gearing up for its appeal of the court ruling that gave the greenlight to the deal. The U.S. Dept. of Justice had argued that the AT&T–Time Warner union violated anti-trust regulations and would lead to higher prices for content. A federal court disagreed, clearing the path for the merger in June. The DOJ decided to appeal that decision in July. 

Stephenson said he was confident of AT&T’s position in the appeal, adding that it is the burden of the government to prove that the previous ruling was incorrect. He added that he expected the litigation to wrap up in January or February of 2019, adding that the company is not sweating out a decision.

“The transaction is closed,” he said. “We are about executing on Time Warner integration. The integration is going quite well. The teams are spending zero effort thinking about the appeal.”

AT&T didn’t take long to step up to the plate with regards to improving inclusion and diversity efforts within its new WarnerMedia division, pledging Wednesday to commit to further diversifying its future TV, movie and digital projects both in front of and behind the camera.

Three months after completing its $108.7 billion purchase of Time Warner – which includes cable networks TNT and HBO – AT&T released a policy statement outlining WarnerMedia’s commitment to diversity and inclusion. Among the policy's initiatives, WarnerMedia says that in the early stages of the production process, “we will engage with our writers, producers and directors to create a plan for implementing this commitment to diversity and inclusion on our projects, with the goal of providing opportunities for individuals from under-represented groups at all levels.”

WarnerMedia will launch its initiative with Michael B. Jordan’s Just Mercy Warner Bros. Pictures project. Jordan (HBO's Fahrenheit 451) has already adopted inclusion riders for new projects within his production company Outlier Society.

“Inclusivity has always been a no-brainer for me, especially as a black man in this business. It wasn’t until Frances McDormand spoke the two words that set the industry on fire — inclusion rider — that I realized we could standardize this practice,“ he said. “The WarnerMedia family has introduced an approach that accomplishes our shared objectives, and I applaud them for taking this enormous step forward.”

In its policy statement, WarnerMedia says it has a “historic and proven commitment to diversity and inclusion … but there is much more we can do.”

Indeed, in a 2017 Directors Guild Of America survey, The Warner Bros. Companies and HBO ranked sixth and seventh among the top 10 largest TV studios in hiring women and minority directors.

WarnerMedia CEO John Stankey said the diversity policy is the “next logical step to improve our content and cement our leadership in contributing to positive change in the industry.”

Added Warner Bros Chairman and CEO Kevin Tsujihara: “I’m proud that Warner Bros. and our sister companies, HBO and Turner, are willing to state unequivocally that this is where we stand on diversity and inclusion. Our policy commits us to taking concrete action to further our goals, to measure the outcomes and to share the results publicly.”

The industry will certainly be monitoring WarnerMedia’s progress. As the company states: "it is essential that our content and creative partners reflect the diversity of our society and the world around us."

The full policy statement reads as follows: 

WarnerMedia companies, Warner Bros., HBO and Turner, have long been committed to diversity and inclusion as moral and business imperatives. It is essential that our content and creative partners reflect the diversity of our society and the world around us. Together with other production companies, networks, guilds, unions, talent agencies and others in the industry, we all must ensure there is greater inclusion of women, people of color, the LGBTQ+ community, those with disabilities and other underrepresented groups in greater numbers both in front of and behind the camera.

For our part, WarnerMedia pledges to use our best efforts to ensure that diverse actors and crew members are considered for film, television and other projects, and to work with directors and producers who also seek to promote greater diversity and inclusion in our industry. To that end, in the early stages of the production process, we will engage with our writers, producers and directors to create a plan for implementing this commitment to diversity and inclusion on our projects, with the goal of providing opportunities for individuals from under-represented groups at all levels. And, we will issue an annual report on our progress.

The companies of WarnerMedia have a historic and proven commitment to diversity and inclusion. But there is much more we can do, and we believe real progress can be made in the industry. We will work with our partners in the entertainment community to make this commitment a reality.

The U.S. Department of Justice has given a heads up on its plans to appeal the June U.S. District Court decision that paved the way for the completion of AT&T’s $108.7 billion merger with Time Warner, claiming in a court filing that the presiding judge in that case ignored “fundamental principles of economics and common sense,” in approving the deal.

U.S. District Court Judge Richard Leon ruled on June 12,  after a six-week trial that the government had failed to prove its case that the merger would not be in the public interest.

Related: AT&T Completes Time Warner Purchase 

AT&T completed its merger with Time Warner two days later, on June 14, but agreed to hold the Turner assets, including CNN, TNT and TBS, separately until Feb. 28, 2019, in case the Justice Department decided to launch an appeal.

Leon had urged the government not to appeal his decision, but on July 12, Justice said it would seek to have his ruling overturned. 

In a brief filed with the U.S. Court of Appeals for the District of Columbia Circuit Monday, Justice said that most vertical mergers are pro-competitive or competitively neutral, but AT&T-Time Warner is different in that it would meld a top programmer and distributor.

“This merger’s combination of Turner’s competitively significant programming content with the vast distribution footprint of DirecTV, among other circumstances, makes this the exceptional vertical merger whose effects are to lessen competition substantially,” DOJ said in its filing.

DOJ had argued in the past that the merger would allow AT&T to substantially raise prices, would increase the potential for programming blackouts and would give AT&T an advantage over other distributors. All of those arguments were rejected by Judge Leon.

Related: Justice Pushes for Expedited AT&T-Time Warner Arguments 

But DOJ said the Judge failed to recognize a fundamental principle of business: that companies would do everything possible to maximize profits.

“The district court’s determination that Time Warner would not exercise increased bargaining leverage post-merger also erroneously rejected evidence that a merged AT&T-Time Warner would maximize profits of the firm as a whole by imposing higher programming costs on rival distributors,” DOJ said in the filing. “The court’s analysis rested on a fundamental misunderstanding of the principle of corporate-wide profit maximization: it treated the principle as a question of fact that must be proved ‘reasonable’ in light of the record evidence.”

AT&T has vowed to fight the appeal, and in a statement showed no signs of giving up the battle.

“Appeals aren’t ‘do-overs,’” said AT&T general counsel David McAtee in a statement. “After a long trial, Judge Leon weighed the evidence and rendered a comprehensive 172-page decision that systematically exposed each of the many holes in the Government’s case. There is nothing in DOJ’s brief today that should disturb that decision.”

AT&T is expected to file its own brief with the D.C. Circuit by Sept. 20. Both sides are scheduled to submit final briefs in October, at which time oral arguments would begin. 

AT&T told analysts late Tuesday just what is up its sleeve regarding its just-completed $108.7 billion Time Warner merger, and it’s fairly simple: grow revenue and the profits will follow.

The trick though, is how to go about doing that.

According to chairman and CEO Randall Stephenson, the path toward profits winds through the millions of customers, viewers and users of AT&T properties, ranging from DirecTV, DirecTV Now, wireless and broadband services, which he numbers at about 170 million relationships, and the literally hundreds of millions of unique viewers of its digital properties. On a conference call to discuss second quarter results, Stephenson noted that cnn.com alone has 200 million unique viewers per month. Tack on other similarly-viewed digital properties from Otter Media and Bleacher Report and the opportunities abound.

Related: AT&T Nearing Deal to Buy All of Otter Media: Report

On the call, Stephenson talked of the new advertising opportunities through the Turner and Time Warner relationship. He noted that when AT&T delivers ads on DirecTV, its yields improve three-to-five times.

“Turner has an ad inventory that's three times the size of our DirecTV inventory, and as we apply the same data to that inventory, we expect a significant lift,” Stephenson said. “You take these three elements -- premium content, 170 million direct-to-consumer relationships and great ad technology -- and then you combine those with our high-speed networks, and we think all of this is a game changer.”

On the content side, WarnerMedia CEO John Stankey said he isn’t concerned with scale and content, but he does want content that scales. I guess that means the goal is to get its shows in front of more people.

Stankey took some heat from a New York Times article earlier this month that cast a Town Hall meeting he had with Turner and HBO employees in a somewhat unfavorable light. Some of his comments – particularly those that likened the media business to childbirth and his assertion that while HBO makes money, it doesn’t make enough – turned out not to be as bad as originally thought (he was apparently laughing when he made the HBO profit comment). On the conference call, Stankey said the reports didn’t “effectively characterize what we are about.”

What WarnerMedia is about, he said, is driving engagement.

“We have a tremendous amount of great projects already in the funnel that as the HBO team and Richard [Plepler, HBO chairman] would describe it, they have not been in a position to say yes to because of constraints on certain resources,” Stankey said.

He added that the goal is to remove constraints from top-quality projects to balance out the schedule to drive engagement on HBO throughout the year.

“That will improve the fact that we can see, especially on the digital platforms, you have customers jumping in and out based on scheduling,” he said. “And if we can smooth that schedule, we can drive churn down or improve retention and power additional subscriber growth.”

Part of that includes ramping up HBO’s programming spend, currently at around $2 billion, or about one-fourth the $8 billion Netflix spends. Stankey wouldn’t be specific as to just how much HBO’s programming budget will rise, but said AT&T could reinvest some of the efficiencies it gets from the merger and by running the business differently.

Related: Netflix Investing 85% of New Spending on Originals 

Stankey said while HBO and Turner properties have created a number of initiatives that are good in their own right, they have relatively small audiences compared to a company the size of AT&T, which he said needs to generate tens of millions of viewers, not millions.

The way to do that, he added, is through togetherness.

Stankey said WarnerMedia’s brands are plenty strong on their own, but not as powerful as they could be if they banded together.

“You can assemble the genre of content and bring them together on one platform and one experience that aggregates and gets scale,” Stankey said, adding that over time the company will unify brands into a more consistent and more focused experience, which will in turn increase scale.

But some analysts see a real problem with the belief that you can ramp up spending, and drive engagement but still offer your product below cost.

In a research note, MoffettNathanson principal and senior analyst Craig Moffett wrote that while it’s nice to say you want to drive engagement, offer content across platforms and create more stuff, it’s not so easy to do that when you’re losing money on the distribution platform.

AT&T’s DirecTV satellite service has been bleeding customers for months – it lost about 286,000 customers in Q2. While its OTT service DirecTV Now gained about 342,000 subscribers (it has a total of 1.8 million customers, compared to DirecTV’s 19 million), that service is priced substantially lower than what it charges for the satellite service. DirecTV Now has also been bundling HBO for free in some of its packages and it offers a free Apple TV device to new subscribers. Moffett called the DirecTV Now subscriber gains a “pyrrhic victory.”

Although Turner had a good Q2 – ad revenue rose 3% and total revenue increased 6.3% -- Moffett isn’t sure it will last long. There is a risk that Turner’s growth rate cold fall sharply in the next round of affiliate renewals --- it’s last deals were heavily front loaded because of sports. And while AT&T said it was encouraged by increased advertising opportunities, Moffett’s colleague Michael Nathanson has written that TV ads are shrinking for the first time in a non-recession.

And when it comes to togetherness, the analyst hopes that is not code for heavy discounting under the guise of bundling.

“With DirecTV, AT&T’s bundling strategy has amounted to little more than giving customers more for less,” Moffett wrote, adding that may have helped with churn in the wireless division, it decimated the satellite company’s profitability. Moffett estimated that DirecTV’s cash flow declined 16.8% in Q2.

“They started giving away HBO even before they owned it,” Moffett continued. “That inflated HBO’s growth rate when [Time Warner] was a standalone company, but it won’t help now that it’s inside AT&T.”  

AT&T chair and CEO Randall Stephenson, a day after the U.S. Dept. of Justice said it would appeal a federal court decision that helped clear the path to its merger with Time Warner Inc., told CNBC Friday morning that the DOJ’s action could affect another potential mega-media merger: Comcast’s pursuit of 21 Century Fox assets.

Related: DOJ to Appeal AT&T-Time Warner Merger 

Comcast was expected to raise the ante again for certain Fox programming and studio assets pledged to The Walt Disney Co. Comcast had outbid Disney’s original $52.4 billion equity offer for the assets in June with a $65 billion all-cash proposal, only to be bested by another cash and stock offer from Disney worth $71.3 billion. The DOJ approved the Disney deal on June 27. 

Speaking to CNBC’s Squawk Box on Friday from the Allen & Co. conference in Sun Valley, Idaho, Stephenson said the DOJ’s plans to appeal the Time Warner purchase came as little surprise, adding that it probably isn’t great news for Comcast’s pursuit of Fox.

“[It] probably can’t help it,” Stephenson told CNBC, according to a transcript. Stephenson said he didn’t want to speculate on the government’s motives for appealing his merger, but said it could affect the Comcast-Fox “process.”

Related: AT&T, Time Warner Cleared to Merge 

“You’re in a situation where two entities are bidding for an asset, and this kind of action can obviously influence the outcome of those actions,” Stephenson said. “But who knows whether that’s behind us.”

The AT&T chief stressed that the appeal process – which he speculated could take five-to-six months to complete -- will have no effect on the way AT&T and Warner Media run their businesses.

“This changes nothing,” Stephenson said. “This changes nothing we’ll be doing over the next 30 days or the next 12 months. We’re about executing our plan. We think the likelihood of this thing being reversed and overturned is really remote. It’s a very narrow path that would have to be traveled to get this thing reversed in any way. So we’re about executing our plan. The merger is closed. We own Time Warner.”

