Why would the media conglomerate agree to be swallowed by an Internet, wireless and cable TV operator when it could continue to concentrate on making content and license its film, TV and live sports content to AT&T and other cable TV and Internet streaming providers such as Netflix (NFLX) , Hulu and Amazon (AMZN) ?
Was it simply a matter of an offer that was too good to refuse?
After all, AT&T's $107.50 per share bid was a hefty 36% premium to where Time Warner's shares traded just before the deal was announced on Oct. 22. For Time Warner's board of directors, rejecting the buyout would have sparked a storm of angry shareholder lawsuits.
But money aside, what's the strategy? Why sell HBO, the Warner Bros. film studio and some of the country's most popular cable TV networks -- TBS, TNT and CNN, to name a few -- to a bunch of telecom suits in Dallas?
At a midtown Manhattan gathering on Wednesday hosted by tech-centric website Recode, John Martin, chairman and CEO of Time Warner's Turner Broadcasting System unit, was pushed to explain his company's thinking. Recode media writer Peter Kafka gladly played the part of skeptic.
"Why not stick to making content, and then distribute it widely through people who are really good at that part of the business?" Kafka asked.
Facebook (FB) , Apple (AAPL) , Alphabet's (GOOGL) Google and Netflix, he said, have more than demonstrated that they're the world's best at creating digital platforms that users find easy to use. Is it a good strategy to expect that a Time Warner or even an AT&T can match the world's smartest tech companies when it comes to the tricky development of a user interface?
Martin countered that yes, making such a platform isn't easy but owning the consumer experience has been the new king of media, dethroning both content and distribution. Internet users have shown that they'll watch inferior content if the viewing is mobile, always on and well-functioning. Alphabet's YouTube is a prime example.
"Ultimately, if we want to control our own windows, and we want to control how we monetize our content, those other companies aren't going to allow us to do that," said Martin, Time Warner's chief financial officer from 2008 to 2014. "You only get global control if you own the global rights to your [content] and if you can control the consumer experience."
Currently, viewers young and old, on mobile or in the living room, turn to Netflix, Google, Facebook and increasingly Amazon and Hulu for their video needs. Of course, content creators such as Time Warner helped to fuel Netflix's ascension, but that's a subject for another day.
Right now, Time Warner wants to regain some of that control.
"We have to think very hard about how do we maximize the value of these network brands, and if we're merely habituating a whole generation of consumers to just wait and watch it on Netflix or Hulu, I don't see how that's the best business answer for us," Martin said. "I don't think, necessarily, that the genie can't be put back into the bottle."
For years, Martin said, content companies have had to rely on cable providers Comcast (CMCSA) and Charter (CHTR) to innovate and improve the user experience. And while Comcast's X1 set-top box is a great improvement on the cable TV experience, millions of viewers have long grown tired of cable TV.
Martin was quick to explain that Time Warner is excited about the launch of DirecTV Now, AT&T's multichannel streaming service, which went live on Wednesday.
"I don't understand for the life of me why some of the biggest media companies, the most well capitalized ones -- Comcast, Charter -- why aren't they innovating faster, why aren't they the virtual MVPDs [multichannel video programming distributors], why they're ceding this space, allowing [internet pay-TV providers] to take away their customers."
By selling to AT&T, Martin argued Time Warner will have the technology to create other branded platforms that feature its programming. Having a national mobile network, AT&T Wireless, only can help that development, he said.
Another key piece of the merger is data.When Time Warner decided in 2008 to spin off Time Warner Cable, Martin said, the role that user information would play in everything from selling advertising to retaining customers wasn't apparent. Leaving aside the fact that Time Warner Cable only covered 20% of the country, AT&T owns a national pay-TV service, DirecTV; a multichannel streaming platform, DirecTV Now; and a mobile provider, AT&T Wireless. (Charter earlier this year swallowed Time Warner Cable after Comcast was forced to abandon its pursuit.)
"When we decided to spin Time Warner Cable, I don't think we fully had an appreciation of how the importance of data would potentially transform how we monetize our audiences," he said. "It's hard to estimate the impact of having the ability to be under the common ownership of a company that is a massive mobile provider -- that could provide some really exciting opportunities."
"But admittedly, these are early days, post-announcement," Martin added. "There's lots and lots of things to be worked out."
Indeed. And everyone, including Kafka, will be watching. In the meantime, shares of Time Warner were up 2.4% Thursday afternoon to $94.08.