AT&T, a communications infrastructure company, now proposes to buy Time Warner, a media company. The business theory here is that AT&T is no longer in the telephone business, it’s in the information-delivery business, so it ought to own that information. Time Warner’s media products — HBO, CNN, the Turner cable stations — are a valuable part of the information that’s delivered via AT&T’s varied communications routes, including mobile, cable and satellite, and therefore AT&T ought to own Time Warner.
A frequent problem with business theory is that it’s created by people — business people whose priority is not consistently being logical but consistently making money — who are not very good at theory. The other problem is that business theory is often not a theory at all, but hype. It’s a lot of people — buyers, sellers, bankers and other hopeful windfall participants — trying to convince each other to do the thing that will enrich them most, even if it’s at the other’s cost.
AT&T CEO Randall Stephenson and Time Warner CEO Jeffrey Bewkes have been, in recent days, often pictured together, as though they are allies and true believers in a cause. In fact, Bewkes has long been of the view that what Stephenson wants the world and his shareholders to believe — it should own the content it distributes — is utter hogwash. Much of Bewkes’ CEO career has been about dismantling that idea and offloading Time Warner’s considerable distribution network. But, at $109 a share, Bewkes is a sudden convert to the theory he has long rejected.
Even the key part of this thesis, that AT&T is in the information business, is not really true. Rather, what’s true, is that it is no longer entirely in the highly regulated telephone industry and is now, faced with massive competition and rapid transformation in the communications business, existentially trying to redefine what business it uniquely is in. “Information” is the valuable part of the communications business, so that’s a good place to start when you are redefining yourself.
But, in fact, AT&T has never informed anyone of anything. It has never been in the business of parsing or evaluating or seeking or shaping information, which is the value in information. AT&T has never been paid to write even one sentence.
Delivering information and creating information are not just different skills, they may be inimical ones. The former must relentlessly seek efficiencies, the latter must tolerate many hopeless inefficiencies.
The job of a media company is to create products that its audience wants and that it will pay for, even when the audience often has little idea what it wants or is willing to pay for. In other words, it’s a widely speculative enterprise.
Read full story at http://www.usatoday.com/story/money/columnist/wolff/2016/10/30/wolff-business-theory-time-warner-deal/92885442/