Related: AT&T Completes Time Warner Purchase 

Stephenson said as part of the original agreement, AT&T would run Warner Media separately and independently, and the company has no intention of changing that.

“I mean, when you have content players who are both suppliers and customers, you just have an obligation to treat them that way anyway,” Stephenson said. “So this changes nothing about how we operate the business. It changes nothing about products we will launch. It changes nothing about other M&A we need to do like Appnexus.”

Related: AT&T to Acquire AppNexus as Start of TV Ad Marketplace

And while the AT&T chief said the appeal could pose some problems for Comcast-Fox, he doesn’t see the same chilling effect on other potential mergers.

“If [I] were a CEO looking at media acquisitions and deals, I don’t think I would be looking at them today any differently than I did yesterday,” Stephenson said. “I think this is a process that will play itself out. But I think there is such a slim chance of this thing being altered in some way that it wouldn’t affect my thinking much at all.

But he added that most other companies shouldn’t have been looking to the AT&T-Time Warner ruling as a regulatory template in the first place, because Judge Leon’s ruling was so specific to that transaction.

AT&T has come under fire lately over how it would run Warner Media, specifically a Town Hall meeting with HBO employees where Warner Media chief John Stankey appeared to want the premium network to be more like Netflix. Stephenson said that Stankey’s message of increasing engagement is a strong one. 

“At the end of the day that’s what this is all about, engaging the consumer,” Stephenson said. “Because the more engagement you have, the more opportunity you have to create value.”

More engagement could mean “pumping more content into HBO,” but it also means spreading it across AT&T’s other digital properties like DirecTV Now, WatchTV and online sites like CNN.com.

Still, the AT&T chief said the company is aware of the potential for culture clashes between Warner and other AT&T units, but added he wasn’t concerned about it.

“I’m conscious of it and we’re being very, very careful and mindful of that.” Stephenson said. “The way we’ve organized the business, it will be run separately, very independently. It’s important that we preserve the culture.” 

A month after a federal judge squashed the U.S. Dept. of Justice’s attempt to block the $108.7 billion AT&T-Time Warner merger, the agency appears to be going ahead with an appeal to again challenge the deal.

In his June 12 ruling, U.S. District Court Judge Richard Leon said the government failed to prove its argument that the deal would lead to higher prices for content for both consumers and other service providers, and urged the DOJ not to appeal. But just weeks after Judge Leon’s ruling, AT&T raised the price of its DirecTV Now service by $5 per month, a move that DOJ could possibly use to prove its earlier point. 

Related: AT&T Completes Time Warner Purchase 

In its two-page notice filed with the U.S. District Court for the District of Columbia, DOJ simply stated its intention to appeal Judge Leon's ruling.

"Notice is hereby given that the United States of America, plaintiff in the above named case, hereby appeals to the United States Court of Appeals for the District of Columbia Circuit from the final judgment entered in this action on June 12, 2018," DOJ said in its filing. .

In a statement, AT&T said it is ready for the latest stage of what has become a lengthy legal battle.

“The Court’s decision could hardly have been more thorough, fact-based, and well-reasoned," AT&T General Counsel David McAtee, said in a statement. "While the losing party in litigation always has the right to appeal if it wishes, we are surprised that the DOJ has chosen to do so under these circumstances. We are ready to defend the Court’s decision at the D.C. Circuit Court of Appeals.”

While the appeal will set the stage for a second round of legal proceedings, it isn’t yet known if the agency will take a different path in its appeal. Some analysts have suggested that Justice might focus on how the combination of a major programmer and an ISP could pose a more serious antitrust risk. 

“The AT&T-Time Warner transaction is a bad deal for consumers and competition," said Public Knowledge Senior counsel John Bergmayer. "Since it has gone forward, AT&T has already raised prices for its DirectTV Now video service, more than doubled the mysterious ‘administrative fee’ it tacks on to most of its wireless bills, and raised the price of some of its wireless plans while removing the HBO subscription that it had previously included. Judge Leon’s decision contained numerous errors, and we believe the DOJ’s position should be vindicated.”

Turner has tapped former AT&T executive Peter Knag as EVP and chief financial officer, reporting to WarnerMedia CFO and Turner administrative officer Pascal Desroches, who was elevated to that position shortly after the merger of AT&T and Time Warner Inc. was completed.

Related: AT&T Completes Time Warner Purchase

“This is an important time of transition for Turner, as the merger with AT&T will allow us to innovate even more quickly and create more value for fans, distributors, content creators and advertisers,” Desroches said in a statement. “Peter was instrumental during the integration process, and I am confident that he will continue to bring his expertise and leadership abilities to the Turner portfolio in this role.”

Knag was previously the vice president of AT&T merger planning, leading financial planning and analysis for the AT&T-Time Warner integration process. Prior to that role, he was managing director of corporate development for AT&T. Prior to joining AT&T, Knag worked for Lehman Brothers and First Albany Corp.

AT&T chairman and CEO Randall Stephenson, a day after closing its $108.7 billion merger with Time Warner, stopped by CNBC’s Squawk Box Friday morning, adding that the coming battle for Fox assets between Comcast and the Walt Disney Co., may not have the same luck with regulators.

AT&T, after a 20-month journey, finally closed its merger with Time Warner on Thursday night. The purchase will give the telco access to top-tier content, which it plans to package in innovative offerings like its planned AT&T Watch product.

Stephenson said there will be more on the AT&T Watch product next week, and he added that there also could be smaller tuck-in acquisitions in the company’s future as it goes forward with its entertainment strategy. 

“Those are the kinds of things we are going to bring to market,” Stephenson said, adding that they will be ad-supported and recent hire, former Group M executive Brian Lesser, who heads up a new advertising and analytics business, will help develop a “significant” ad platform. “You should expect some smaller, not like time warner, but some smaller M&A in the coming weeks to demonstrate our commitment to that.”

Related: AT&T-Time Warner Cleared to Merge 

While Stephenson answered the typical “how does it feel” questions – not surprisingly he said it feels pretty good – but sidestepped inquiries about his feelings about the ongoing Comcast-Disney-Fox deal, adding he believes it may not have the same luck with regulators.

Related: Comcast Makes All-Cash Bid for Fox Assets 

“I’m not going to say anything publicly because if I say I think the deal makes sense and ought to be approved, people are going to say, ‘See, it’s anti-competitive,’” Stephenson said on the show, according to a transcript. “And if I say it should be killed, they will say, ‘Well, then it’s a deal that ought to be done.’ So I’m going to remain quiet as it relates to what our views of it are. We’re not going to engage in terms of either advocating or contesting the deal. I think they have an interesting road ahead of them in terms of the approval process. I wish them Godspeed.”

Related: Disney Pulls Fox Trigger 

Stephenson added that because the Fox deal would be a horizontal merger – a competitor would be taken out of the industry (Fox), it will get “just an extra level of scrutiny because of that.”

The AT&T chief said he was relieved that the approval process was finally over and that AT&T can now focus on integration and execution. But he did say the lengthy process did teach him a few things.

“I’ve learned a lot about our legal system in the last six to seven months, grinding through this and so forth,” Stephenson said. “When you get into this process, the facts and circumstances about a particular deal is what matters. And on this particular case, AT&T and Time Warner, it was the facts and circumstances surrounding our deal that were evaluated and were adjudicated so I don’t know how transferable a lot of this is to the next deal. That will be up to the Department of Justice and those companies to sort out. But this one was very specific and the process was specific to our situation.”

Stephenson added that he wasn’t sure whether Disney or Comcast would ultimately win the Fox assets, but he said both have their reasons for wanting more content.

“I think they both have very logical reasons for wanting to own this business,” Stephenson said. They’re not much different than ours. I mean, what do you want? You want extensive premium content. You want extensive direct to consumer relationships. And in a Comcast situation, they want international capabilities. With Latin America, we have the largest pay TV business in Latin America. So pairing Time Warner with that and giving ourselves great international capabilities is great. So I’m kind of ambivalent as to which way it goes. …We’re going to run our play, and I think what they’re doing and what they’re pursuing just reinforces a play we’re running. We think we’re on the right path and we want to get there first. So I’ll let them go fight their own legal battles and let them fight to get the prize for Fox. We’re going to go execute our play.”

Just two days after receiving the green light from U.S. District Court Judge Richard Leon, AT&T said it has completed its $108.7 billion purchase of Time Warner.

"The content and creative talent at Warner Bros., HBO and Turner are first-rate. Combine all that with AT&T’s strengths in direct-to-consumer distribution, and we offer customers a differentiated, high-quality, mobile-first entertainment experience,” AT&T chairman and CEO Randall Stephenson said in a statement. “We’re going to bring a fresh approach to how the media and entertainment industry works for consumers, content creators, distributors and advertisers.”

Related: AT&T-Time Warner Cleared to Merge

Judge Leon approved the deal without conditions on June 12.  AT&T had originally planned to complete the transaction by June 20, but a decision by the DOJ not to seek a stay of the Judge’s order helped accelerate that timetable.

Related: AT&T: DOJ Won't Seek Stay of Deal

AT&T first announced its agreement to purchase Time Warner in October 2016, creating a distribution and content juggernaut with more than 20 million pay TV subscribers, movie and TV studio production and cable networks including CNN, TBS, TNT and HBO. About 20 months later, weathering criticism from the current President of the United States and an attempt to block the deal on anti-trust terms from the Department of Justice, the deal is complete.

In a statement, AT&T said the business will consist of four segments, each which will operate independently:

• AT&T Communications: Providing mobile, broadband, video and other communications services to U.S.-based consumers and nearly 3.5 million companies.
• : Comprising HBO, Turner and Warner Bros. Together, these businesses had revenues of more than $31 billion in 2017. A new name for this business will be announced later.
• AT&T International: Providing mobile services in Mexico to consumers and businesses, plus pay-TV service across 11 countries in South America and the Caribbean. It had revenues of more than $8 billion in 2017.
• AT&T’s advertising and analytics business: Providing marketers with advanced advertising solutions using customer insights from AT&T’s TV, mobile and broadband services, combined with extensive ad inventory from Turner and AT&T’s pay-TV services. A name for this company will be announced in the future.

AT&T added that former Time Warner chairman and CEO Jeff Bewkes has agreed to remain with the company as a senior advisor during a transition period.

“Jeff is an outstanding leader and one of the most accomplished CEOs around,” Stephenson said in a statement. “He and his team have built a global leader in media and entertainment. And I greatly appreciate his continued counsel.”

As previously announced, leading the four businesses and reporting to Stephenson will be:

· John Donovan, CEO of AT&T Communications;

· John Stankey, CEO of AT&T’s media business;

· Lori Lee, CEO of AT&T International and Global Marketing Officer of AT&T Inc.; and,

· Brian Lesser, CEO of AT&T’s ad and analytics business.

All of Bewkes’ direct reports will now report to John Stankey. 

The Department of Justice won't seek a stay of the court decision approving the AT&T-Time Warner merger, according to a document from AT&T's lawyers obtained by B&C/Multichannel News, which means the company can close the deal as early as Friday (Update: The deal actually closed late Thursday, June 14)..

DOJ waived the post-ruling waiting period for such a stay, which would have delayed the closing.

The letter, from AT&T attorney Daniel Petroccelli to the Department of Justice's antitrust division, it is the company's understanding that DOJ has no objection to closing the merger ASAP, including by week's end, and won't seek a stay.

Judge Richard Leon had said he would not issue a stay in an event. That apparently does not mean DOJ won't appeal, but only that it won't seek the stay that could have held up the closing, which has to happen by Thursday, June 21, or AT&T pays a $500-million break-up fee.

The judge did not apply any conditions on the deal, but AT&T confirmed to Justice that, after the deal, it would manage Turner nets as a separate business unit form AT&T Communications (DirecTV and U-verse), that AT&T Communications won't have a role in setting Turner prices or terms with unaffiliated distributors, and that Turner would not consult with AT&T Communications in setting those prices.

AT&T also said that the number of Turner employees will remain "largely unchanged," as will compensation levels.

AT&T said that beyond managing Turner separately, it would create a firewall between Turner and AT&T Communications to prevent "the transmission or exchange, either directly or indirectly, of competitively sensitive information of unaffiliated programmers or distributors. It defines that information as "contract terms, pricing or negotiations."

Comcast formalized an offer to purchase certain 21st Century Fox assets once pledged to The Walt Disney Co., committing $65 billion in cash for the properties and touching off what could be a lengthy bidding war.

Comcast said in May that it was prepared to make a “superior” all-cash bid for the Fox assets. 

On Wednesday (June 13) one day after U.S. District Court Judge Richard Leon approved the other mega-deal in the media space – AT&T’s $108.7 billion purchase of Time Warner -- Comcast made good on that promise.

"We have long admired what the Murdoch family has built at Twenty-First Century Fox," Comcast said in a letter to Fox's board of directors Wednesday. "After our meetings last year, we came away convinced that the 21CF businesses to be sold are highly complementary to ours, and that our company would be the right strategic home for them."

The offer values the Fox assets at about $35 per share, a 19% premium to the Disney deal.

