The deal of the year could change how we watch TV.
The tie-up of AT&T and Time Warner, which brings together one of the largest wireless and pay TV providers and cable networks like HBO, CNN and TBS, could kick off a new round of industry consolidation.
Stocks of some programmers that could attract interest rose sharply on Friday as the deal of the year came together. Discovery gained 3.6 percent, AMC rose 3.9 percent and Scripps jumped 5.6 percent.
Media content companies are having an increasingly difficult time as standalone entities, creating an opportunity for telecom, satellite and cable providers to make acquisitions, analysts say.
Media firms face pressure to access distribution as more younger viewers cut their cable cords and watch their favorite shows on mobile devices. Distribution companies, meanwhile, see acquiring content as a way to diversify revenue.
"The industry needs to consolidate," said Salvatore Muoio, whose firm invests in a number of media companies, including Time Warner. "You have a lot more competition from the likes of Netflix, Amazon and Hulu."
AT&T said late Saturday it will buy Time Warner for $85.4 billion in a combination of cash and stock, forging the biggest deal in the world this year. It expects to close the acquisition by the end of 2017.
AT&T chief executive Randall Stephenson said the deal "is a perfect match of two companies with complementary strengths who can bring a fresh approach to how the media and communications industry works for customers, content creators, distributors and advertisers."
Owning content will help AT&T "innovate on new advertising options, which, combined with subscriptions, will help pay for the cost of content creation," the company said Saturday.
But the deal and others will need to pass the scrutiny of regulators, who have raised increasing concerns about media mergers.
Shares of Disney, often thought of as a leader in content, are down 16 percent for the past year, noted Richard Greenfield, analyst at BTIG, who said the industry is under "significant stress."
Earlier this month, Disney Chief Executive Robert Iger highlighted the growing importance of distribution for content companies.
"The biggest thing that we're trying to do now is figure out what technology's role is in distributing the great content we have," Iger told attendees at a luncheon held by the Boston College Chief Executives Club.
Former Federal Communications Commission (FCC) Chairman Julius Genachowski, a partner at the Carlyle Group, said a AT&T-Time Warner deal "and other big potential deals reflect the landscape that's changing dramatically from wired to wireless with big changes in consumption of video particularly among millennials," he said.
The deal will face serious opposition.
Republican presidential candidate Donald Trump on Saturday vowed flatly to block a deal if elected.
"As an example of the power structure I'm fighting, AT&T is buying Time Warner and thus CNN, a deal we will not approve in my administration because it's too much concentration of power in the hands of too few," Trump said.
Senator Edward Markey, a Massachusetts Democrat, also raised serious concerns.
"In the telecommunications market, we need more competition, not more consolidation. We need a telecommunications market where pay-TV gatekeepers don't favor their own content providers," Markey said. "Less competition has historically resulted in fewer choices and higher prices for consumers, and this deal should be assessed with consumers, competition and choice in mind."
AT&T said the Justice Department will review the deal but said it is unclear if the FCC will also have to approve the deal since the companies haven't decided "which FCC licenses, if any, will be transferred to AT&T in connection with the transaction."
Barclays analyst Amir Rozwadowski said distributors could increasingly look to buy content. "Companies that traditionally ran their businesses in 'siloed' environments are now expanding their reach into tangential markets in order to seek out new growth and bundling services in order to reduce churn," he said.
Cable company Comcast kicked off the trend with its acquisitions of NBCUniversal in 2011 and more recently of DreamWorks Animation in a bid to become a massive force that controls how television shows and movies are made and delivered to viewers.
Comcast's acquisition was in part aimed at diversifying its business out of cable.
AT&T has already made moves to turn itself into a media powerhouse, buying satellite TV provider DirecTV last year for $48.5 billion.
It also entered into a joint venture, Otter Media, with the Chernin Group in 2014. The venture invests in media businesses and has rolled out video streaming services targeted at millennials.
Meanwhile, Verizon, has made a number of content acquisitions, including AOL. It has announced plans to buy internet company Yahoo Inc but has indicated it may renegotiate following a breach of Yahoo user email accounts.
As its bread-and-butter wireless operations struggle in a saturated phone market, Verizon had said in July it would buy Yahoo's core business for $4.83 billion to drive growth in advertising and media.
But some analysts said questions persist about the success of big vertical deals. U.S. regulators will insist on significant conditions as part of any approval that would limit the synergies from any deal, they said, noting that in 2011 Comcast was forced to give up day-to-day control of video website Hulu in order to buy NBC, and that it had to make NBC programs available to other streaming services.
"Vertical integration between programming and distribution in particular raises a number of issues: DirecTV, for instance, might favor Time Warner content, crowding out or refusing to carry alternative and independent programming that viewers might prefer," said John Bergmayer, senior counsel at advocacy group Public Knowledge.
Stephenson told reporters Saturday that the deal "is a vertical merger in its pure sense. Time Warner is a supplier to AT&T and we are combining with a supplier."
As a result, he added, "there's no competitor being removed from the marketplace, there's no competitive harm that is being rendered by putting these two companies together. So any concerns by the regulators, we believe will be adequately addressed by conditions, that's our anticipation."