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A media giant in the balance sheet: AT&T antitrust trial begins

FILE – In this Oct. 24, 2016, file photo, the AT&T logo is placed above one of the shops in New York. On Monday, March 19, 2018, AT&T kicks off against the federal government in a process that can shape how you get, and how much you pay, to stream TV and movies. AT&T says that it needs to gobble up Time Warner if itââ, ™s to have a chance against the likes of Amazon, Netflix and Google in the quickly evolving world of video entertainment. (AP Photo/Mark Lennihan, File)

(Copyright 2016 The Associated Press. All rights reserved.)

NEW YORK (AP) — On Monday, AT&T kicks off against the federal government in a process that can form of how you get it, and how much you pay for the streaming of TV and movies.

AT&T says that it needs to gobble up Time Warner if it is to have a chance against the likes of Amazon, Netflix and Google in the quickly evolving world of video entertainment.

The Justice Department antitrust lawyers say that if AT&T and Time Warner are allowed to combine, the consumer will end up paying more to watch their favorite programs, or on a TV screen, smartphone or tablet.

“On the one hand, the government is saying this is the Old World, and AT&T Time Warner is saying: this is the New World,” said Larry Harbor, senior industry and innovation fellow at the Georgetown University. “They’re arguing completely different views of how the content industries see now, let alone in the future.”

In October 2016, AT&T offered to buy Time Warner for $86 billion. Dallas-based AT&T Inc. provides wireless, broadband, and DirecTV satellite services via telephone and TV. New York-the headquarters of Time Warner, owner of HBO, TNT, TBS and CNN networks and sports programming, including Major League Baseball play-offs and the NCAA’s March Madness basketball tournament.

The government sued to block the deal last November.

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AT&T’S CASE

Nearly 60 percent of Americans still TV mainly from traditional cable services, according to a Pew Research Center report. But that is clearly divided by age. About 61 percent of the people between 18 and 29 primarily use streaming — services – compared with 10 percent of the people in the age group of 50 to 64.

AT&T says that the merger is necessary to compete as more people use streaming services like Netflix, Amazon and others. It denies the government’s assertion that the merger will restrict choice and lead to higher prices for consumers.

“The blocking of the transaction would deny consumers these benefits, and shield large, vertically integrated companies, such as Comcast/NBCU, Netflix, Google, Amazon and Facebook the new league on their own turf,” the company wrote in its pre-trial brief.

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THE GOVERNMENT’S CASE

The government brushes off the argument that the proposed acquisition is about offering the consumer more choice. Instead, it says, will lead to less competition and innovation, while higher prices for consumers, as AT&T may involve Time Warner programming from other distributors and offer more cheaply only on its own network.

The Ministry of Justice is also dismissive of the idea that the mega-merger could lead to competition for large players like Google and Netflix, noting that most people still watch TV through traditional cable boxes.

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THE RESULT

“The real fundamental thing this trial will decide is how much space does the media industry have to use the scale in the fight against the internet giants who eat their lunch now,” said B. Riley FBR analyst Barton Crockett.

If the court blocks the deal, a chill over media deal-making is likely to be. Large players like Amazon or Google could decide to keep the creation of their own content offerings rather than to grow through acquisitions.

But if the court let the deal go through, it can easily spur a wave of similar deals with other distributors — think major cable, satellite and phone companies — bulk-up with entertainment purchases to compete against rivals born on the internet.

A middle ground compromise is also possible if AT&T loses this round. The company may agree to sell some companies or meet other constraints in order to win approval for the merger.

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