Related: AT&T-Time Warner Cleared to Merge 

Comcast had been waiting on a favorable decision in the AT&T-Time Warner deal before launching its bid. In addition to the Fox assets, Comcast also has a $31 billion offer on the table for British satellite TV company Sky, which is 39% owned by Fox. With the two deals, Comcast has committed more than $100 billion to the Murdoch family, the founders and largest shareholders of both Fox and Sky.

Related: Comcast’s Manifest Destiny 

The addition of Fox’s cable channels FX, FXX and National Geographic; movie and TV production studio 20 Century Fox; 21 regional sports networks; and its 30% interest in Hulu would add to Comcast’s existing content assets, housed within NBCUniversal. Coupled with NBCU’s NBC broadcast network and 14 cable channels – including Bravo, USA Network and Syfy – the deal makes the already largest cable operator in the country -- with 22 million video and 25 million high-speed internet customers – into a formidable content player.

A successful Fox bid would also put a huge debt burden on Comcast, increasing its leverage to $164 billion, according to Moody’s Investors Service, second only to AT&T-Time Warner.

While Roberts has fired the first shot, the battle is far from over. Disney is expected to make an aggressive effort to keep intact the Fox deal it reached in December. That deal, now valued at about $68 billion, will likely be sweetened with additional cash. The question is, which side will blink first.

Related: Flurry of Deals Expected in Wake of AT&T-Time Warner 

Both Roberts and Disney chair and CEO Bob Iger are staking their reputations on this deal. Although a consummate negotiator, Roberts has gotten the stiff-arm twice before – the 2004 play for Disney that was rejected by shareholders and a 2015 deal for Time Warner Cable that was abandoned after it was clear it wouldn’t pass regulatory muster.

Regulatory issues aside – and there are issues – Comcast sees the Fox and Sky assets as a way to diversify its holdings both online and internationally.

Related: AT&T-Time Warner Merger Approval Draws Crowd 

The deal would give Comcast control of two sizable content and distribution assets inside the U.S. (online video service Hulu) and outside (U.K. satellite-TV giant Sky).

Hulu, the online service partly owned by Disney (30%), Fox (30%), Comcast (30%) and Time Warner (10%), about a year ago launched Hulu Live, a virtual multichannel video programming distributor that now has about 800,000 customers. That’s in addition to the Hulu SVOD service, which boasts around 20 million customers.

Getting Fox’s 30% interest in Hulu would give Comcast 60% control of a national OTT distribution arm — it would likely try to buy out Disney and Time Warner at a later date — and could position the cable operator nicely for any changes that may come in the distribution business.

Adding Fox Networks International, Sky and Star India, Fox’s pay TV network in India, would also lessen the blow of increasingly intense competition in the U.S. by boosting Comcast’s international exposure from 9% of total revenue to 25%.

“It really comes down to who wants Fox and Sky the most and who is willing to take leverage up beyond their historical comfort zone, particularly as the winning bid is likely to be all-cash or cash-heavy,” BTIG media analyst Rich Greenfield wrote in a recent blog post. "Disney has never been in a bidding war, whereas Comcast has. However, we have a really hard time seeing Iger ending his career in defeat to Comcast and then simply retiring after the loss (damages his legacy). On the other hand, we cannot imagine Brian Roberts as an owner who is looking out 30+ years losing the last major chess piece on the game board that he covets, especially to Disney. That is not the storybook ending Roberts wants either.”  

Because a Comcast deal would combine two studios (Fox and Universal), it would likely get some extra antitrust scrutiny. Robert McDowell, former Republican FCC commissioner, has said the same in reference to a Disney-Fox deal, which would also combine major programming assets.

But, at least on the FCC side, three deregulatory Republicans see a fiercely competitive market for video distribution from both traditional distributors and massive edge players, and tend toward allowing companies to scale up to do battle in that space.

The deal would certainly get a lot of pushback in Washington from consolidation critics still smarting over Comcast-NBCU, likely including smaller cable operators who already say the combination of Comcast with NBCU's programming assets is causing them competitive harms.

Putting an exclamation point on such distribution and programming combinations, at least for consolidation critics, was last week's elimination of net-neutrality rules, which they say will free up powerful players to favor their own online programming. Comcast has said it does not block, throttle, prioritize for pay or favor its own content -- all pledges the Federal Trade Commission can enforce (though critics note they are also positions it could change given that the bright-line rules against all of those practices have been eliminated).

The AT&T-Time Warner deal approval may well break the dam of pending M&As, but Judge Leon was simply one judge in one circuit. It would likely take a decision on appeal, if Justice appeals the case, to create wider precedent for how courts would treat such mergers. However, Judge Leon warned against looking beyond the facts of this specific merger to draw wider conclusions.

Consolidation critics were taking aim at the deal .

"Comcast thinks the time is ripe for deal-making, but the public will quickly sour on this proposal," said Public Knowledge Research Director S. Derek Turner. "We simply don't need the country's biggest cable company and broadband provider controlling even more content and taking even more of our money every month.“If approved, the 21st Century Fox takeover would saddle Comcast with a whopping debt load. There’s every reason to believe that internet and pay-TV rate hikes would follow this deal, as Comcast exploits its dominant position to gouge its competitors and customers alike.”

"Comcast’s bid to buy 21st Century Fox in the immediate wake of a federal judge’s approval of the AT&T-Time Warner merger is a catastrophe in the making," said Demand Progress director of communications Mark Stanley "With the FCC’s order gutting net neutrality protections going into effect this week, the door has been kicked wide open for giant internet providers like Comcast and AT&T to block and discriminate against online content."

John Eggerton contributed to this story

MoffettNathanson principal and senior analyst Craig Moffett downgraded AT&T to “sell” from “neutral” a day after its blockbuster deal to acquire Time Warner was approved, adding the transaction will do little to right what has been a faltering ship.

U.S. District Court Judge Richard Leon approved the AT&T-Time Warner deal on Tuesday, urging the U.S. Dept. of Justice not appeal his decision and setting the stage for a June 20 completion of the deal. But Moffett said after a nearly two-year process, Time Warner can provide a short-term cash flow boost to the new company, but it won’t be enough to stem what has been years of bleeding.

Related: AT&T, Time Warner Cleared to Merge

The new AT&T will carry a tremendous debt load -- $249 billion, according to Moffett’s estimates (if AT&T were a country, its debt would be between Indonesia and the United Arab Emirates) – that will have to be supported by shrinking cash flow. Moffett also lowered his 12-month price target on AT&T stock to $28 per share from $35 per share.

In a research note, Moffett said the problem isn’t Time Warner as much as the rest of AT&T’s business. Video distribution revenue – basically DirecTV – fell 6.2% in the last quarter and consumer broadband revenue is down 3.2%. Wireless revenue is down 1.7% and commercial wireline, which Moffett said is a business about as big as Time Warner itself, is down 3.3%.

On the cash flow side, EBITDA at the Entertainment Group was down 19% and fell 5.2% in the wireless segment. Moffett said a lot of that is self-inflicted – AT&T has been an aggressive bundler of products, in some cases heavily discounting services – but he added there are no signs that any of the pressures on AT&T’s business segments will ease soon.

“Time Warner is but a small bucket with which one might bail out a sinking ship,” Moffett wrote. 

Comcast is expected to touch off a bidding war with the Walt Disney Co. for certain 21 Century Fox assets as early as tomorow, the first shot in what is expected to be a full-on fusillade of deals in the wake of federal approval of AT&T’s $108.7 billion purchase of Time Warner Inc.

U.S. District Court Judge Richard Leon issued his decision late Tuesday, rejecting the U.S. Dept. of Justice’s efforts to block the AT&T-Time Warner deal, and impose no conditions. According to reports, Judge Leon urged the government not to seek a stay of his decision. AT&T said it expects to close the deal by June 20, the day before the merger agreement was set to expire. 

"We are pleased that, after conducting a full and fair trial on the merits, the Court has categorically rejected the government's lawsuit to block our merger with Time Warner," AT&T said in a statement. "We thank the Court for its thorough and timely examination of the evidence, and we compliment our colleagues at the Department of Justice on their dedicated representation of the government. We look forward to closing the merger on or before June 20 so we can begin to give consumers video entertainment that is more affordable, mobile, and innovative."

Related: AT&T-Time Warner Cleared to Merge 

Comcast had already made public its intention to go after the Fox assets – which includes cable channels FX, FXX and National Geographic, 20 Century Fox studios and 21 regional sports networks. In May, fearful that Fox and Disney would try to push a deal through before the AT&T-Time Warner decision was rendered, Comcast said it was in the “advanced stages” of making a “superior” all cash bid for the Fox properties.

Related: Comcast Considers All-Cash Offer for Fox Assets 

Most analysts believe Comcast will make good on that promise on Wednesday, with some estimates putting the bid at around $78 billion, including assumed debt, which would be about $10 billion sweeter than the Disney offer. Disney also has the right to increase its bid and is expected to do so vigorously, so the climate is right for a bidding war.

As the battle for Fox rages on, other smaller content companies will face increasing pressure to add scale. Discovery, which merged with Scripps Networks Interactive earlier this year, could seek out even more properties to beef up its content coffers. CBS and Viacom, locked in a boardroom battle over recombining those assets, could see a way toward a merger, or seek out additional scale. And standalone programmers like AMC Networks, Hallmark Channel and others could find themselves scrambling for partners. Lionsgate Entertainment, which purchased premium channel Starz in 2016 for $4.4 billion, could be a likely consolidator or a target itself.

Investors seemed to think so too. Lionsgate stock was up 9.5% ($2.28 each) to $26.49 per share in after-hours trading. Discovery stock increased 5% ($1.13) to $25.15 per share; CBS gained 3% ($1.55) to $53.93; Viacom was up 2.5% (71 cents) to $29; and AMC Networks gained 1.4% (84 cents) to $62.48 per share. Comcast investors, anticipating a Fox offer, drove shares down 3.7% ($1.19 each) to $31.20 in after hours trading. Disney shares fell 1.5% ($1.50) to $102.80 per share.

Media stocks were lukewarm in early trading Tuesday, with AT&T slightly up and Time Warner shares down marginally, as Judge Richard Leon’s decision concerning their $108.7 billion merger drew nearer.

AT&T shares were priced at $34.51 each early Tuesday, up 33 cents or about 1%. Time Warner shares were down 52 cents (0.6%) each to $95.65 per share as the deadline loomed.

The rest of the media sector was equally tepid -- Viacom shares were up 0.18% (5 cents); Disney rose 0.4% (43 cents) and Fox was up 1.4% (57 cents) -- in earlier trading. 

Judge Leon is expected to deliver his decision at 4:30 p.m. today. Depending on how that decision goes, it could either open the floodgates to more media mergers or put a firm clamp on any big content deals for the foreseeable future.

Most analysts are expecting Judge Leon to find in favor of the AT&T-Time Warner deal, albeit with some conditions. As long as those conditions are reasonable – they don’t involve major asset divestitures like DirecTV or the Turner networks – the merger could close as early as June 18.

A completed AT&T-Time Warner merger would give the green light to other deals – Comcast is expected to be first out of the gate with an all-cash bid for 21 Century Fox assets currently pledged to The Walt Disney Co. At its annual meeting of shareholders yesterday, Comcast chairman and CEO Brian Roberts reiterated the company’s ability to make a counter offer for the Fox properties, telling investors the cable giant was in the “advanced stages” of putting together a deal.

That would likely touch off a bidding war between Disney and Comcast for Fox, which could last as long as either has the stomach to continue.

In a note Tuesday morning, Moody’s Investors Service VP Neil Begley wrote that recent tax reform measures could boost Disney’s free cash flow – and its ability to add more cash to its Fox bid – by about $2 billion.

"We believe this increase in free cash flow from tax reform provides more cushion for Disney to either get leverage back to well below 2.25x within 24 months of the close of the acquisitions of Fox & Sky or to raise its bid if necessary because of a potential competing bid from Comcast,” Begley wrote. “Comcast is also benefiting from the TJCA. Over the longer-term, we anticipate that Disney will earmark a portion of this newly found annual free cash flow towards increased share repurchases and dividends over time. With that being said, we also expect the company to increase its capital expenditures spending which should lead to increased EBITDA, thus benefiting bondholders."

In a research note BTIG media analyst Richard Greenfield predicted that both Roberts and Disney chairman and CEO Robert Iger are likely to dig in their heels to win the Fox asset, which should be beneficial to Fox. 

“We continue to believe Rupert Murdoch and the [21 Century Fox] Board of Directors are keenly focused on the highest bid for Fox’s assets that can pass regulatory approval, regardless of whether that is the current Disney bid, Comcast’s coming bid or even other third-party bids,” Greenfield wrote. 

The Department of Justice signaled it is OK with a D.C. district court accepting a brief from smaller cable operators offering a compromise resolution to the AT&T-Time Warner merger.

That wasn't a huge surprise given that DOJ, which sued in that court to block the deal, also said its antitrust division generally doesn't oppose amicus briefs in district courts.

DOJ also said it was not weighing in on whether the ACA/RCN proposal would be "helpful to the court at this time," beyond saying it disagreed that behavioral conditions, as ACA/RCN proposed, "were appropriate in this case."

