Here are four reasons AT&T may be better off if U.S. District Court Judge Richard Leon rules in favor of the government and blocks the deal.
Pay TV is shrinking. Doubling-down on content to support DirecTV may not matter if the entire pay-TV business is in irreversible secular decline.
Even if HBO is growing (some of that growth is from AT&T giving away HBO subscriptions last year with the assumption its deal would go through), U.S. pay-TV households are shrinking at an alarming rate.
Only 79 percent of U.S. homes subscribed to some form of a pay TV service last year, down from 88 percent in 2010, according to a study from Leichtman Research Group. That's not good news for CNN, the CW, and Turner Broadcasting, which survive on eyeball-driven affiliate fees and advertising. It's possible Time Warner is a melting iceberg.
Losing could set a precedent that also weakens competitors, including tech giants. If AT&T loses, and the government applies a new, strict anti-vertical integration precedent to the largest technology companies, that could stop them from acquiring media companies themselves. It could also prevent them from one day branching out into wireless distribution, AT&T's core business.
"Whatever this judge says in his opinion will carry a lot of weight in future analyses of vertical transactions," said Breed.
A ruling against AT&T would also hurt its direct competitors. Other wireless and cable companies would conceivably have to give up on any dreams of vertical integration. It's unclear how a decision would affect Comcast, which is already vertically integrated through its ownership of NBC Universal, CNBC's parent company.
Time Warner could get caught in an expensive bidding war for content. Technology companies are increasingly bidding on content, the lifeblood of HBO.
Netflix has already committed $8 billion for 2018. Apple may spend up to $4.2 billion on original content by 2022. YouTube is ramping up production of original series. Amazon spent $4.5 billion on 2017's video content, according to J.P. Morgan estimates.
Major sports rights are tied up for a while — NBA games will air on Turner's TNT through the 2024-25 season. Sunday Ticket, which AT&T already owns, is locked up until the end of the 2022-23 NFL season.
Still, what happens if Netflix, buoyed by a $135 billion market valuation that's close to double all of Time Warner, outspends HBO on the most promising new shows? And if not Netflix, what about Amazon, Google and Apple?
The same question applies to sports rights. Facebook will exclusively stream 25 Major League Baseball games this year. It's a tiny deal — but could be a precursor of what's to come.
These are media-rights deals, not mergers. Chances are the government isn't going to block them. Instead of protecting AT&T from technology companies, owning Time Warner may make AT&T even more vulnerable to brutal competition for content.
Buying Time Warner will increase AT&T's massive debt load. It's already about $125 billion and would balloon to about $175 billion if the deal goes through. While tax reform has given AT&T some relief, "you still have to be concerned with that level of leverage," Moffett said.
"The more you get enamored with a strategic idea of what you can do with an asset, the more you overlook the warts," Moffett said.