Fox bid for Time Warner sparks content merger race - WAFB 9 News Baton Rouge, Louisiana News, Weather, Sports

Fox bid for Time Warner sparks content merger race

Posted: Updated:
  • NationalMore>>

  • Beretta: Gun law forcing move out of Maryland

    Beretta: Gun law forcing move out of Maryland

    Tuesday, July 22 2014 7:31 PM EDT2014-07-22 23:31:22 GMT
    Beretta U.S.A. Corp. says concerns about a gun-control bill that passed in Maryland last year have made it necessary to move its weapons making out of the state to Tennessee.More >>
    Beretta U.S.A. announced Tuesday that company concerns over a strict gun-control law enacted in Maryland last year have made it necessary to move its weapons making out of the state to Tennessee.More >>
  • Crews make gains on massive Washington wildfire

    Crews make gains on massive Washington wildfire

    Tuesday, July 22 2014 7:31 PM EDT2014-07-22 23:31:19 GMT
    Firefighters and local authorities are heartened by weather forecasts that call for continued cooler temperatures and higher humidity as they battle a destructive wildfire that has charred hundreds of square miles...More >>
    Firefighters were making progress Tuesday in their efforts to get the largest wildfire in Washington state's history under control, with wetter weather bringing some relief but also raising concerns about flash flooding.More >>
  • Supreme Court allows Arizona execution to proceed

    Supreme Court allows Arizona execution to proceed

    Tuesday, July 22 2014 7:31 PM EDT2014-07-22 23:31:09 GMT
    Attorneys for the state of Arizona have asked the U.S. Supreme Court to allow an execution planned for Wednesday to proceed, saying Joseph Rudolph Wood can't establish he has a First Amendment right to the...More >>
    The U.S. Supreme Court on Tuesday allowed an Arizona execution to go forward amid a closely watched First Amendment fight over the secrecy surrounding lethal injection drugs in the country.More >>
By RYAN NAKASHIMA
AP Business Writer

LOS ANGELES (AP) - Even though Rupert Murdoch's $76 billion bid for rival media giant Time Warner Inc. has been rejected, that doesn't mean how you watch TV shows and movies will stop changing any time soon.

The cash-and-stock bid by Murdoch's Twenty-First Century Fox Inc. was partly meant to counter consolidation among TV distributors like Comcast-Time Warner Cable and AT&T-DirecTV.

The more must-have channels like HBO and Fox News Channel are assembled under one company, the stronger that company's bargaining position in demanding licensing fees from the TV distributors, no matter how big they get.

Time Warner also owns TV channels CNN, TNT and TBS, along with the Warner Bros. movie studio, which includes Batman, Superman and Harry Potter. Fox owns the 20th Century Fox movie studio, the Fox broadcast network and such TV channels as Fox News and FX.

Much of the value is in the television channels because of the ever-increasing fees they are able to command from cable and satellite TV providers. Disputes over such fees have led to temporary blackouts of popular channels from various systems.

The Comcast-Time Warner Cable and AT&T-DirecTV deals are both undergoing regulatory review. In disclosing the rejected bid Wednesday, Time Warner and Fox indicated that their talks were over, but analysts don't expect Murdoch to give up. The offer was worth about $86.30 a share based on Tuesday's closing price.

If talks resume and a takeover succeeds, analysts see some possible consumer benefits.

- TV EVERYWHERE COULD GET A PUSH

A combination could accelerate the industry's "TV Everywhere" push, in which traditional media companies make their channels available over the Internet as part of a TV subscription. It's the pay TV industry's answer to the rise of streaming services such as Netflix, YouTube and Amazon.

The hang-up in making those channels available online has partly been licensing deals with content producers. A unified company with an even larger suite of channels from TBS to FX could make such deals standard industrywide. Apps modeled after Time Warner's successful HBO Go could also be applied to more networks.

"A player with more scale would be able to work on that and make digital content offering more user-friendly to the consumer," Nomura analyst Anthony DiClemente said.

- MOVIE STUDIOS COULD SHORTEN THEATER EXCLUSIVITY

With a North American box office market share of around 30 percent, a combined Warner Bros.-20th Century Fox movie studio could push movie theater companies to shorten the time between when a movie hits theaters and when it's available for sale or rental through digital outlets like iTunes.

A shortened window helps studios spend less money on marketing because they wouldn't have to advertise each time a movie becomes available on a different platform. Theater companies have pushed back, as earlier digital release times could cut into ticket sales.

"They would have a lot of ability to experiment with new release patterns for movies," FBR Capital Markets analyst Barton Crockett said.

- ESPN COULD GET A CHALLENGER

While there's no guarantee that the cost of sports rights would come down, a merger would reduce the number of bidders for such rights and allow a combined company to spread acquired content over more channels. For example, after Comcast bought NBCUniversal, it rebranded Comcast's Versus channel as NBC Sports Network and used it to carry figure skating and hockey during the Winter Olympics in Sochi.

Fox could bolster its sports channel, Fox Sports One, by combining efforts with Time Warner's TNT to recapture the rights to broadcast NBA basketball games when they expire in 2016. TNT currently shares those rights with The Walt Disney Co.'s ESPN and ABC.

TNT also has rights to college basketball and professional golf, adding to Fox's Major League Baseball and NASCAR racing.

"A combined portfolio of sports could better challenge ESPN," DiClemente wrote in a research note.

- BUT THERE ARE POSSIBLE DOWNSIDES

To blunt the rise of streaming services like Netflix and Amazon Instant Video, a combined company would have more power to withhold content or demand steeper licensing fees. That, in turn, could force streaming services to raise subscription prices.

And further consolidation puts more media voices under the control of one entity. That's why Fox, which operates the lucrative Fox News Channel, is willing to sell Time Warner's CNN, according to one person familiar with the matter. That person spoke on condition of anonymity because that deal point wasn't officially made public.

It's unclear how regulators would view so many pay TV channels being owned by the same company.

- AND IT'S NOT OVER YET

DiClemente and Janney analyst Tony Wible both believe that with interest rates low and with Fox having a healthy balance sheet, Fox could raise its bid above $100 per share by borrowing more money.

It also could set off interest by other bidders for Time Warner, which in turn could set off other mergers among content companies that don't want to be left out.

"It's a chain reaction," Wible said. "There will be more consolidation on the content side."

Crockett agreed. "I think what this is, is 'Game on.'"

___

AP Business Writers Mae Anderson in New York and Tom Murphy in Indianapolis contributed to this report.

Copyright 2014 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

Powered by WorldNow