But it at least gave the submission credit for being on point.

"Unlike the two prior motions for leave to file amicus briefs, which the Court denied, the proposed RCN/ACA filing does appear to be relevant to the issues to this case, as the Court requested input with respect to alternative remedies, DOJ told the court.

Earlier this week, smaller cable operators pitched the court on a hybrid structural/behavioral remedy that could make the AT&T-Time Warner merger palatable to them.

The brief, from the American Cable Association, RCN Telecom, Grande Communications Networks, and WaveDivision Holdings, was filed Monday (May 14).

That court is currently deciding whether to block or condition the proposed merger after the Justice Department filed suit to block the deal unless AT&T spins off Turner programming assets.

The Justice Department had asserted that without spinoffs of Turner networks, the merger would mean substantially less competition and thus higher prices for consumers.

The companies argued that to make their case, the government had to prove that the merger "will likely (not potentially or possibly) lessen competition substantially, in a video marketplace that is experiencing revolutionary, unstoppable transformation and growth in competition at all levels."

The operators are not taking either side in their amicus brief, though they say they are assuming, as does Justice, that the deal as structured violates antitrust laws by "enabling the merged entity to raise prices for its programming to ACA members in excess of those that would occur in a competitive market."

They argue that the case divides along all-or-nothing positions while their's is a "middle ground," and that the court has more flexibility than DOJ or AT&T-Time Warner suggest to strike such a compromise.

Justice says that if the court concludes the deal violates antitrust laws, it can only consider DOJ's structural remedies to fix it, while Turner has offered up behavioral conditions of outside arbitration and standstill agreements for any program access complaints.

ACA and company say both are wrong, that the Turner remedy is underwhelming, and that the court can fashion a remedy that employs a behavioral remedy in addition to or in lieu of structural conditions.

That remedy would be to apply the arbitration and standstill agreements to all programming of the post-merged company, including Time Warner's HBO, tweak the arbitration process, ensure the use of bargaining agents and fee-shifting, prevent retaliation against rivals' subs, and permit the remedy itself to be tweaked or extended.

While its ultimate fate hangs on whether U.S. District Court Judge Richard Leon believes its $108.7 billion merger with AT&T is in the public interest or the biggest affront to consumer protections in recent memory, Time Warner Inc., showed that it can still hold its own separately, with revenue up a modest 3% in Q1 while net income rose a strong 15%, due mainly to tax reform.

Judge Leon is expected to rule on the AT&T-Time Warner antitrust case in the next several weeks – the trial is currently in the rebuttal phase and should be completed before the end of April. Closing arguments were scheduled for Monday, April 30. Judge Leon has said that the trial must conclude before the end of this month if the parties want his decision to be rendered before their self-imposed deadline for the deal of June 21. 

While AT&T and Time Warner executives have testified that the deal is essential to their collective survival, both seem to be weathering the earthquakes of change in the media business – AT&T reported first quarter earnings Wednesday night, adding 312,000 new customers to its over-the-top product DirecTV Now, offsetting losses in its traditional satellite and IP video offerings. 

At Time Warner, overall revenue was up 3% to $8 billion fueled by gains at Home Box Office and Turner. Operating income fell 13% to $1.8 billion and adjusted operating income dipped 8% to $2 billion due to declines at all the company’s segments.

Net income increased 15% in the period to $2.07 per share, although about 49 cents of that performance was due to tax reform and the settlement of a federal tax audit.

On the TV side, revenue at Turner was up 8.3% to $3.3 billion, fueled by an 8% gain in subscription revenue. Ad sales were up 9% in the period, due mainly to a strong showing by the NCAA Men’s Basketball Tournament (March Madness). At HBO, revenue increased 3.3% to $1.6 billion in the quarter. Adjusted operating income at Turner was down 5% $1.13 billion and dipped 10% at HBO to $535 million in the period.

At its Warner Bros. division, revenue fell 4% to $3.2 billion and adjusted operating income was down 25% to $383 million, due to lower television and theatrical sales.

Time Warner managed to maintain its full-year guidance – it expects adjusted operating income to rise in the high-single digits company-wide, with mid-single digit increases in subscription revenue at Turner.

“We’re off to a strong start to 2018 and we remain on track to meet the financial goals we laid out at the beginning of the year, as we continue to execute our strategic objectives, including investing in and delivering the most compelling content to audiences around the globe and across platforms,” Time Warner chairman and CEO Jeff Bewkes said in a statement. “We look forward to the resolution of the legal challenge to our pending merger with AT&T and remain excited about the benefits of the merger, such as the potential to further strengthen our businesses by accelerating our innovation and increasing our ability to connect more directly with consumers.”

AT&T chairman and CEO Randall Stephenson pretty much stayed on message in his testimony in the ongoing federal antitrust trial concerning AT&T’s pending merger with Time Warner Inc., stressing that the deal is necessary for the distribution giant to continue to compete effectively against over-the-top providers.

Stephenson also dismissed government suggestions that AT&T would use Time Warner content, which includes CNN, HBO, TBS, TNT, Cartoon Network and others, as a club to force higher prices for programming or to lure subscribers to other pay TV services to AT&T.

Stephenson’s testimony followed that of Time Warner chairman and CEO Jeffrey Bewkes, who told the court Wednesday that government claims the combined entity would force higher prices or exclusivity were “ridiculous.”

According to reports, Stephenson said he viewed the Time Warner agreement as a “vision deal” that would help the company compete against emerging OTT providers like Netflix and Amazon. The Time Warner deal is a big shift in strategy for the company into the content arena, a move Stephenson said the company has to make quickly.

“We knew we had to have scale,” he said, according to Variety. 

Stephenson was the second AT&T executive to take the stand in the trial in as many days. Late Wednesday AT&T senior EVP of AT&T-Time Warner integration planning John Stankey, dismissed the government’s fear that the combined entity could join with fellow vertically integrated entertainment company Comcast to withhold content from rival distributors. Stankey said that wouldn’t make good business sense and given AT&T’s many battles with Comcast in the past, was extremely unlikely.

“I’m not going to cooperate with someone I don’t like,” Stankey said of Comcast, according to Bloomberg. “We don’t want to cooperate with Comcast and play their game.”

AT&T and Time Warner will have to wait at least another day to begin the defense of their proposed merger in a D.C Court.

Judge Richard Leon rescheduled opening arguments from Wednesday (March 21) to Thursday due to the predicted snowstorm. He has also rejected a request by former Justice officials to make possible Presidential interference part of the trial.

DOJ v. AT&T/TW: Battle Lines Drawn

The Justice Department is suing to block the deal, arguing that without spin-offs or programming assets it violates antitrust laws, giving the combined company the incentive and opportunity to raise prices and reduce competition from competing distributors.

AT&T/TW have offered to accept baseball style arbitration of any program carriage disputes and say there is no reason to expect the company to withold programming, like HBO or college basketball or CNN, from the many distributors that pay for that programming, and whose payments comprise much of the value they are placing on the deal.

Leon has rejected a request by some former Justice Officials to reconsider his earlier decision not to force the White House and Justice Department to produce records of communications between the two as part of the case.

They were, and are, concerned the Trump Administration may have "interfered" in DOJ's vetting of the AT&T-Time Warner merger and say, if so, it was likely unconstitutional selective enforcement and a violation of the First Amendment.

Candidate Trump said his administration would block the deal if he were elected.

Then-candidate Donald Trump signaled he thought the merged company would be too big--Time Warner owns CNN, one of the news outlets Trump has accused of teaming up with Democrats to undermine him--and said his administration, if he were elected, would block the deal.

AT&T and Time Warner have already told the court they think it is selective enforcement.

AT&T-Time Warner will be able to include its arbitration proposal as evidence that the deal would not de facto mean its distribution rivals would have to pay higher prices for must-have Turner programming like HBO or March Madness.

That is according to a ruling from Judge Richard J. Leon, who is presiding over the trial, scheduled to begin March 19--oral argument begins March 21, with unresolved motions being dealt with the first two days.

The Justice Department is suing to block the deal, saying it would raise prices and reduce competition because the combined company would have the incentive and opportunity to withhold must-have programming--HBO, March Madness--from rivals.

DOJ's analysis of the deal had not factored in that arbitration offer when projecting price increases, says AT&T. Justice had asked the court to exclude that arbitration offer as evidence.

DOJ had asked the court to exclude the evidence, saying it would "waste trial time and confuse the proceedings" debating "whether defendants will adhere to their unilateral Arbitration Offer or any new unilateral promises made by defendants at trial, or their impact on the analysis of the Transaction." Justice also said that if the evidence were included, it should only be to inform the court about possible remedies when it found the deal violated antitrust laws."

The proposal was to offer competing distributors outside arbitration when Turner carriage deals expire—and promised no carriage negotiation blackouts for seven years—if its acquisition of Time Warner goes through.

AT&T/Time Warner said that the arbitration offer was just one of the reasons why the government's claim of a theoretical 45-cent increase in the average monthly pay-TV bills for U.S television consumers was of base.

"The motion concerns just one of those reasons," AT&T/Time Warner said in opposing the motion, [which is] defendants’ irrevocable and legally binding commitment to (1) continue to license the Turner networks to distributors after the merger without any drops in service and (2) resolve disputes about licensing terms through “baseball-style” arbitration (the “Arbitration/No-Blackout Commitment” or “Commitment”). Defendants extended this Commitment to Turner’s current and future distributors in November 2017 as a concrete assurance that this merger has never been about raising the price of Turner content."

AT&T and Time Warner made the case for their merger in a pre-trial brief filed Friday (March 9) with the U.S. District Court for the District of Columbia.

That includes signaling that their lawyers will tell the court--the arguments in court begin March 19--that the business is moving from a TV-centric to an online video-centric model, where its competitors are the vertically integrated online behemoths Netflix, Amazon, and Google, among others.

For example, "as of the end of 2017," the said, "Netflix had approximately 118 million global subscribers and nearly 55 million U.S. subscribers, more than the top six U.S. cable companies combined."

"The transaction before the Court is a vertical merger of two companies that operate in highly competitive environments, but do not compete against each other," the companies told the court....Modern antitrust law recognizes that mergers between suppliers, such as Time Warner, and distributors, such as AT&T, almost always create efficiencies and synergies that lead to lower consumer prices and greater innovation.....There is no fact-based evidence that this merger will harm competition. Nothing will be withheld from competitors; consumer prices will not go up. To the contrary, the government now concedes it would not be profitable for the new company to withhold its television networks from pay-TV distributors and that the new company’s prices to its own television customers will go down. As a result, the government’s suit to block this merger is not only baseless in fact, but it is affirmatively contrary to consumer welfare, making it difficult for the government even to allege a viable antitrust claim, much less prove one."

They assert that the government's own lead economic expert doesn’t think the combined company would withhold Turner networks from competitors because the lost licensing and d revenues would exceed the theoretical gains of denying rivals access to that programming and that the company will reduce its own prices for DirecTV because of the "otherwise unattainable" merger efficiencies.

Or put another way, as the companies do, quoting another case: "Now, what remains of the government’s case, 'like a Persian cat with its fur shaved, is alarmingly pale and thin.'" 

In the first big merger review under the Trump Administration, the Justice Department filed suit last fall to block AT&T's bid for Time Warner and its valuable programming assets in a deal valued at $108.7 billion including debt.

Retired: AT&T/Time Warner Merger Trial Takes Shape

According to Justice, the combined company would "use its control over Time Warner’s valuable and highly popular networks to hinder its rivals by forcing them to pay hundreds of millions of dollars more per year for the right to distribute those networks.  The combined company would also use its increased power to slow the industry’s transition to new and exciting video distribution models that provide greater choice for consumers, resulting in fewer innovative offerings and higher bills for American families."

Justice wants AT&T to spin off the Turner programming assets, arguing they give the combined company the incentive and opportunity to disfavor competitors.

AT&T and Time Warner have signaled such a spinoff is unnecessary and a nonstarter.

Vrio, a holding company that houses AT&T's DirecTV Latin America assets, filed an S-1 registration statement with the Securities and Exchange Commission to spin off a minority interest in the unit to the public, a move that could raise as much as $100 million.

AT&T had been hinting about a spin-off of the Latin American unit for months – earlier this month it said it was exploring its options concerning an initial public offering. The move is expected to help AT&T pay off some of the debt associated with its pending $108.7 billion purchase of Time Warner Inc.

Vrio, which AT&T formed in October 2017 specifically to hold its DirecTV Latin American interests, is expected to trade on the New York Stock Exchange under the symbol “VRIO.” The number of shares that will be issued and the timing of the IPO hasn’t yet been determined.

AT&T is currently gearing up for a legal battle with the U.S. Department of Justice over the Time Warner purchase. If the deal gets approved – the Justice Department has already moved to block the deal, and a trial is scheduled to start March 19 on the matter – AT&T’s debt load would balloon to about $180 billion.

AT&T’s entertainment business in Latin America mainly consists of its DirecTV Latin America satellite TV service. DirecTV Latin America has about 13.6 million subscribers and includes a 93% interest in Sky Brasil, the largest satellite company in the strongest economy in the region and Pan Americana, which includes operations in Chile, Argentina, Columbia, Venezuela and Puerto Rico. AT&T has toyed with the idea of selling the unit in the past. A Reuters report last year said it was exploring a sale of the assets, which were valued at the time at about $8 billion.

