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Data Sheet—Why AT&T’s Time Warner Deal Brings the Future of Television Closer

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U.S. District Court judges sure do love to write. Back in the Microsoft antitrust case, the late Judge Thomas Penfield Jackson issued a 207-page tome with findings of facts and another 46-page decision with his findings of law. On Tuesday, in the same courthouse, Judge Richard Leon rendered his verdict allowing AT&T to acquire Time Warner for $108 billion and remake the entertainment landscape. It only took 172 pages.

Reading through Leon’s unsearchable, uncut-and-pastable PDF file, the same annoying format judges have been using since before the Microsoft case, it’s about halfway through that you find the crux of the entire AT&T case. The Justice Department charged that AT&T was buying Time Warner so the carrier could charge its competitors more to carry CNN, HBO and NBA games on TNT, or maybe even cut them off altogether to make its own distribution services more popular. AT&T said just the opposite–it was buying all that content to lower its costs and to create more futuristic services, like a mobile app that mashes up news clips from CNN into a personalized video news feed for every viewer or a mini-package of cable channels watchable on a mobile phone for $15 a month.

In his notes for explaining the deal rationale to his board, AT&T CEO Randall Stephenson wrote, as Leon quotes on page 89 of his decision: “How can you advantage your own distribution (TV, BB, wireless) without harming TW position as a wide distributor of content to other SVOD, cable networks, and broadcast networks.” (For those unfamiliar with the acronyms, “BB” is broadband, aka home Internet service, and “SVOD” stands for “subscription video on demand,” the Internet-based video services like Google’s YouTube TV and AT&T’s own DirecTV Now.)

Aside from proving Stephenson is a fan of the Oxford comma, the government argued that this quote showed AT&T did intend to use Time Warner’s content as a weapon. On the stand, Stephenson responded that the point was to shoot down any notion that AT&T could win by limiting the spread of Time Warner’s content, as the government was suggesting. Judge Leon agreed with Stephenson, as should anyone familiar with the basic economics of the content business in 2018.

Although it’s the biggest pay TV provider in the country, AT&T controls only a fraction of that shrinking market (thanks to cord cutting). Time Warner sells its content to the entire pay TV market, however, and makes its money by charging subscription fees and running ads. Messing with other TV distributors in the hopes of gaining more subscribers for AT&T would never make up for the lost subscription and ad dollars. AT&T’s incentive is to use HBO and CNN as carrots, not a stick, to attract more users on every platform. Big media’s reluctance to go along with AT&T’s new ideas to transform TV for the mobile era led the carrier to buy Time Warner in the first place.

Now that AT&T has won, expect change to come rapidly. Whether that will be enough to justify the $108 billion price tag is another question. My go-to analyst in this realm, Craig Moffett, just downgraded AT&T’s stock to “sell,” noting that the company’s projected $249 billion debt burden would fall just below Indonesia in the ranking of countries’ borrowings. Stephenson better get to work on that cool CNN mobile app pronto.

Aaron Pressman
@ampressman
aaron.pressman@fortune.com

NEWSWORTHY

Slimfast. Electric carmaker Tesla is focusing on cutting costs and plans to layoff 9% of its workforce. CEO Elon Musk wrote to employees that the company must demonstrate “that we can be sustainably profitable. That is a valid and fair criticism of Tesla’s history to date.” Mobile chip giant Qualcomm is also going the cost cutting route after fending off an unwanted takeover offer from Broadcom. Qualcomm is trimming staff and resources from its effort to make server chips, but won’t close down or sell the unit at this time, Reuters reports.

Careful what you wish for. Cities vying to win Amazon’s second headquarters might want to check in on recent events in Seattle, site of Amazon’s HQ1. Less than a month after the city passed a small tax increase on medium-sized and large employers to fund programs for the homeless, city councilors reversed course and repealed the levy. Amazon and other local employers were heavily funding a petition drive to cancel the tax. Council member Lisa Herbold explained the about face, saying the ballot fight was “not a winnable battle.”

Influential. She got a first-time drug offender pardoned by the president. Now celebrity Kim Kardashian West has turned her brand leverage on another powerful leader, Twitter CEO Jack Dorsey. This time, Kardashian is seeking something everyone wants: an edit feature for tweets. “I had a very good convo with @jack this weekend at Kanye’s bday and I think he really heard me out on the edit button,” she wrote (on Twitter, of course).

High finance. Leading digital currency exchange Coinbase has a new way for people—–or at least some people—to invest in its market. The firm said it opened a cryptocurrency index fund for “accredited” U.S. investors with a minimum of $250,000 to deposit.

High finance, part 2. The leading ride hailing service in Southeast Asia, Grab, is getting a $1 billion capital infusion from Toyota. The companies will also cooperate more closely on the development of connected car services, such as an insurance service that monitors driving behavior via telematics to reduce premiums.

Cheap finance. Growing e-commerce may be restraining the prices of consumer goods in ways official government inflation statistics fail to capture, according to a new research paper. Prices for everything from computers to toys and shoes fell more online than in the the Labor Department’s widely cited Consumer Price Index.

Mobile finance. European online payments firm Adyen went public on the Amsterdam exchange and investors drove up the company’s share price 66% in early trading on Wednesday. That gives the processor of payments for Netflix, Facebook, and Spotify a stock market value of more than $17 billion, compared to its profits last year of $84 million.

FOOD FOR THOUGHT

Digital currencies like bitcoin have taken investors on a rollercoaster ride of highs and lows amid regulatory crackdowns, highly publicized thefts and inscrutable technical controversies. Wired reporter (and former Fortune writer) Erin Griffith has spent some time investigating the hype factory behind the cryptocurrency boom. While major online sites like Facebook and Google have banned crypto-related advertising, inventive startups are getting around the limits, she notes:

Etherisc, an insurance-focused blockchain project that’s launching a token sale later this month, evaded Facebook’s ban by using generic, high-minded tech terms that don’t bring to mind get-rich-quick schemes, like “ICO” or “token sale.” The company spent €1,132 on Facebook ads promoting its “decentralized protocol” on Facebook in late May. A Facebook spokesperson says the ads violated its policy and were approved in error.

Even so, the results were not what Etherisc expected. The company wound up with more than 56,000 “likes,” primarily from Nepal, Indonesia, and Bangladesh, according to an image of the company’s advertising dashboard viewed by WIRED. Etherisc founder Stephen Karpischek said he suspects the likes came from bots or click farms that direct their fake accounts to follow legit organizations in order make the accounts look real. He doesn’t want Etherisc to be associated with buying fake followers, so he’s considering deleting the page and starting over.

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BEFORE YOU GO

SiriusXM host and music publicist Eric Alper has performed a great service for all us Gen Xers and other folk who are fans of the original 1960s live action Batman show starring Adam West. As he promoted on Twitter on Tuesday, Alper assembled a graphic of every word used in a fight on the show. It’s way beyond the famed biff, bang and boom. Zlonk, krunch, and vronk were some of my favorites. What about you?

This edition of Data Sheet was curated by Aaron Pressman. Find past issues, and sign up for other Fortune newsletters.