Turner Chief Pushes Back on Core Justice Dept. Argument
WASHINGTON — The head of Turner Broadcasting on Wednesday pushed back against one of the central arguments of the government’s case to block the AT&T and Time Warner merger, saying that his company’s channels would not be used as a weapon against rivals if the deal went through.
The Justice Department has argued that Turner, which is owned by Time Warner, owns “must-have” channels like CNN and TNT that the merged company would use as leverage in negotiations with other cable and satellite TV operators. But John Martin, the chief executive of Turner, told a federal court that his channels were not absolutely vital for a cable or satellite business.
“I believe we have must-have, as do other programmers,” Mr. Martin said. “Must-have is another way of saying we have popular programming.”
Much of the Justice Department’s argument in the trial, which started last week, has centered on the importance of Turner’s exclusive sports rights, which include professional and college basketball games. Mr. Martin’s testimony had been one of the most anticipated moments of the trial.
The Justice Department called on Mr. Martin as an adversarial witness in large part to present emails and memos he wrote that revealed how important Turner content is to Time Warner’s business, and how critical Turner is for cable and satellite operators.
In one memo presented Wednesday, from 2016, Mr. Martin emphasized the importance of renewing rights to the N.C.A.A. college basketball championships, known as March Madness.
“March Madness plays a critical role” for Turner, Eric Welsh, a lawyer for the Justice Department, read from the email.
It’s “not just important but has a critical role,” he said to Mr. Martin.
Mr. Martin, who joined Time Warner in 1993, was one of the first witnesses called by the Justice Department. He has been vocal critic of the government’s lawsuit to block the merger, calling the Justice Department “clueless” last month.
Mr. Martin’s testimony revealed how the trial has placed company executives, who normally put a bold face on their businesses for investors, in a tricky position. AT&T and Time Warner played down their influence. Their rivals have described their weaknesses in full detail.
Mr. Martin tried to walk a thin line of presenting Turner’s sports and entertainment networks as important but not too important.
During cross-examination by AT&T, Mr. Martin disputed the government’s idea that the merger would give AT&T the incentive to use Turner Broadcasting as a negotiating weapon to extract higher fees from cable, satellite and online streaming providers.
Cable channels, he said, need to be distributed to make money — and can’t do that if rival cable operators decide that the price is too high to carry a channel.
“Distribution is the most important variable for success for any programmer,” Mr. Martin said. He said revenue for cable television networks come from two sources: subscription revenue and advertising. “Distribution affects both of those,” he said. “It’s simple math.”
The trial, which started last week, has attracted huge public interest, with the courtroom packed with company and government officials, investors, reporters and industry analysts. On Tuesday, executives from AT&T and Time Warner were in attendance. John Stankey, an AT&T executive poised to lead Time Warner if the merger is approved, has attended every day.
Judge Richard Leon of the United States District Court for the District of Columbia will decide the case. He has not indicated an inclination toward any arguments.
On Wednesday, in one of his few comments so far in the trial, he expressed astonishment at the $1 billion Turner pays each year for rights to broadcast National Basketball Association games.
“You said billion?” he said, eyebrows raised.
The Justice Department has called all the witnesses so far, and the early testimony by AT&T’s rivals has supported the Justice Department’s claim that the huge media merger would unfairly harm their businesses that depend on offering Turner’s channels. AT&T owns a nationwide satellite TV operator.
Warren Schlichting, the president of SlingTV, a streaming video service owned by Dish Network, another national satellite TV company, took the stand on Monday and Tuesday. He said Turner’s “hard-core” negotiating tactics in the past had led to blackouts of its channels and a loss of subscribers. Mr. Schlichting warned that things would get worse with a merger.
“With the merger, all the incentives change, and we have one of our most important licensers teaming up with our biggest adversary,” Mr. Schlichting said. “I just don’t know what incentive Time Warner would have to get a deal done.”
The government’s witnesses have faced tough questioning from Daniel Petrocelli, the lead litigator for AT&T and Time Warner. To show SlingTV’s history of contract disputes and willingness to lose customers, Mr. Petrocelli presented a long list of occasions when Dish allowed channels to go dark after contract negotiations failed. Mr. Petrocelli also pointed a several public statements by Dish’s chairman, Charlie Ergen, that appeared to diminish the importance of Turner channels to Dish.
The trial has moved slowly and is expected to last more than six weeks, with testimony from AT&T’s Randall Stephenson and Time Warner’s chief, Jeff Bewkes. Among the most important witnesses may be Carl Shapiro, an antitrust economist for the Justice Department who is not expected in coming days. Mr. Shapiro has projected that the merger would lead to a 45-cent monthly price increases for cable and satellite customers.
Mr. Petrocelli has previewed a plan to attack Mr. Shapiro’s analysis, which he has said is flawed and cherry-picks data.