AT& T And Time Warner Merger Is A Potential Death Sentence For Netflix - Netflix, Inc. NASDAQ: NFLX)On Saturday, AT& T (NYSE: T) agreed to acquire Time Warner (NYSE: TWX) (the entertainment company, not the cable company) for $8. Friday's closing market cap of $6. With this acquisition (assuming it goes through), AT& T would possess a quality entertainment portfolio and ongoing content- creation capabilities to provide to its wireless/TV customers.

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If AT& T is a vein, Time Warner is its newfound blood, and in my opinion, there's a lot of strategic possibilities for AT& T in this deal that can combat the rise of media- streaming companies such as Netflix (NASDAQ: NFLX). What does AT& T gain by purchasing Time Warner?

Obviously, AT& T is purchasing Time Warner for its entertainment portfolio, and its ability to create more quality content on an ongoing basis. Time Warner's content portfolio includes Warner Bros film studio (Movies such as "Harry Potter"), CNN (news, broadcast), HBO (TV shows such as "Game of Thrones"), TNT (NBA basketball broadcasts), and DC (which includes characters such as Batman, Superman, Green Lantern, Flash, and Wonder Woman- -just to name a few.)The gist of the play is that AT& T can distribute Time Warner's content through its Internet/wireless networks and TV services, where it is a major player, and perhaps gain market share from online streaming platforms such as Netflix."Why didn't AT& T just buy Netflix? They could have easily afforded it."1. Cable providers such as AT& T view Netflix as an adversary. Simply put, if people are watching Netflix, then they're not watching TV, and that dynamic decreases advertising revenues for the TV companies.

Netflix doesn't display ads, and if they ever did, it's safe to assume that customers would be outraged or at the very least, perceive Netflix as less valuable. As you know, a big part of Netflix's attractiveness is based on the user's ability to view TV shows and movies without being disrupted by advertisements.

So the idea of AT& T buying out Netflix and running ads on it doesn't make any sense. You can ship an item by plane or by truck, but not both at the same time." That's a metaphor, and what it's pointing out is that AT& T and Netflix are both platforms that facilitate content delivery, so it is natural for them to merge with content companies rather than other platforms. Furthermore, Netflix is a threat to traditional cable companies. There has been a developing trend of price- conscious consumers choosing to cancel cable TV services and choosing to purchase stand- alone Internet service instead and coupling it with a Netflix subscription. This combo is a cost- effective and time- saving way to entertain a family because Netflix has no ads, and you watch anytime at your pace according to your schedule. At the same time, you can still get your news via the Internet. Aside from every news organization having websites, a simple Twitter account strategically following various news sources who post their content to Twitter can be a great way to receive breaking news without gluing oneself to the TV or being bogged down by frequent advertisements.

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Another example is using Seeking Alpha rather than watching CNBC, which could work for some independent investors, depending on their trading frequency and strategy. Watch The Suffering Online Hitfix. How the AT& T and Time Warner Merger Can Kill Netflix. By merging with Time Warner, AT& T no longer needs to win the battle of net neutrality (which would have allowed AT& T to cap Netflix's streaming speeds on its data networks, amongst other things.)Of course, AT& T would like to win that battle, but this merger creates a more palatable strategy: rather than stifle Netflix on their networks by capping data, AT& T's merger with Time Warner could potentially make it less compelling for their customers to own a Netflix subscription (or other variations of media streaming such as Hulu, Amazon Prime Video, You. Tube Red, etc.) by simply competing on the basis of content. If customers are busy watching shows and movies created by Time Warner, they have less time to watch Netflix, and over time, may choose to cancel their Netflix subscription. If other ISP's such as Verizon (NYSE: VZ) choose to collectively implement a similar strategy, it could severely slow down Netflix's growth, or worse. What can Netflix do to fight back?

Netflix has always known that these mergers between wireless providers and content producers were a possibility from the start, and that's the reason Netflix has been desperately burning through cash to create its own original content- -it's the only chance Netflix has to survive in the long run. It is a mandatory gamble Netflix must take, because they will not be able to sustain the business model of solely licensing the content of others and streaming it on their platform. That's because losing one important bid on some popular content to a competitor such as Hulu can mean the difference between subscribers staying or leaving on any given month. By producing its own original content, Netflix can rely less on winning bids for the content of others, and provide a little more stability in their subscriber numbers. Dark Mirror Full Movie In English. The problem is, Netflix has stepped onto a hamster wheel.

They will never be able to stop producing new content without losing ground. For this reason, I do not consider Netflix's cash burn on content an investment as some bulls do, but a permanent cost in operating the business moving forward.

To survive in the long run, Netflix would require a merger with another company that produces its own content. Disney (NYSE: DIS) is the most brought- up candidate, so I shall discuss the prospects of a hypothetical merger between the two companies. Netflix would probably welcome a Disney merger, but would Disney benefit from it? Disney is not as worried about their movie segment as much as they are worried about their ESPN business, which has contracts with various sports organizations spanning about a decade into the future. With such a far- out time frame, I am guessing that Disney's main priority in any sort of strategic merger is to conclusively secure the future of its ESPN business investments. As far as Disney's movie portfolio, I would imagine that Disney is content with simply selling distribution/streaming rights to the highest bidder, and would prefer more players to be in the game, as it creates competition for its movie content.

In terms of saving its ESPN business via a Netflix purchase, Disney could hypothetically buy Netflix, stream live ESPN sports events on the latter's platform, and allow users to rewind and watch games repeatedly, while serving unique ads each time. Furthermore, this value proposition of all the classic Disney movies and all the content that Disney owns, combined with being able to watch sports on an easy- to- use interface such as Netflix would potentially allow Netflix to raise prices to somewhere around $1. People who only have access to the Internet and Netflix for entertainment tend to miss out on sports, and the extra price increase would still be less than having to pay for traditional TV services. If they don't like sports, Disney has a huge portfolio of movies, and ongoing content that's constantly being created.