Goldman Sachs & Co. LLC, J.P. Morgan Securities LLC, Citigroup Global Markets Inc. and Morgan Stanley & Co. LLC will act as the joint book-running managers for the IPO.

Subscribers to HBO Now and other direct-to-consumer OTT options from HBO offered through streaming distributors such as Amazon and DirecTV Now have surpassed 5 million, according to multiple reports.

That more than doubles the 2 million OTT subs that HBO had accumulated when Time Warner disclosed that figure about a year ago.

RELATED: Bewkes: HBO Now Tops 2M OTT Subscribers

HBO added five million domestic subscribers for all of last year, with Q4 revenues rising 13%, to $1.7 billion (including a 16% rise in subscriber revenues), according to The Wall Street Journal. The WSJ, citing an HBO exec, was also among the news outlets reporting the updated 5 million streaming subscriber figure for HBO. 

RELATED: Time Warner Reports Higher 4th Quarter Earnings

HBO Now launched on April 7, 2015, for $14.99 per month. Amazon started to pitch HBO subscriptions to Prime customers in late 2016. DirecTV Now, AT&T’s OTT TV service, has been offering HBO as a premium add-on, for $5 extra per month, since its launch in November 2017. 

A flurry of mega deal announcements late in the year didn’t help programming stocks that much in 2017, as the sector rose just 4.1% for the year, while distribution stocks, despite continued pressure from over-the-top competition, managed another year of double-digit percentage growth.

Despite an acceleration in pay TV subscriber losses in the third quarter – about 827,000, compared with 559,000 in the prior year – distribution stocks rose 12% for the year, fueled by strong growth at Charter Communications. Charter, the target of intense takeover speculation earlier in the year – none of those deals have come to fruition – rose 17% for the year, closing at $335.96 per share on Dec. 29.

That, coupled with steady growth at Comcast (16%), Liberty Global (17.2%) and Cable One (13%), offset declines at the two newest stocks in the sector. Altice USA, the domestic cable arm of European telecom giant Altice N.V., went public in May and fell about 35% by the end of the year, mainly dragged down by leverage concerns at the parent company. Overbuilder Wide Open West tapped the public markets in June, but dipped about 36% for the year, closing at $10.57 each on Dec. 29, as competitive concerns weighed on the stock.

Still, cable distributors gave back a big chunk of their gains earlier in the year when Comcast and Charter both reported subscriber losses in the third quarter. Comcast had warned investors that it would lose between 100,000 and 150,000 customers in Q3 due to Hurricane Harvey, as well as “competitive issues.” It ended up losing 125,000 video customers in the period, and broadband growth was slower than expected. Charter lost about 104,000 video customers in Q3 – more than twice its losses in the prior year.

Those losses affected the stocks – Comcast fell 7% in September after Comcast Cable EVP of XFinity Services Matt Strauss mentioned a shortfall was coming, and never quite recovered. If the year had ended on Sept. 6, Comcast would have finished up 19.2%. The same would have been true for Charter – its shares fell 8.3% on Oct. 26 when it announced Q3 results. The day before, Charter was on a pace to finish the year up 20%.

Distributor stocks rose nearly 40% in 2016, mainly on deal activity and speculation that more consolidation was to come. While 2017 wasn't the deal free-for-all that some may have expected, Pivotal Research Group CEO and senior media & communications analyst Jeff Wlodarczak said changing investor attitudes and tax reform are driving shares.

“Investors are transitioning to more of a higher data monetization, wireless market share, still solid overall financial growth and increasingly large capital return strategies,” Wlodarczak said. “At the end of the day I think we are in the seventh inning of the transition for cable.”

Neither sector matched the growth of the so-called FANG stocks – Facebook, Amazon, Netflix and Google – which rose a combined 46.8% for the year. Amazon, which plans to spend about $6 billion on programming in the coming year, rose the most, rising 56% for the year from $749.87 to $1,169.47 each. Netflix was a close second, rising 55.1% from $123.80 to $191.96 each, while Facebook gained 53.4% from $115.05 to $176.46 per share. Google gained the least but still beat cable’s best, rising 35.5% from $771.82 each to $1,046.20 per share by year’s end.

The Walt Disney Co.’s Dec. 14 announcement of its plan to purchase core assets from 21st Century Fox was the cap for what had been a strong deal year in the programming sector. In July, Discovery Communications announced its long-awaited purchase of Scripps Networks Interactive in a transaction valued at about $14.6 billion.

But those deals were just barely enough to push the sector into the black for the year. Overall, programming stocks were up 4.1%, perhaps weighed down by uncertainties surrounding the other mega-deal in the sector, AT&T’s $108.7 billion purchase of Time Warner Inc.

AT&T had expected to close the Time Warner deal by the end of the year, and for most of 2017 looked to be on track to meet that goal. But as the year wore on, rumblings that the Department of Justice would look unfavorably on the deal began to grow, culminating in a DOJ lawsuit in November to block the deal on anti-trust terms. AT&T has vowed to fight the suit, and is scheduled to have its day in court in March.

Whatever the outcome, the roller-coaster approval process has played havoc with the stocks. AT&T shares were down 8.6% for the year, closing on Dec. 29 at $38.88 each. Time Warner’s decline was softer, dropping 5.2% to close at $91.47 on Dec. 29.

Pay TV stocks remained stable in the wake of Federal Communications Commission chief Ajit Pai’s moves to dismantle Title II classification of broadband providers, keeping a promise he made when he took office earlier this year.

Related: FCC Moving to Repeal Bright-Line Net Neutrality Rules

For the most part, stocks in the cable distribution sector were flat. Comcast rose 1.7% and Charter was up less than 1% for the day.

Pai has long opposed so-called net neutrality, a set of regulations under the 2015 Open Internet order and imposed by Pai's predecessor, Tom Wheeler. Wheeler, who was named FCC chair in the Obama Administration, called Pai’s recent moves “a tragedy,” according to reports.

But cable and telco broadband service providers have opposed the rules from the start, arguing that they are already doing much of what the regulations mandate on their own. And while Pai’s moves could allow broadband companies to throttle back some websites and charge for priority speeds or treatment, they would have to disclose when they are doing that even under the new rules. Perhaps that, and the fact that Pai’s stance on the regulation has never been a secret, led to the relatively tepid market reaction.

Related: House Republicans Say They'll Work for Permanent Net-Neutrality Rules

Comcast closed at $36.42 per share, up 59 cents each or 1.7%, while Charter Communications finished the day at $338.51, up 14 cents each or 0.04%. Altice USA shares fell 1.9% (38 cents each) to $20.10 each.

Telcos Verizon Communications, down 2 cents (0.04%) to $46.18 and AT&T, which Monday (Nov. 20) revealed the Department of Justice filed suit to block its merger with Time Warner Inc., fell 31 cents each (0.89%) to $34.33 per share.

On the content side, Viacom rose 4.2% ($1.12) to $27.27 each; Time Warner rose $1.85 each (2.1%) to $89.56 per share, The Walt Disney Co. rose 25 cents (0.24%) to $103 each and 21st Century Fox increased 22 cents (0.7%) to $30.88 per share. AMC Networks rose 71 cents (1.4%) to $50.55 per share and Discovery Communications, in the middle of the regulatory approval process for its $14,6 billion purchase of Scripps Networks, fell 12 cents each (0.7%) to $17.24 per share.

Tech stocks like Google, Amazon, Facebook and Netflix were relatively flat as well. Facebook was up the most – 1.75% or $3.12 each to $181.86 –followed by Google, up 1.6% ($16.13 per share) to $1,034.51; Amazon up 1.2% ($13.28 each) to $1,139.59; and Netflix, up 1.1% ($2.12 each) to $196.22 per share.

AT&T vowed to fight the U.S. Department of Justice’s move Monday to block its $108.7 billion merger with Time Warner Inc., adding that the government has no legal grounds to stop the deal, which has been slogging through the federal anti-trust approval process for more than a year.

“We are going in to this to win,” AT&T chairman and CEO Randall Stephenson told reporters in a press conference Monday night. “We are very confident and we intend to win.”

Stephenson said on the call that AT&T has “offered concrete and substantial solution” and will continue to offer them to get the deal closed. He declined to say what those solutions were.

AT&T first announced its agreement to acquire Time Warner in a deal valued at $85 billion ($108.7 billion including debt) on Oct. 22, 2016. At the time, the companies believed the deal would take about a year to complete.

The deal would combine the largest distributor – AT&T with about 25 million pay TV customers – and the second largest content provider. Time Warner includes the Warner Bros. movie studios, and Turner Networks including content brands like CNN, Home Box Office, Cartoon Network, TNT, TBS and TCM.

AT&T had been confident that because the merger was a vertical combination – neither company has any competing businesses – it would have easily moved through the approval process. But that became less clear shortly after the deal was announced, when then-presidential candidate Donald Trump said he would block the deal if he were elected.

When Trump did win the election, business leaders believed he would back off on his promise and let the deal through. But Trump has battled with CNN since becoming President – he regularly calls the network “fake news” – and it became clearer in the past month that the deal may face some resistance from the government.

Stephenson had contended earlier that CNN divestiture was never put on the table as a condition of the deal, but he again said at the Monday press conference that selling the network was not an option.

“There has been a lot of reporting and speculation whether this is all about CNN,” Stephenson said. “Frankly, I don’t know. But nobody should be surprised that the question keeps coming up, because we witnessed such an abrupt change in the application of antitrust law here. The bottom line here is we cannot and we will not be party to any agreement that would even give the perception of compromising the First Amendment protections of the press. Any agreement that results in us forfeiting control of CNN, whether directly or indirectly, is a non-starter. We believe quite strongly that any divestiture of AT&T assets or Time Warner assets is not required by the law. We have no intention of backing down from the government’s lawsuit.”

Earlier this month, newly appointed Assistant Attorney General Makan Delrahim, head of the DOJ’s anti-trust division, had hinted that he would apply structural conditions rather than behavioral conditions to mergers, and word leaked to several news outlets that the government would seek a divestiture of either Turner or DirecTV to get the deal approved.

Related: Makan Delrahim Lays Groundwork for Divestiture

In a statement, Delrahim said the merger would “greatly harm American consumers. It would mean higher monthly television bills and fewer of the new, emerging innovative options that consumers are beginning to enjoy.”

AT&T has argued all along that the DOJ has no precedent to stop the merger – neither AT&T nor Time Warner compete in any business and the deal would mot remove a top competitor from the industry.

“Today’s DOJ lawsuit is a radical and inexplicable departure from decades of antitrust precedent. Vertical mergers like this one are routinely approved because they benefit consumers without removing any competitor from the market. We see no legitimate reason for our merger to be treated differently,” AT&T Senior EVP and General Counsel David McAtee II said in a statement. “Our merger combines Time Warner’s content and talent with AT&T’s TV, wireless and broadband distribution platforms. The result will help make television more affordable, innovative, interactive and mobile. Fortunately, the Department of Justice doesn’t have the final say in this matter. Rather, it bears the burden of proving to the U.S. District Court that the transaction violates the law. We are confident that the Court will reject the Government’s claims and permit this merger under longstanding legal precedent.”

Now the DOJ will have to prove that the deal violates anti-trust law. That won’t be easy. The DOJ hasn’t successfully blocked a vertical merger in 50 years. And the last time it attempted to block a vertical deal – U.S. v. Hammermill Paper Co. in 1977 – it was rejected by the court.

But the government was successful during the Nixon Administration of blocking Ford Motor Co.’s purchase of Autolite, one of two independent sparkplug manufacturers in the country at the time. The government was successful in that case because it involved static technologies, high concentration levels and barriers to entry, according to AT&T.

“In contrast AT&T and Time Warner are both in wildly competitive, fluid and innovative industries with new entrants on a daily basis,” AT&T said in a statement. “Neither company has market power.”

But the lawsuit could delay the process long enough for both parties to call it a day and walk away from the transaction – much like Comcast did in 2015 when it discovered the DOJ would contest its merger with Time Warner Cable. While this merger is different – Time Warner Cable was the second largest distributor in the country and the combined company would have huge dominance in broadband nationally – some have argued it would place too much power in once company’s hands.

The government has cited one case where its opposition helped scratch a big deal – Semiconductor maker Lam Research’s failed purchase of KLA Tenecor in 2016. AT&T argued that the DOJ did not officially file a suit to block that deal, but like the Comcast-TWC merger, let it be known that it would oppose the union. The parties simply walked away from the deal. And that may be the DOJ’s whole point.

But at least for now, AT&T seems adamant about having its day in court.

“Voluntary abandonment is not precedent,” AT&T argued in a statement. “No court decided anything because there was no case.

Daniel Petrocelli, retained counsel from O'Melveny & Myers for both AT&T and Time Warner said at the press conference that he does not expect the suit to drag on in the courts.

“This is not a case that is going to drag on for months and months,” Petrocelli said, adding that he was hopeful a trial could proceed in as early as 60 days. “The DOJ will be hard pressed to tell the court they are not ready.”

