Stefan Bewley, a director at consulting firm Altman Vilandrie & Co. who assembled a subscriber-loss study for Charter, said the MSO would be better off without Turner’s networks.
The detail, highlighted in a new research report from BTIG analyst Rich Greenfield, was revealed during the trial over the Justice Department’s attempt to block AT&T’s $85 billion acquisition of Time Warner, the parent company of Turner.
Bewley said during the trial that, from his perspective, Charter would be better off and save a lot of money by dropping Turner. As Greenfield points out, the DOJ’s use of the study, which is part of its defense that Turner’s channels are valuable and would therefore give AT&T too much leverage over its distribution rivals in carriage consent negotiations, is ironic considering Charter CEO Tom Rutledge’s comments from late in 2016.
Rutledge told Bloomberg that any company that owns both content and distribution has to honor the content side of things first because “if you crater the content business, you can destroy a lot of value. And so nobody’s ever been able to reach the distribution scale they need to sort of go exclusive and use it as a real differentiation tool.”
Big h/t to @RichBTIG for finding this overlooked comment in the DOJ-AT&T transcripts. Charter commissioned a study about impact of dropping Turner. The author of the study concludes Charter would be better off dropping Turner. pic.twitter.com/XVotDaQfRY— modest proposal (@modestproposal1) April 12, 2018
Earlier in the trial, Charter’s lead programming negotiator, Tom Montemagno, testified that he had only skimmed the report but acknowledged that similar programming to what Turner offers could be found for less money on other channels, according to Bloomberg.
Both details seem to belie the notion that owning Turner would give AT&T undue power over other pay TV distributors and could eventually cause consumer costs to rise, one of the DOJ’s chief arguments against the merger.
In trial prebriefs, the DOJ cited University of California, Berkeley, economics professor Carl Shapiro’s research amid concerns about rising consumer costs if the AT&T-Time Warner merger goes through.
"If TV program distributor AT&T acquires TV-program producer Time Warner, American consumers will end up paying hundreds of millions of dollars more than they do now to watch their favorite programs on TV," the DOJ wrote. "In short, the transaction violates Section 7 of the Clayton Act, because its effect 'may be substantially to lessen competition.' Prices for current services will go up and development of emerging competition will slow down.”
The same study assembled by Bewley has been the subject of cross-examination by AT&T. The study predicted that Charter would lose 9% of its subscribers if it lost Turner’s network. Last week, Daniel Petrocelli, attorney for AT&T and Time Warner, cross-examined Bewley, who admitted that the figure was 5% in the study when it was originally handed over to Charter in April 2017.