Merge or Perish: Telecom giants look to buy into media industry

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02:12

Two American telecom giants - AT&T and Comcast - made multi-billion-dollar bids this week to buy major media companies. More deals are likely as companies struggle to compete against Netflix and Amazon Prime. Karina Huber has more.

This week a U.S. Federal Judge approved AT& T's 85 billion-dollar bid for Time Warner disagreeing with the Justice Department's argument that it would lead to higher prices for consumers.

The combined company would include CNN as well as HBO hits like "Game of Thrones".

IAN KING, SENIOR RESEARCH ANALYST BANYAN HILL "I don't think it's a surprise. From the very start, this is a vertical merger so there's no competitive issues going on here. On one hand, you have a content provider. On the other hand, you have a content creator in Time Warner."

One day later Comcast offered an all-cash deal worth 65 billion dollars to acquire most of 21st Century Fox. That amount is higher than Disney's current offer. A bidding war could ensue.

Consolidation in the sector comes after massive disruption caused by the success of streaming content providers like Netflix and Amazon Prime.

IAN KING, SENIOR RESEARCH ANALYST BANYAN HILL "Providers of content are facing an existential crisis because companies like Amazon Prime and Netflix are spending four to eight billion dollars this year each on developing their own unique content and that's causing consumers to want to cut their cords."

American consumers are increasingly cancelling their cable subscriptions, relying instead on a la carte subscriptions online. Some media executives say they need to team up with telecom companies to survive. King believes there will be a change in what consumers want from their internet providers.

IAN KING, SENIOR RESEARCH ANALYST BANYAN HILL "Now we choose our internet service providers and our phones by who has the best plan or who gives us the best service coverage. I think in the future you'll see the plans are chosen by what content you want to watch."

KARINA HUBER NEW YORK "Approval of the AT&T/Time Warner acquisition is likely to lead to even more consolidation as it signals regulators are willing to support such deals. At the same time, interest rates are rising creating more incentive for executives to get a deal done now rather than later. Karina Huber, CGTN, New York."