AT&T cited hundreds of vertical mergers that have been approved by DOJ since the Ford deal, including 2011’s merger of Comcast and NBC Universal. While that deal was loaded with conditions –many of which will expire next year, speculation has been high that the DOJ believes it may have missed the boat on that deal, allowing Comcast to amass too much content power. According to some observers, the agency doesn’t want to make the same mistake with AT&T-Time Warner.

But whatever the government feels about big deals – one worry is that AT&T would make some content from Time Warner exclusive to its own distribution properties – it may have little choice. AT&T claims there

“The critical and uncontested fact is that this merger neither eliminates any competitor nor increases concentration in any market,” AT&T said in a statement.

Media watchdog groups had been opposed to the deal from the start, but have expressed some trepidation over the reports that the action could be at least in part motivated by the President’s own bias toward CNN. Many have said that would create a dangerous precedent.

“Blocking this merger is the right thing to do — and we hope the Justice Department is doing it for the right reasons,” Free Press CEO Craig Aaron said in a statement. “This deal would give AT&T way too much power to undercut competitors and raise costs on TV viewers and internet users everywhere.

“…It’s refreshing to see the Justice Department doing something about this deal,” Aaron continued. “However, we remain very troubled by President Trump’s threats to punish outlets like CNN that have aired critical coverage of the administration. The Justice Department must demonstrate that Trump’s saber-rattling has nothing to do with this suit. It could start by giving the same level of scrutiny to other mega-deals like Sinclair’s proposed merger with Tribune. But the bottom line is that the public would be best served if this merger is scrapped.”

Time Warner shares were down by about 1% on Nov. 20 and were priced as low as $87.15and as high as $88.50 in after-hours trading.

Some observers have warned that the DOJ action could put a chill on future media mergers, especially those involving companies that have been critical of the president. Stephenson agreed.

“I would suggest that this lawsuit has the whole world questioning what they will, can and cannot do,” Stephenson said. This throws a huge degree of uncertainty to anybody contemplating joint ventures, anybody contemplating M&A. That’s one of the key concerns about this. To take suddenly without any notice and just upturn 50 years of precedent on a transaction like this can have nothing but a freezing effect on commerce in general.”

New York – Liberty Media chair and cable legend John Malone stood before a rapt, standing room-only audience at his company’s annual investors meeting here Thursday, telling analysts and investors that politics appears to be clouding what once was expected to be a more streamlined merger approval process.

Malone didn’t mention AT&T-Time Warner by name, but the chances of that merger passing regulatory muster have been under a cloud in recent weeks, as reports have said the government could move to block the deal if certain assets like CNN aren’t divested.

Related: Missed Connection for AT&T-Time Warner?

“I personally have very little insight into what the Antitrust Division is smoking these days,” Malone joked at the investor meeting. “Normally, verticals [mergers] have always been regarded as pretty straightforward, low-risk. To the degree politics gets into it, it becomes difficult to predict.”

Malone said that he hasn’t experienced much push back from regulators in his own business, although he added that the approval process for Discovery Communications’ (of which Liberty is a major shareholder) purchase of Scripps Networks Interactive has taken longer than expected.

“It has been a little bit delayed, more than I would have guessed,” he said.

Read More: Complete Coverage of the Discovery-Scripps Deal

But Malone still believes that smaller content companies, so-called “free radicals,” will be able to combine with little resistance from the government. But he said the current regulatory environment could be spurred by Justice Department officials wanting to rectify perceived misses in the 2011 approval of Comcast-NBC Universal. Comcast agreed to about 150 conditions for that deal, most of which expire in the middle of next year.

But those conditions were largely behavioral, centering on ensuring that Comcast did not favor its own networks more than others in terms of carriage and that it made those network available to all distributors.

“We have a new Antitrust Division, the FCC has gone more flexible, more capitalistic,” Malone said, adding that he wasn’t sure what the department’s concerns may be. “The only noise I picked up is that the professionals at Justice were not happy with the behavioral agreements they reached with Comcast on the NBC Universal deal. So they’re kind of rethinking behavioral versus structural change.”

But he added when Charter, another big Liberty holding, purchased Time Warner Cable last year, the cable operator agreed to “a number of rigorous agreements, some of which the government has voluntarily backed away from.”

Malone said the content business, both on the linear and social media side, appears to be more politically sensitive now than ever.

Liberty Media CEO Greg Maffei put the situation more bluntly, adding that consolidation in the content business is happening because of obvious pressures on the model.

“In my judgment, the traditional linear content business is severely challenged,” Maffei said. “I get the idea that there should be limitations on ensuring Starz [another Liberty holding] for example,  should get carriage on DirecTV. But the content business has gone from 200 original shows five years ago, 450 this year, the cost per hour at least doubled. We’ve seen a 5x increase in content. These guys can’t pay for it, we’re not going to pay for it at Charter, I suspect. Guys like Netflix have an amazingly advantaged model compared to the traditional guys. …The traditional content business is really challenged. The idea that you’re going to block consolidation here is crazy.”

Malone also touched on the wireless business, adding that despite his continued belief that a cable company will eventually acquire or be acquired by a wireless company, Charter’s decision to offer a wireless product through an MVNO with Verizon was the right move.

Malone added that MVNO’s effectively create “more competition instead of less,” and is probably the best way to get into the wireless space.

Malone said he isn’t particularly in love with the wireless business, but over time it becomes an important part of the connectivity picture.

European cable operator Liberty Global already has a strong wireless component and Malone said the synergies are “ultimately enormous.”

Malone was particularly high on Charter’s prospects, adding that cable’s two-way capabilities and broadband business will win the day.

“When you stick stuff out there and don’t have some kind of two-way path with the consumer, how do you know who’s watching, who’s paying?” Malone said. “…The reason got we out of the satellite business when we did was because it’s a one-trick pony – video only, very high ARPU and no return path. It was clearly going to come under assault.”

But Malone added practically every new communications technology, voice, video, internet search, 5G wireless, will need some kind of robust terrestrial network to make the final connections.

“The wind is at our back,” Malone said. “And all this noise about everybody wants to buy Charter, everybody wants to have some deal with Charter, well it’s actually true. It’s a fabulous company. It’s going to go in a great direction.”

Sports Illustrated is once again trying to get into the video business, this time launching a streaming version of Sports Illustrated TV on Amazon Channels.

Amazon Prime members can subscribe to SI TV for $4.99 a month. The channel will be accessible through the Prime Video app on TVs, streaming media players, mobile devices, Amazon Fire TV, Fire TV Stick and Fire tablets or online at Amazon.com/amazonchannels.

Related: Amazon Denies It’s Building Free Version of Prime Video

Sports Illustrated was part of Time Warner before the company spun off its troubled Time Inc. publishing businesses. SI the magazine is cutting its print run to just 27 issues this year.

Time Warner offered a CNN Sports Illustrated cable channel in 1996, but the network was unable to get enough distribution amid competition from ESPN, Fox and others.

Read  more at broadcastingcable.com.

AT&T chairman and CEO Randall Stephenson continued to hammer home that he would not sell key assets to facilitate regulatory approval of his pending deal to buy Time Warner, adding that if the agency rejects the merger, he’s ready to go to court.

“We would have to ask ourselves, is a negotiated settlement a better or worse outcome than if we litigate,” Stephenson said at the New York Times Dealbook conference Thursday. “If we feel like litigation is a better outcome, then we would litigate. If we can get a negotiated settlement, for time, and energy and money you would obviously go with a negotiated settlement.”

But he added that if the government wants to go to court, he hopes it will be soon.

“If we’re going to go to litigation, our preference would be sooner is better,” Stephenson said. “We’re prepared to litigate now.”

Stephenson seemed to chafe most at reports he had offered to sell news network CNN, the object of President Donald Trump’s unwavering consternation, to get the deal done. He added that he has not personally received any pressure from the government to sell the cable news network.

But while the emphasis has been on CNN, early reports on problems with approvals centered on DOJ requesting AT&T sell Turner Broadcasting, CNN’s parent, not just the network.

“Selling CNN makes no sense in the context of what we are trying accomplish,” Stephenson said. But when asked if he would sell DirecTV instead, he hedged a bit, adding that conversations with the DOJ are highly confidential.

“What gets discussed inside that room is highly privileged. I cannot go there,” he said. It’s so important that when you’re in these kind of negotiations with Justice, that they remain confidential because you can’t have open and candid conversations about a negotiated settlement if everything is leaking. What happens inside that room needs to stay inside that room.”

But later, he reiterated that he has no intention of selling any large assets to appease the DOJ.

“You shouldn’t expect us to sell something larger [than CNN],” Stephenson said, adding that pairing Time Warner's content with DirecTV's distribution is a key component of the deal. “It’s illogical. It’s why you did the deal. To suggest selling some of the key franchises makes no sense.”

Reports have suggested that President Trump is pressuring the DOJ to force a sale or spin-off of CNN, a network that he has repeatedly called “fake news.” At the Dealbook conference, CNN’s Reliable Sources host Brian Stelter asked Stephenson from the audience if he had any reason to believe that the problems the deal is facing at the DOJ are being caused by the President’s interference.

“I have no reason to believe that,” Stephenson said. “My only interaction with anybody in the federal government on this deal, has been with the Department of Justice.”  

AT&T CEO Randall Stephenson shot back at reports that claimed the U.S. Department of Justice said the telco had offered to sell CNN to clear the path toward approval of its pending merger with Time Warner, issuing a statement that AT&T has no intention of selling the network.

“Until now, we’ve never commented on our discussions with the DOJ,” Stephenson said in a statement Wednesday (Nov. 8). “But given DOJ’s statement this afternoon, it’s important to set the record straight. Throughout this process, I have never offered to sell CNN and have no intention of doing so.”

Earlier Wednesday, a report in the The New York Times said DOJ would require a divestiture of either Turner Broadcasting, which includes CNN, or DirecTV as a condition of the deal. It was the latest in what has been a growing sense that the merger, once thought to be a shoo-in for approval, may face more hurdles. 

Prior to that, AT&T chief financial officer John Stephens had said at the Wells Fargo Media & Telecom Conference that the timing for the deal’s approval was “now uncertain.”

The path to an AT&T-Time Warner merger got even murkier Wednesday after The New York Times reported that the U.S. Department of Justice would seek a divestiture of either Turner Broadcasting or DirecTV as a condition for its approval of a deal.

UPDATE (4:15 p.m.):AT&T’s Stephenson: 'No Intention' to Sell CNN

The Times, citing sources familiar with the companies, said the DOJ has asked that AT&T sell either Turner Broadcasting – Time Warner's group of cable channels that includes CNN, the news network President Donald Trump has repeatedly accused of airing “fake news” – or DirecTV, the satellite TV giant that AT&T purchased in 2015.

The possible conditions of the merger would appear to remove any purpose for doing the deal. When it announced the pairing in October 2016, AT&T said the inclusion of the Time Warner cable channels would fuel future over-the-top video offerings. DirecTV also is a core part of that strategy, with its more than 20 million pay TV subscribers. Its programming deals also were the foundation for AT&T’s over-the-top service DirecTV Now, which currently has about 1.5 million subscribers.

Once thought to be a relative shoo-in for regulatory approval – neither company has overlapping businesses – the path toward the finish line has been less clear in recent weeks. Earlier today, AT&T chief financial officer John Stephens said the timing of the Time Warner deal’s approval, once expected before the end of the year, is “now uncertain.”

AT&T said it had no comment on the Times story. But in a statement today, AT&T came out in support of President Trump’s tax plan, which is facing stiff resistance in Congress, stating that it will invest an additional $1 billion in its U.S. operations in 2018 if the plan currently before the House is signed into law.

“With a rate of 20% combined with provisions for full expensing of capital expenditures for the next five years, we’re prepared to increase our investment in the United States,” AT&T CEO Randall Stephenson said in a statement. “If the House bill is signed into law, we’d commit to increase our domestic investment by $1 billion in the first year in which the new rates are in place. And research tells us that every $1 billion in capital invested in telecom creates about 7,000 good jobs for the middle class.”

AT&T and Time Warner will most likely sue if the government puts such onerous conditions on the deal.

Candidate Donald Trump had threatened that a President Trump's Justice Department would block an AT&T/Time Warner deal as too much consolidation.

But a condition requiring a spin-off of CNN, which is part of Turner, would bring the President's attacks on the news media into play since CNN has been the President's favorite whipping-outlet in Tweets slamming it as fake news, though it has plenty of company including the New York Times and Washington Post and broadcast network news operations.

Even deregulatory Democrats have warned against blocking or hobbling the deal if it is seen as retribution for news coverage the President disagrees with.

An AT&T source said, without comment on whether the report about Justice was accurate, that the company’s lawyers could find no legal justification for requiring a CNN spin-off.

Given that, if Justice did sue to block the merger without a spin-off, AT&T might just take its changes and litigate the suit.

Justice can’t nix a merger, but it can file suit to block it in court as a violation of antitrust laws.  That case is harder to make with a vertical merger like AT&T—primarily combining distribution and content assets—than other combos.

Time Warner shares were down 5.5% ($5.20 per share) to $89.46 each in afternoon trading, while AT&T shares were down 12 cents each (0.4%) to $32.95 per share.  

