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Time Warner saw YouTube as threat, used HBO in talks, U.S. says

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AT&T CEO Randall Stephenson leaves the federal courthouse in Washington on March 22. The Trump administration is facing off against AT&T to block the telephone giant from absorbing Time Warner, in a case that could shape how consumers get, and how much they pay for, streaming TV and movies.

U.S. antitrust officials trying to stop AT&T Inc.’s takeover of Time Warner Inc. pointed to Time Warner’s use of HBO as leverage in programming talks with distributors, including YouTube, as evidence of the kind of bargaining power AT&T would gain from the deal.

HBO was at the center of talks with YouTube when the video site was starting an online TV service. YouTube didn’t want to take all of Time Warner’s Turner Broadcasting channels because it wanted to offer a slimmed-down package of channels at a lower cost than traditional cable.

That would have caused “irreparable harm” to Turner’s business model, Turner executive Coleman Breland, who negotiated with YouTube, said in an email presented in court Monday by the Justice Department. Breland told Time Warner Chief Executive Officer Jeff Bewkes about YouTube’s position, and Bewkes in turn told HBO to stop negotiating with YouTube on a programming deal, Breland testified.

The Justice Department is using details of programming negotiations to make its case. The government says Time Warner’s content, particularly premium sports such as March Madness college basketball, are must-haves for distributors. If AT&T owns Time Warner, it could use that leverage to raise prices on rivals such as Dish Network Corp., the Justice Department says.

The Justice Department says the AT&T deal is a particular threat to emerging rivals such as YouTube’s TV service and Dish’s Sling TV that want to offer cheaper and smaller bundles of channels. That model is a threat to AT&T’s DirecTV business, so AT&T is motivated to use Time Warner to squelch it, according to the government.

Under a previous settlement with the Federal Trade Commission, Turner was prevented from tying HBO and Turner together in programming talks and conditioning the purchase of HBO on also buying Turner channels. That agreement expired after 10 years.

Time Warner is free to tell pay-TV companies “no Turner, no HBO, true?” Justice Department attorney Dylan Carson asked Breland.

“That’s true,” Breland said.

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