Why Comcast, AT&T Are Splurging: Leverage

Comcast and AT&T have already pledged $112 billion for two acquisitions in the past few months, and this is only the beginning of a feverish few years of dealmaking, according to a new report by Ernst & Young.

This is the second report in as many weeks projecting billions of dollars will change hands as media conglomerates try to outflank competitors and new rivals by getting bigger.

With the rise of YouTube, Netflix and Hulu, traditional media and cable companies are consolidating to dictate terms as best they can. Comcast and AT&T want to provide video and Internet services -- without paying an arm and a leg for those videos.

“Size matters,” Tom Connolly, Global Leader of Media & Entertainment, Transaction Advisory Services at Ernst & Young, told TheWrap. “These companies want to do what they can to maximize geographic reach and customer reach for when they are negotiating.”

Time Warner, Disney and Comcast want to own as many different producers of content as they can, so that the people who own the pipes must deal with them if they want high-quality product.

Executives remain optimistic about the future, according to the report, but these deals could cost people their jobs. Companies will reduce the size of their work force, eliminating redundancies as they acquire companies that perform some of the same functions.