Here’s why it doesn’t make sense for AT&T to own Time Warner

AT&T wants to buy Time Warner, and Wall Street, predictably, obliged, sending Time Warner shares up and AT&T stock down. Too bad the deal doesn’t make much sense. (Similarly, it doesn’t make sense for Apple to own Time Warner, either, which we’ll get to further down.) Here’s why: A company that owns pipes, whether over the air or through the ground, doesn’t actually benefit from owning the content flowing through those pipes.

Time Warner, which owns HBO, CNN, Warner Bros. and a lot of sports rights via Turner, loses its value if it can’t sell its content to every possible distributor, including AT&T’s main rivals, such as Comcast and Verizon. AT&T knows this (or should), but since the company’s been saddled with a price war (thanks to T-Mobile and Sprint), it’s been looking for new ways to increase growth. As part of that effort, it completed its $49 billion acquisition of DirecTV in 2015, a deal that actually makes sense since it allows AT&T to upsell both services to the respective customers, as well as potentially making both stickier. Even then, fewer people today are buying TV subscriptions from satellite providers (long known as the cheaper option to cable), since they can now get a lot from Netflix and Hulu and Amazon.