AT&T CEO defends Time Warner merger in court

Stephenson pushed back on the Justice Department’s argument that the tie-up will allow AT&T to use Time Warner programming as leverage to hurt their competitors. He argued that his incentive is to make sure that Time Warner entertainment is as widely available as possible.

 

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“The more people that watch your content, the more your content is worth,” Stephenson said.

 

Distributing that content widely will drive up the value of the advertisements the combined company will air, the AT&T chief argued. 

 

Thursday was the first time U.S. District Judge Richard Leon heard from the AT&T CEO, as Stephenson sought to defend the telecom giant’s effort to break into the entertainment industry.

 

Stephenson said that the purpose of the merger is not to use Time Warner content as leverage but to combine AT&T’s deep well of consumer data with Time Warner’s valuable content and advertising to deliver ads tailored toward specific consumers. He said the point is to use methods that Facebook and Google have employed to vacuum up online advertising revenue.

 

“We would like to compete for their advertising dollars,” Stephenson said.

 

He suggested that being able to charge more for advertising could drive down subscription costs for consumers.

But Craig Conrath of the Justice Department pushed back, noting that AT&T’s advertising revenue has increased in recent years, while the company at the same time has charged more for pay-TV subscriptions.

The prosecutor also argued that even with AT&T’s purchase of Time Warner, the combined company would not be competing directly with internet streaming platforms. Conrath noted that companies like Amazon and Netflix don’t have the live news and sports offerings that are among Time Warner’s signature products.

The AT&T CEO responded by saying that half of millennials don’t want that programming enough to subscribe to cable or satellite television.

And while Stephenson argued that those companies engage in vertical functions — producing original content and operating platforms to distribute it — Conrath pointed out that they still must rely on internet providers like AT&T to make sure users can access their content.

Pressed by Conrath about the targeted advertising practices, Stephenson admitted that AT&T would track customers’ location and browsing activity in order to deliver ads that would be relevant to them. He said that users would have to give their permission in order for the company to submit to this data collection.

Time Warner CEO Jeff Bewkes testified in court Wednesday making similar arguments that the merger of the two companies is essential to compete with internet giants and called the Justice Department’s argument against the deal “ridiculous.”

The Justice Department sued to block the merger in November, arguing that combining the telecom giant with an entertainment company like Time Warner — which owns channels including CNN, HBO, TNT and TBS — could hurt competition, with AT&T having the incentive to charge more for that programming to other distributors.

The trial began in March and is expected to wrap up in the coming weeks.

Updated: 5:50 p.m.