Washington Bureau Chief John Eggerton contributed to this report

Time Warner Inc. shares took a nosedive Thursday after the Wall Street Journal reported that the U.S. Dept. of Justice is considering filing a lawsuit to block the content company’s planned merger with AT&T.

Time Warner shares were down more than $6 each (6.2%) to $92.31 per share in early trading Thursday as reports surfaced that the deal, expected to be closed by the end of the year, may encounter a hiccup. The shares closed at $94.70 each, down 3.75% or $3.69 per share.

AT&T announced the deal in October 2016, a $108.7 billion (including assumed debt) pairing that would combine the largest pay TV distributor in the country with the second largest content creator. Time Warner owns the Warner Bros. movie studios and iconic networks like HBO, TBS, Cartoon Network and CNN.

While President Trump had said during his election campaign that he would block the deal, mainly because of what he believed was CNN’s harsh treatment of him, most in the cable business expected the deal to be approved with few or no conditions. AT&T executives have said in the past that because the two companies don’t compete, there is little reason to consider the deal to be anti-competitive.

Related > Analysis: DOJ's New Antitrust Chief Keeping AT&T-Time Warner Options Open

“When the DOJ reviews any transaction, it is common and expected for both sides to prepare for all possible scenarios," AT&T said in a statement. "For over 40 years, vertical mergers like this one have always been approved because they benefit consumers without removing any competitors from the market.  While we won't comment on our discussions with DOJ, we see no reason in the law or the facts why this transaction should be an exception.” 

According to a report in the Journal, DOJ is considering filing a suit in the case that it decides to block the merger. The Journal also said there is another faction within the agency that is working with the companies to approving the deal, but with conditions, but those two sides are not close to a compromise.

The Journal added that it is common in deals of this nature for the DOJ to be working on two separate tracks, and stated that in recent years the agency has placed an emphasis on preparing for litigation in case talks break down.

If the DOJ decided to block the deal, it would have to present its case to a judge and prove that the union would harm competition.

AT&T shares were relatively unscathed in early trading, down 5 cents each (0.2%) to $33.50 each.      

AT&T is reportedly inching closer to closing its much anticipated $108.7 billion merger with Time Warner Inc., and according to an excellent article in Vanity Fair that maps out some legitimate fears on the content side concerning the merger, it was revealed that AT&T has a new name picked out for the Time Warner unit. While AT&T is keeping that new moniker tightly under wraps until the merger is officially approved, your humble reporter has come up with a few tongue-in-cheek suggestions. Feel free to add your own in the comments.

AT&T Content & Entertainment Delivery Services:  In keeping with the telco tradition of sucking the life out of brands and relegating them to names that simply convey what they technically do. (For reference, see: Tele-Communications Inc. is now AT&T Broadband & Internet Services).

EIC (Eat It, Comcast): Breaking with earlier said telco traditions, AT&T decides to take the low road, pointing out that it not only bests the largest cable company in terms of total video subscribers (25 million vs. 22 million) it also has a bigger content operation (Time Warner vs. NBC Universal).

TimeDirecTVWarnerWirelessNow: As the mobile, video, satellite and OTT worlds collide, so do their brand names.

TWE: The Deuce: A mash up of one of Time Warner’s former entities – Time Warner Entertainment – and its critically acclaimed series about breaking into the content industry in the 70s, The Deuce. No word on whether Randall Stephenson or John Stankey will be playing a dual role, a la James Franco.

AT&TTW: Another acronym that makes little sense, but probably fits nicely on a hat, mug or other tchotchkes at the HBO store.

Jeff Zucker’s Mother Ship: A mash up of the CNN chief, who has overseen one of the biggest turnarounds in cable with the news network besting Fox News for the  first time ever this year; and a quote from an unnamed CNN executive in the Vanity Fair piece that likens its new corporate overlords to aliens.

Stankey Turner Overdrive: Combining AT&T Entertainment Group chief John Stankey, Turner Networks and Canadian rock group BTO. You Ain’t Seen Nothin’ Yet.

Danaerys Inc.: Taking the name of the Mother of Dragons from its popular HBO show, Game of Thrones invokes power, intelligence, strength and if all else fails, fire.

Courageous: John Malone named Liberty after his yacht, so why can't AT&T name Time Warner after Ted Turner's old boat? The name invokes the new company’s adherence to the values of its past, as well as the value of a buck.

Happy Fun Time Cartoon Video Game Networks: In keeping with the convergence of media, video content and the internet, AT&T decides to name its content unit using popular SEO terms. 

AT&T said it has extended the termination deadline for its planned $108.7 billion purchase of Time Warner Inc. for a “short period” as the deal continues to wind its way through the federal approval process.

AT&T proposed purchasing Time Warner on Oct. 22, 2016, a deal that would combine the largest pay TV distributor in the country with the second largest content producer. At that announcement, the companies anticipated the regulatory approval process would last about one year.

The deal is still being scrutinized by the U.S. Dept. of Justice, but so far the agency has not rendered a decision.

In a filing with the Securities and Exchange Commission Monday, AT&T said it has extended the termination date for the merger for a “short period of time to facilitate obtaining final regulatory approval required to close the merger.”

According to the original deal documents, either party could terminate the transaction if it did not receive the necessary approvals by Oct. 22, 2017, or in the case of specia extensions, by April 22, 2018.

AT&T anticipates it will receive U.S. approval for the deal by the end of this year.

The company added in a separate statement that it has receved its final approval outside of the U.S., from Brazilian anti-trust authority Conselho Administrativo de Defesa Econômica (CADE).

"We appreciate the hard work by CADE to review and evaluate the AT&T-Time Warner merger and approve it based on its benefits to Brazilian consumers," said AT&T senior executive vice president and general counsel David McAtee in a statement.

The approval was made with targeted conditions to address specific issues, but similar to earlier nods the transaction has received from authorities in Chile ad Mexico, the approval does not require AT&T or Time Warner to divest of any assets.

Brazilian authorities have weighed in with antitrust concerns about the AT&T-Time Warner merger, according to deal critic Public Knowledge.

Such a finding would mean AT&T-DirecTV "would not be allowed to treat Time Warner assets as part of that company, but would need to deal with them at arms length," the group said.

Brazil's Administrative Council for Economic Defense (CADE) said the deal should be rejected unless some properties are divested, though it did not identify which, said Public Knowledge.

The CADE board still has to vote on that recommendation.

AT&T was putting the best face on it, including saying it would work with CADE to "clarify" any issues.

“The merger between AT&T and Time Warner has taken one more step in its path to conclusion in the Brazilian market," the telco said. "The CADE’s Superintendency referred the case to the Board for review. This means that the transaction will now be analyzed by the CADE’s body responsible for its final decision on the matter.

AT&T said it believes the union of the two players will not bring anti-competitive impacts to the market, but rather will benefit consumers as it will enlarge the options of content available to them and raise their access to information and entertainment. The combined companies will also contribute to market competitiveness, improving the offer of high-quality services to customers, and will stimulate the development of the audiovisual sector in Brazil.

AT&T said that of the 19 approvals it needs from 19 different countries, it has already gotten 16, with three pending -- Brazil, Chile and the United States.

Reports last week had the U.S. Justice Department reaching the home stretch of its antitrust review. The FCC is not conducting a public-interest review because the deal was structured so that it did not include any exchange of licenses.

Time Warner, preparing for its acquisition by AT&T, said its second-quarter profit was up 11% as subscription revenue rose at Turner and HBO.

Net income rose 10% to $1.06 billion, or $1.34 per share, from $952 million, or $1.20 per share, a year ago. Revenue rose 5% to $7.3 billion.

The results topped Wall Street forecasts.

Time Warner said it continues to expect the AT&T deal to close before the end of this year. The company also reaffirmed its full-year earning guidance.

At Turner, revenue rose 3% to $3.1 billion. Subscription revenue was up 13%. Operating income was down 7% to $1.1 billion because of higher expenses. Programming costs were up 12% mostly because of the new licensing deal with the NBA.

Turner's advertising revenue was down 6%, and content revenue was down 8%. The company said not having the NCAA Championship and Final Four games this year cost it 8% worth of ad revenue. It also had two fewer NBA playoff games and lower ratings at its domestic entertainment networks. Ad revenue increased at CNN and Turner’s international networks.

Related > Turner’s Martin: ‘We Need Fans, Not Viewers’

At HBO, operating income increased 10% to $531 million as programming costs declined 3%. Revenue rose 1%, with subscription revenue up 8%, while content and other revenue was down 44%.

“We’re very pleased with our first-half results, which keep us on track to achieve our objectives for the year,” said CEO Jeff Bewkes. “Our performance is a result of the continued successful execution of our strategic objectives – with the strong subscription revenue growth at Home Box Office and Turner a great example of this – along with the investments we’re making in our brands and high-quality video content.”

Related > TCA17: Turner’s Kevin Reilly Says Consolidation Will Whittle Down Cable Channels

Warner Bros. operating income was down 28% to $233 million from last year when Flixster was sold. Adjusted operating income was up 20% to $261 million. Revenue rose 12% to $3 billion as higher theatrical revenues were partly offset by lower TV revenue.

Bewkes noted the box office numbers for the films Wonder Woman and Dunkirk, and the Emmy award nominations earned by HBO and Warner Bros.

“These results and accolades reflect strong execution and the investments we’ve been making, both in the best content and in ensuring that we deliver our content across platforms to offer engaging experiences for our audiences,” he said. “Accelerating our pace of innovation and being able to connect more directly with consumers are among the exciting reasons for our proposed merger with AT&T, which remains on track to close before year-end, pending regulatory review and consents.”

You can probably pack a potential mega deal between Verizon and The Walt Disney Co. along with all the other wished-for-but-never-realized mergers gathering dust in your media Hope Chest. But don’t throw away the key just yet.

Fox Business Network got a chance to shout out a question to Verizon CEO Lowell McAdam from behind the barriers at the Allen& Co. summit in Sun Valley, Idaho, Wednesday asking the phone company chief if he was pursing a deal to buy the Walt Disney Co., to which he simply responded, “No.” 

The Allen conference is the annual retreat for media giants and has been a veritable petri dish for some of the biggest deals in the space – Disney CEO Michael Eisner hatched the plan to buy Cap Cities ABC after bumping into Warren Buffett, who was on his way to the golf tees at the conference, in 1995.  Other big deals that reportedly sprung from seeds planted at the conference include Comcast- NBC Universal and Amazon’s purchase of the Washington Post. And this year the attendees list is chock full of more traditional media and digital media moguls like 21st Century Fox’s Lachlan and James Murdoch, Facebook CEO Mark Zuckerberg, Discovery Communications CEO David Zaslav, Buffett and Apple CEO Tim Cook. Jared Kushner and Ivanka Trump were also rumored to be planning to attend, although that could have changed in light of the most recent White House scandal.

Verizon has been linked with other possible suitors over the past several months – reports have had it eyeing Comcast, Charter, Disney and even CBS, none of which has come to fruition. The frenzy around the telco is obviously fueled by AT&T’s proposal to buy Time Warner Inc. for about $108.7 billion in stock, cash and assumed debt. The industry, always abhorring a vacuum, has actively wondered why Verizon hasn’t tried to do the same.

There is an argument that with traditional TV viewing being turned on its ear by over-the-top players and skinny bundles, distributors have to buy content. The problem is, most of the good content is locked up in giant conglomerates like Time Warner, 21st Century Fox and Disney. Any deals would have to be huge – some estimate that buying Disney would cost Verizon at least $190 billion, which is well above Verizon’s current market cap of about $174 billion.

I was never convinced that Verizon was seriously pursuing any of the companies it was rumored to for the simple reason that Verizon wouldn’t add much to the mix. As far as cable operators go, aside from a wireless network, Verizon wouldn’t bring much to the table. Fox presents problems with ownership – the Murdoch family doesn’t seem too hot to get out of the media business just yet -- and Disney would cost too much. Verizon hasn’t been deal-shy – it purchased Yahoo and AOL in the past two years – it’s just been thrifty. The Yahoo deal is costing about $4.5 billion, just slightly more than the $4 billion Verizon paid for AOL in 2015. The leap to a nearly $200 billion territory is pretty steep. Not that they couldn’t do it – put enough accountant and lawyers in a room and they can hammer out practically anything – but I just don’t see a desire to bet the company just yet.

But as Fox Business reporter Charlie Gasparino said in his report, just because Verizon doesn’t seem to want Disney doesn’t mean no one else is clearing space in its Hope Chest for the asset. He pointed to a previous Allen conference where the speculation was that Fox would buy Time Warner, which never came to be (albeit not without Fox trying hard to make a deal happen). But that speculation put Time Warner in play, and it eventually agreed to a deal with AT&T. Whether that gets approval from a Presidential administration that literally fantasizes about body-slamming CNN, Time Warner’s flagship news network, remains to be seen.

But like Time Warner, Gasparino believes that Disney is now in play, and there could be a handful of deep-pocketed suitors trying to justify a deal. Amazon, Google, Facebook, Apple all have been named as potentially interested in Disney’s vast content assets.

“I think there is a good chance Disney is in play,” Gasparino said in his report.

