Short post here, but I'd like to say I'm amazed that AT&T has not found a way to settle by now. Sure, sell off CNN or Turner, who cares? It's just cash flow, not the future of the business. Cut a deal where you buy TWX and then special dividend the shares of Turner to your shareholders.
The thing is - this deal absolutely should go through. The government's case is weak and even silly. There are a few ways to look at it:
AT&T is $230B market cap, TWX is $75B. Together let's say $300B. The purpose of this deal is to be able to compete with the New Tech Players: Google, Amazon, Facebook, and Apple, all with market caps over $500B and as high as $900B and gazillions more users than AT&T. FWIW, Netflix is $140B.
AT&T has about 20 million cable subscribers. Netflix has OVER 100 million.
Facebook, Amazon, Netflix, and Apple are producing content which can only be consumed on their platform. It's quizzical that the government is arguing that T could withhold TWX content to boost prices when there are four giant competitors that are building their business on doing just that.
What IS distribution anymore? It used to be that if my cable company didn't offer a channel, I didn't get it. But I buy a TV now and Netflix come pre-installed...do the telcos have any distribution power over Netflix? (Net neutrality muddies this up - it IS weird that Netflix could be 100% reliant on a telco to deliver its product and somehow doesn't need to pay the telco. Everywhere else in capitalism when one company needs another company to make money, there is an associated payment.) When I buy TV shows from iTunes and fling them to my AppleTV...what is distribution? When I buy a movie on Google Play and load it up on Chromecast...what is distribution? AT&T knows this - they are fighting against being a dumb pipe...and know what? Good for them! They built the infrastructure that make our connected life possible. Massive capex deployed nationally for decades.
Let's say the goal is to bundle HBO and other packages with an AT&T wireless package at a reduced price (they are already doing this). That is a LOWER price. It doesn't matter if Verizon + HBO = $100 and AT&T + HBO = $80 puts Verizon at a disadvantage...I am $20 richer if I switch to AT&T. That's a lower price. The impact on your credit card statement is the same as if AT&T plans were $20 cheaper and you switch to them from Verizon.
On every one of those metrics, AT&T is already at a serious disadvantage (even combined with TWX). DirecTVNOW is $35/month vs. $10 for Netflix, AT&T has a tiny userbase (20 million) compared with the hundreds of millions of the other competitors, its distribution of any TWX offering is disadvantaged to the Netflix, Hulu, and Prime Video competitors, etc.
So Why Be Stubborn?
This is simple game theory. AT&T is stuck as having spent years positioning for this new future, and if the government stops it, there's basically no other options. Plus, Stephenson tried and failed to buy TMobile so this would put his merger success at 1 out of 3. So why risk failing at all? Take the bird in hand.
OK, let's say AT&T wins. Well, Makan Delrahim of the DOJ will look very silly and the DOJ will appear to be pretty much neutered. Any other tech company should be able to vertically integrate and they have MUCH MORE CASH and FAR LESS DEBT than AT&T. Apple could buy Disney ($155B). ComcastNBCUniversal can make a bid for Fox. Facebook could buy Major League Soccer. They can all put them behind silos like the tech companies (imagine if Comcast stopped offering NBC to rivals.) AT&T - doing this deal to shrink a competitive disadvantage - will find itself back at square one.
What should AT&T do?
Pay the pound of flesh. But pay it in a way that chills the industry from attempting competitive responses. AT&T is in a FAR better situation if they get everything except CNN (launch a new news channel!) or Turner (the tech companies may outbid them for sports rights anyways!) and Disney's Fox bid is blocked, Comcast can't move of them, and Facebook and Apple and Amazon can't buy content. The trick is to be the LAST mover.
AT&T is in the enviable position to have the last laugh and stop the show. The laugh might not be as big as they originally planned, but that's better than tears.
Disclosure: I am/we are long TWX, T.