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PrintStunning Rebuke. Those are the two words we keep hearing about Judge Richard Leon's decision to allow AT&T (T) to merge with Time Warner (TWX) over the government's objections.
Those two words could not be more wrong. That's because not only is it a stunning rebuke, it is a nuclear blast against the government. No, make that a thermonuclear hydrogen bomb blast directed at the antitrust division of the Justice Department -- and the fallout will be incredible.
I will go a step further. This nuclear assault will unleash more mergers. In fact, it will demand more mergers, as the judge seems bound and determined to show that the Justice Department doesn't have a clue what it is talking about, nor does its expert witnesses or any of its lawyers or economists.
In fact, I think this ruling even calls into question their viewing habits. The only thing that was left out was a charge that the justice department lawyers have to stop using rabbit ear televisions and ought to go get cellphones instead of land lines.
Believe me, I am being way too diplomatic, because there was a tinge of stinging chemical weaponry here by the judge -- as you can see with this little bit of legal doctrine: "After all, as Nobel Laureate Bob Dylan correctly observed, you don't need a weather man to know which way the wind blows." Yes, he invoked the Subterranean Homesick Blues to explain how the world has moved so far past the Justice Department's view of the TV-viewing world, now that Facebook (FB) and Alphabet/Google (GOOGL) control so much of the advertising dollars that you end up actually feeling sorry for AT&T-Time Warner, even after the merger. That's how left behind the untargeted advertising model is, even after merging with 100 million wireless customers.
Worse still, the cord-cutting that is going on will make it, if you read closely, a failed merger -- simply because no matter how much vertical integration you get, these two companies are going to continue losing share every day of their existence.
I know lots of people today are saying that the rebuke is really a subtle jibe at President Trump for insisting that the case be brought because he hates CNN. The judge acknowledges a level of punitive costs extracted by the government in the delay of the deal and in the huge amount of legal bills that it generated.
But I think that's a sideshow. This is a brief that says the Justice Department doesn't get that the Facebooks, Amazons (AMZN) , Googles and Netflixes (NFLX) -- indeed, the whole of FANG (Facebook, Amazon, Netflix and Alphabet/Google) can put all of these old-line companies out of business if they don't get together and save costs. It is a clarion call for the likes of Disney (DIS) and Comcast (CMCSA) -- and anyone else in the business of trying to get customers to watch ads -- to do everything it can to make it so they can compete with FANG, because they most surely can't now.
That's why the bottom line is that Judge Leon's decision is all about trying to save the traditional media in a world where the odds favor their extinction, as their costs are too great and their revenue too meager to stay on a collision course with FANG -- a course which has, despite the government's naïve objections, already been set in action if not already been etched in stone.
As the laureate said, "the answer, my friend, is blowin' in the wind." And the answer is that traditional media better merge. For if they follows the government's course, they will certainly die, because "the times, they are a-changin'."