But whatever happens, there is one thing that any potential suitor has to remember: The TV business is hard. It may look simple – just throw a bunch of money at some creative types, make some shows and grab a big bucket to catch the torrent of profits that will inevitably flow. But anybody who has actually played in the space knows it is much different than that. Successful TV executives are a sometimes-otherworldly mix of creative genius, financial maven and just plain lucky stiff. And that hope chest can just as quickly turn into a Pandora’s Box for the unprepared and unsuspecting media suitor. The back lots of content companies are littered with the carcasses of executives from inside and outside the business who learned that lesson the hard way.  

Turner Networks chairman and CEO John Martin told an industry audience Thursday that the programmer is no longer focused on traditional ratings, adding he would be happier to have smaller audiences that are more engaged with the company's content.

"We're no longer in the Nielsen, day part, CPM game,” Martin said at the MoffettNathanson Media & Communications Summit in New York Thursday. “We're in the fan-engagement business."

The rise of cord-cutters, cord-nevers and skinny bundles is reshaping the way that people watch TV. And over the top services like DirecTV Now (owned by AT&T),  Dish Network’s Sling TV and the recently launched Hulu Live TV, are encroaching on traditional pay TV outlets.

Turner parent Time Warner Inc. is currently in the middle of a $108.7 billion merger with AT&T, a process Martin said he was confident would be completed by the end of the year.  

Martin said that Turner has deals with several OTT providers and will likely have more. But the shift in consumer habits is setting the notion that networks should strive for the largest possible number of viewers on its ear.

“It’s become increasingly clear to all of us that we need fans, not viewers,” Martin said. "That’s a different concept in TV because TV has always been about getting as much reach as you can. I'd rather have a smaller audience that is more dedicated and that loves the products we have, versus casual viewing that may aggregate to greater reach. I think engagement si ultimately going to lead to monetization."

Martin also commented on the emergence of virtual MVPDs, adding that while smaller packages may not include all of Turner’s 10 channels, they will include enough.

“My guess is we’re not going to be able to get 10 networks in all of those packages,” Martin said. “But 85% of our affiliate fees are in four networks and 90% are in five. If we can get four or five, we’re in good shape. If that means you could grow the overall pool of subscribers, because aggregate bundles of networks are being bundled in a way that subscribers like better, so they’ll be more subscribers, we’ll be fine.”

While traditional Pay TV operators have generally suffered customer declines due to new virtual MVPDs and other over-the-top providers, those very same newcomers have offset losses for the big programmers.

For at least the past two years, most cable programmers have seen traditional TV carriage dip about 2% annually as customers either drop service, reduce their programming packages or take their money elsewhere. The growing number of competitors — the latest, Hulu Live TV, launched its beta-test version last week (see Cover Story) — has steadily chipped away subscriber rolls at the top pay TV distributors.

Comcast, the only major cable operator that gained basic video subscribers last year (161,000) and in the first quarter (42,000) did so largely through retention efforts and the rollout of its next-generation X1 platform. X1 also has given customers better access to subscription video-on-demand services; X1 includes an embedded app for Netflix with others likely to follow.

In April, Comcast launched a wireless service, Xfinity Mobile, that should also boost those retention efforts.

On the programming side, some content providers are the streamlined services counteract losses resulting from their networks being part of a larger pay TV bundle.

Time Warner Inc. chairman and CEO Jeff Bewkes said on an earnings call last Wednesday that virtual multichannel video programming distributors (vMVPDs) are having an impact. “It’s mitigating some of the declines at the traditional providers,” he said. “So, if new offerings can combine that kind of attractive pricing and packaging with the sort of new 21st century on-demand platforms, interfaces, then we think they can definitely attract new subs into the network system. And that’s a great opportunity for Turner and every other network to find its natural audience.”

CBS chairman and CEO Les Moonves said the company will bundle its CBS All Access and Showtime OTT offerings for the first time this year while continuing to offer them separately. For any skinny bundle to survive, he said, it must include the CBS network.

“We are not being affected in any way by any changes in subscription numbers throughout the industry,” Moonves said on the call.

While consumers seem ready to drop premium channels such as HBO, Showtime and Starz from their traditional pay TV packages, they’re snapping them up through other avenues, Morgan Stanley media analyst Ben Swinburne found in a recent report.

In a recent survey of about 3,100 pay TV customers, Swinburne noted that premium uptake is down so far this year compared with last year — about 46% of respondents said they had at least one premium network, vs. 53% in 2016. But he still predicted premium network subscribers would be up in 2017, as they have been for the past five years, due mainly to digital distribution.

Every premium channel has a digital direct-to-consumer counterpart, which also stems the losses. And the vMVPD field, once occupied solely by Sling TV (which launched in 2015), has become increasingly crowded.

In addition to apps from individual networks, services like CBS All Access, Sony PlayStation Vue, DirecTV Now and YouTube TV are increasingly gaining customers. Swinburne estimated by the end of this year, virtual MVPDs will have 3 million subscribers.

Hulu Live’s launch is another sign of increased vMVPD traction, Swinburne said. “Notably, we believe Hulu should benefit from its existing, scaled direct-to-consumer subscriber base and its ability to drive advanced advertising innovation,” he said.

Hulu Live should do well because it will carry “gold” tier networks from The Walt Disney Co., CBS, NBCUniversal and Time Warner, as well as Scripps Networks Interactive’s three core channels of HGTV, Food Network and Travel Channel, said Swinburne. Hulu’s owners — Disney, Fox, NBCUniversal and Time Warner — should also “benefit from involvement in a new distribution platform as pay TV consumption continues to evolve,” he added.

Time Warner has filed an application with the FCC to sell its lone TV station, WPCH Atlanta, to Meredith Corp. Meredith has been operating the station for Time Warner, so it would not be a big change.   

The purchase price is $70 million, according to the agreement, which was filed with the FCC today (Feb. 23).

Meredith has a JSA with WPCH--—formerly Turner's Superstation WTBS—for more than 15% of ad time, so it already has an attributable interest in the station. It already owns WGCL-TV there.

AT&T has said its deal to purchase Time Warner would not have to be filed with the FCC—which presupposed the sale of that station, since if the license transferred to AT&T, the FCC would have to review it on public interest grounds. 

Time Warner has some other FCC licenses—for internal links between CNN field trucks and studios—but AT&T has signaled those will not be part of the deal either.

FCC chairman Ajit Pai would not comment on whether the FCC would use that WPCH sale to get at the larger AT&T-Time Warner merger, but that would appear unlikely from the deregulatory Republican.

There had been speculation that Time Warner would either have to sell the station or place it in a trust to avoid the FCC review.

The Republican Chairman of the Senate Antitrust Committee, Mike Lee (Utah), and Democratic ranking member, Amy Klobuchar (Minn.), have potential concerns about the deal and called on new Attorney General Jeff Sessions to insure it gets a thorough review.

In a letter to Sessions Friday, they said that the proposed deal "raises complex questions that will require a fact-intensive investigation that has yet to be completed, as well as a deep understanding of the economics of the digital content creation and distribution markets,” the senators wrote. “The stakes for consumers are high.”

"[T]he Department has previously recognized that vertical mergers involving video content providers and video content distributors can raise significant competitive issues," they wrote. "The Department has rigorously analyzed those issues using well-accepted legal and economic principles and should follow that approach in its review of the AT&T-Time Warner transaction."

Among the issues they want Justice to focus on in its antitrust review are 1) "whether the transaction would provide AT&T the incentive and ability to suppress rival content companies’ distribution"; 2) whether "the proposed transaction might create the incentive and ability for AT&T to undermine rival MVPDs and Online Video Distributors"; and 3) whether there are "practical obstacles to the enforcement of any conditions it may impose."

The FCC will not be reviewing the deal for public interest issues, though the two companies sent a group of senators--not including Klobuchar or Lee--a public interest statement Friday (Feb. 17)making the argument for the deal's pro-consumer effects.

The full text of the letter is below, supplied by Klobuchar's office:

"Dear Attorney General Sessions:

"As Chairman and Ranking Member of the Senate Judiciary Committee’s Subcommittee on Antitrust, Competition Policy and Consumer Rights, we write concerning AT&T’s proposed acquisition of Time Warner, Inc. The proposed transaction raises complex questions that will require a fact-intensive investigation that has yet to be completed, as well as a deep understanding of the economics of the digital content creation and distribution markets. Although the purpose of this letter is not to focus on the ultimate antitrust decision, we want to highlight three considerations we believe the Department should take into account in evaluating the proposed transaction. At the same time, the Department has previously recognized that vertical mergers involving video content providers and video content distributors can raise significant competitive issues. The Department has rigorously analyzed those issues using well-accepted legal and economic principles and should follow that approach in its review of the AT&T-Time Warner transaction.

"First, the Department should consider whether the transaction would provide AT&T the incentive and ability to suppress rival content companies’ distribution. AT&T has a substantial position in every platform used to distribute video content. It is the second-largest wireless provider, with 133 million subscribers; the largest Multichannel Video Programming Distributor (MVPD), with 25 million subscribers split between DirecTV and U-Verse; and a major internet service provider, with 16 million broadband customers. Time Warner is one of the largest programming and content creation companies in the United States. Among other television networks, it owns CNN, HBO, TBS, and TNT, and it makes its own content through Warner Brothers Pictures and Warner Brothers Television. Time Warner sells its content to movie theaters, streaming services, and MVPDs—including AT&T.

"As a result, AT&T would be both a distributor of and competitor to many content providers (HBO, for example, competes with premium channels such as STARZ and Showtime; CNN competes with MSNBC; and small independent content providers compete with Time Warner’s content). AT&T could conclude that it’s beneficial to limit competing content providers’ access to AT&T’s distribution services. As one witness explained, if AT&T goes down this route, its decisions might disproportionately affect independent programmers that meet unique market needs, thus affecting the type of content available to consumers. In response, AT&T has pledged not to restrict access to AT&T’s distribution networks. For example, Randall Stephenson, AT&T’s CEO, testified before our Subcommittee that that the market demands that each MVPD “better have a wide array of content” and that “you will lose customers if you do not” because “[t]here are too many alternatives.” These statements, made under oath, should factor into the mix of information considered by the Department.

"Second, the proposed transaction might create the incentive and ability for AT&T to undermine rival MVPDs and Online Video Distributors (OVDs). The Antitrust Division has focused on similar concerns in evaluating previous transactions. In reviewing Comcast’s acquisition of NBC Universal (NBCU), for example, the Antitrust Division explained that Comcast “will have a strong incentive to disadvantage its competitors by denying them access to valuable programming or raising their licensing fees above what a stand-alone NBCU would have found it profitable to charge.” AT&T may likewise find it beneficial to increase the price of popular Time Warner content to rival MVPDs in an effort to benefit AT&T, and this behavior may raise antitrust concerns. The popularity of Time Warner’s must-have content may leave competing cable providers—particularly smaller or regional cable companies—with no alternative but to pay higher prices and pass these higher prices on to consumers. AT&T could benefit directly from higher carriage prices or indirectly by undercutting rival MVPDs’ prices. Because AT&T’s television services, such as DirecTV Now, are available across the country, AT&T competes directly with many MVPDs, and that concern could be more prominent than in similar mergers. In response, AT&T has pledged not to restrict distribution of Time Warner content, including in testimony before our Subcommittee.

"In addition, AT&T may attempt to undermine rival OVDs. As a result of the proposed transaction, AT&T has launched its own online video distribution platform, and AT&T may use its mobile and broadband networks to undermine rival OVDs’ ability to compete. During the hearing, there was significant discussion about zero-rating and whether it could be a tool to undermine competing OVDs. AT&T has promised to offer zero-rating to all content providers on nondiscriminatory terms, consistent with the FCC’s Open Internet Order. At the hearing, however, Mr. Stephenson acknowledged the challenge in devising an approach to ensure that AT&T lives up to that promise, explaining that “I think we ought to allow the Department of Justice to formulate an approach for doing that.” More generally, AT&T has explained that the merger would be a key factor in disrupting the existing pay-television industry. Mr. Stephenson testified that, “[a]s a result of the transaction, we [AT&T] will be a significant content company for the first time. We will have a strong incentive to optimize the additional value of our content by having a robust mobile network that can deliver the advanced video services that the transaction makes possible.” Stephenson predicted that, “when AT&T rolls out these offerings, others will follow suit,” leading to increased competition in video distribution.

"Third, while we do not take a position on the appropriateness of conditions in general or in this case, we urge the Department to consider practical obstacles to the enforcement of any conditions it may impose. As the Department is aware, adjudicating disputes over the interpretation or application of merger conditions can be a time consuming and resource-intensive process. In some cases, the time and resources needed to enforce a condition may render it ineffective.

"The stakes for consumers are high. If the deal has anticompetitive effects, it will increase consumer prices and may inhibit future innovation. But the companies maintain that the deal may also be an important catalyst in breaking the existing pay-television model that so many consumers find frustrating. In response to Committee questions, Mr. Stephenson said the merger “will bring the consumers better-priced options.” The Department must determine whether the evidence supports or disproves that claim. We trust that the Department will engage in a careful analysis guided by the facts in evidence and agreed-upon economic principles. Thank you for your attention to these matters, and we look forward to following up with you regarding this transaction."