Kempner: New trust issues arise between CNN and President Trump?

8:06 a.m. Thursday, Nov. 9, 2017 Business
President Donald Trump got lots of airtime on CNN during his election campaign, but he’s also been a frequent and vocal critic of the news network. Now there are reports that the Justice Department wants AT&T to sell the CNN and the rest of Turner Broadcasting or risk federal opposition to its proposed purchase of Time Warner.

We always knew there were trust issues between Donald Trump and CNN. Now, some people are looking for the president’s fingerprints on action that could undercut the network.

News outlets reported that the U.S. Department of Justice told AT&T it will try to block the company’s purchase of Time Warner unless AT&T makes a brutal move, such as selling off Time Warner’s Turner Broadcasting unit, which includes CNN.

That’s the equivalent of saying you can buy a two-story house, so long as you agree to get rid of the roof … and the first story.

Turner, which is sort of based in Atlanta, accounts for nearly 40 percent of Time Warner’s revenue and almost 60 percent of its operating income. In addition to CNN, it includes a bevy of TV networks such as TBS, TNT, Adult Swim and Cartoon Network.

It’s hard to imagine AT&T wanting to buy Time Warner without being able to hold on to Turner. (Other parts of Time Warner are HBO and Warner Bros., the producer and distributor of TV shows, movies and video games.)

When the proposed AT&T/Time Warner combo was announced during last year, Trump called out CNN specifically and said his administration would not approve such a deal “because it’s too much concentration of power in the hands of too few.”

CNN, of course, is the news network that the president most loves to hate. He’s accused CNN of being deeply unfair to him and others.

All this has fed into concerns -- which the Whitehouse denies -- that maybe the president might try to put the squeeze on the Justice Department’s antitrust folks to isolate CNN and Turner.

That’s not hard to imagine. Trump doesn’t mind barging outside the lines. I guess you could say he’s an activist president. 

But he isn’t the only political leader who has wanted to block the AT&T/Time Warner combo, and traditional antitrust concerns have been raised.

Some Democratic politicians have warned about such a giant corporate consolidation of big media properties. Hillary Clinton’s vice presidential running mate, Tim Kaine, expressed at least general concerns during the campaign. And Bernie Sanders said the deal should be killed.

Tom Arthur, an Emory University professor specializing in antitrust law, told me it has been decades since Justice officials last stopped such vertical mergers which bring together companies across different industries (rather than horizontal integrations that consolidate businesses in the same line of work).

AT&T is mostly a provider of communications links and pipelines for information. Time Warner produces that content that can flow through AT&T’s systems.

“It’s mildly surprising” that the Justice Department might try to force AT&T to shed big chunks of Time Warner, Arthur said.

It would be an aggressive extension beyond the conditions federal lawyers negotiated in the 2011 combination of Comcast and NBCUniversal, he said. In that one, Comcast agreed to a few concessions, including licensing content to online competitors.

That seems way easier to pull off than shedding a key chunk of the company as AT&T apparently is being asked to do with Turner. (The New York Times reported Justice officials also offered another option: that AT&T sell off DirecTV.)

Arthur told me he wonders whether concerns about the growing might of technology companies like Facebook and Google are feeding into a push to limit AT&T’s power.

Meanwhile, CNBC reported that AT&T CEO Randall Stephenson is pushing back, saying publicly, “I have never offered to sell CNN and have no intention of doing so.”

Fighting the government is costly, and unfinished deals leave corporate employees uncertain, divert company focus and eventually start smelling like old fish.

Still, what other likely player would the Justice Department be OK with buying CNN or Turner’s other networks? A media company that already has news and entertainment networks? Wouldn’t that be a consolidation of power, too?

Remember that Fox News-parent 21st Century Fox tried to buy Time Warner three years ago before being rebuffed by the company. There was talk at that time of Fox putting CNN up for sale in that scenario, too.

It could be an ugly thing for Atlanta if Turner becomes an isolated pawn as a result of regulatory maneuvering.

Turner still has thousands of employees in downtown and Midtown Atlanta, even as most senior Turner leaders and most CNN news shows are no longer based in Georgia.

The company’s operating income is more than twice the size of either HBO or Warner Bros., Time Warner’s other units. Still, over the latest nine-month period, Turner’s operating income has slipped.

Turner faces issues confronting much of the cable television terrain: more competition, shifting viewing habits and declines in subscribers that hurt ratings and, ultimately, advertising dollars.

Turner is trying to come up with more programming on demand and more distinctive content that viewers will seek out wherever they want.

Here’s the part that’s sure to annoy the president: Turner’s news networks are financially on the rise.

Which suggests that CNN’s dysfunctional symbiotic relationship with Trump, aka the Presidential News Machine, is continuing to pull in viewers.

That’s one place CNN is probably glad to see Trump’s fingerprints.

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