Financier №4 (40) 2025

Over the past 25 years, many telecom providers have attempted to build vertical integration with media holdings in an effort to provide subscribers with a unified ecosystem, filled with their own content, additional services, and advertising.

In practice, such integration has, in most cases, failed to produce the expected results. Market participants have dubbed this trend the “media curse of operators.”

AOL & Time Warner. Ballon D'essai

The first major failure was the merger of AOL and Time Warner. In the 1990s, AOL was the primary provider of landline internet access for millions of households. The company provided email, and a news and entertainment portal. At the time, Time Warner was a major media holding company with the Warner Bros. film studio, HBO and CNN channels, magazines, and a cable business. The companies' intention to merge became known in early 2000, with the deal valued at $182 billion. The merger took place a year later. The resulting company became known as AOL Time Warner.

The goal of the integration was to unite audiences and achieve synergies. It was envisioned that AOL users accessing the internet through the company's portal would receive news and other media content from Time Warner. This would have increased advertising revenue and internet traffic. However, this business model never took off. The companies merged just before the dot-com bubble burst - a sharp decline in internet stocks, which had previously seen explosive growth on inflated investor expectations. This collapse led to a sharp reduction in online advertising budgets. 

Another factor was the spread of broadband internet, which led to a decline in AOL's subscriber base. The differences in the management approaches of the merging companies also made themselves felt. The media holding's management was more cautious and conservative, while the internet company was led by people inclined to take risks. This led to a slowdown in business processes precisely at a time when swift action was needed amid the industry's crisis.

As a result of these circumstances, the company posted a record loss of approximately $99 billion in 2002. In 2003, the AOL name was dropped from the company's name, leaving only Time Warner. Then, media assets were sold to mitigate the balance sheet. Finally, Time Warner spun off AOL into a separate entity in 2009.

Verizon. The Rise and Fall of a Media Empire

The next attempt at a partnership between a major telecom operator and a media holding company occurred in the mid-2010s.

In 2015, Verizon (VZ), one of the leading telecom operators in the US, acquired the aforementioned AOL for $4.4 billion. At that time, the company no longer provided internet access, but owned several major publications and websites such as The Huffington Post, TechCrunch, and Engadget, as well as the ONE by AOL advertising platform.

Verizon planned to monetize its subscribers through advertising on AOL platforms. The company began consolidating all of its advertising tools and even acquired several small mobile advertising services. In 2017, Verizon acquired Yahoo, an internet search engine with an email service, news platform, and financial portal, for $4.48 billion to increase its audience reach. According to the telecom's management, advertisers were expected to be attracted by the ability to buy ads on multiple platforms in single window mode.

In practice, the combined platform failed to compete with other popular media and social networks for effective ad targeting. As a result, its budgets were diverted to other services, primarily Alphabet (GOOGL) of Google, the world's leading search engine. In 2018, Verizon acknowledged the impairment of its media business, and it was sold to Apollo for approximately $5 billion in 2021. The telecommunications company focused on its core business and the development of 5G networks.

According to Market Research Future, the global digital video content market reached $47.38 billion by the end of 2024

AT&T. A Bid for Leadership in the Streaming Age

In October 2016, AT&T (T), one of the largest US telecommunications companies, announced its intention to merge with Time Warner, later renamed WarnerMedia. The deal was made in mid-2018. Its value was approximately $108.7 billion.

Upon the merger was completed, AT&T began developing an advertising platform called Xandr, which integrated data from WarnerMedia's television channels, websites, and apps. Through Xandr, advertisers could target audiences and deploy campaigns simultaneously on TV and online, buying video ads across multiple platforms.

In 2020, WarnerMedia launched the HBO Max streaming service. AT&T offered its subscribers a bundle offer that combined mobile and home internet services with access to TV series, movies, and other content from the Warner Bros. video library. Numerous marketing campaigns were conducted to retain existing subscribers and attract new ones. 

In an effort to remain competitive in its traditional business, AT&T began deploying 5G communications networks in parallel with the development of its own media assets. This led to a significant increase in the telecom operator's debt burden. Furthermore, competition intensified significantly in the streaming sector. Newcomer Netflix (NFLX), for whom streaming video was its primary and sole business, steadily increased its market share.

Ultimately, in 2021, AT&T abandoned the streaming idea and announced the spinoff of WarnerMedia, which was merged into the media holding Warner Bros. Discovery (WBD) in April 2022. AT&T received $43 billion from these deals and a 70% stake in the new company.

Comcast. Discovery of Europe

In 2018, Comcast (CMCSA), which operated in the field of cable TV and provided broadband Internet access in the United States, decided to offer subscribers its own media content. At that time, the company had already completed a relatively successful integration with NBCUniversal, which will be discussed below.

Comcast hoped to expand its media presence by acquiring Sky, a major European cable television operator that held numerous rights to broadcast sports events in the UK, Italy, and Germany, for approximately $39 billion.

Comcast management intended to bring NBCUniversal's film studio content to the European market, and also offer advertisers a unified solution for purchasing advertising time on TV and online services. Separately, they planned to open free access to the Peacock streaming platform for Sky users and expand to a European audience.

However, numerous regulatory requirements in the Old World prevented the US player from fully deploying its advertising technologies. Furthermore, the trend of TV viewers shifting to the internet intensified during this period.

As a result, Comcast's ambitious plans to increase advertising revenue failed to materialize. Furthermore, like many other players in the sector, the company was losing the competitive battle for the streaming market to Netflix, and retaining rights to broadcast sports events was becoming increasingly expensive.

The situation worsened in 2022 following a deterioration in macroeconomic conditions and a decline in consumer spending in Europe. The company then recognized an $8.6 billion impairment of assets and sold its German division of Sky. Comcast decided to focus on developing its business in the UK and Italy, where the situation was more favorable. However, its plans to create a major European media holding company based on the telecommunications company never came to fruition.

Comcast and NBCUniversal: An Exception to the Rule

Perhaps the only successful example of media integration in telecoms is the merger of Comcast and NBCUniversal. The $16.7 billion deal took place in 2011, long before Sky was acquired.

By the early 2010s, NBCUniversal was a media holding company that managed the film studio Universal Pictures, the NBC television channel, several cable networks, the Spanish-language broadcaster Telemundo, and the Universal theme parks. The merger with Comcast took place in several stages. First, it acquired a controlling stake in NBCUniversal from General Electric, and two years later, it acquired the remaining stake. This reduced the financial burden and gave Comcast time to evaluate the impact of the merger.

By that time, Comcast, unlike other telecoms, had its own advertising platform, into which new media assets were successfully integrated, and NBCUniversal had a number of profitable businesses that financed the integration and development of the new streaming service Peacock.

The secret to the successful merger was Comcast's avoidance of attempting to simultaneously implement several complex projects requiring significant investment. As we recall, this is precisely what happened to its peers, AT&T and Verizon. The story of the merger with NBCUniversal demonstrates that the “media curse” can easily be reversed with the right approach and accurate resource assessment