A potential combination of entertainment giants 21st Century Fox and Time Warner would likely draw intense scrutiny from the Federal Communications Commission, Justice Department, Capitol Hill and consumer groups already concerned about media consolidation.
Although Time Warner has rejected an offer valued at $80 billion by 21st Century Fox, industry analysts don't expect 21st Century Fox Chairman Rupert Murdoch to quietly go away. When Murdoch sets his sights on an asset, he is usually very aggressive in his pursuit.
A pairing of 21st Century Fox and Time Warner would put the world's two biggest movie and television production companies under the same roof. Both companies also own power cable networks. Time Warner has HBO, TNT, CNN and TBS while 21st Century Fox owns Fox News and FX and 22 regional sports networks. 21st Century Fox also owns the Fox broadcast network and 28 TV stations reaching almost 40% of the country.
From an FCC standpoint, there are few regulations on the books that would stand in the way of a 21st Century Fox - Time Warner deal. Although 21st Century Fox owns Fox Broadcasting and Time Warner owns 50% of the CW network, that would not be enough to derail the marriage.
Senior 21st Century executives have acknowledged that should it reach an agreement to buy Time Warner, it would likely spin off the cable news channel CNN.
What would likely be of tremendous concern would be the power a 21st Century Fox - Time Warner combination would have in the creative community, specifically writers and producers looking to make television shows and movies.
The majority of TV shows and movies are produced by just a handful of companies -- Time Warner, 21st Century Fox, Walt Disney Co., Comcast's NBCUniversal and Sony Corp. A merger of two of the biggest producers would eliminate a buyer and give that entity a lot of leverage.
"The increased buying power 21st Century Fox would have is a huge antitrust issue I would expect the Justice Department to look at," said Derek Turner, research director of Free Press, a media watchdog group.
A top priority for 21st Century Fox is to get out from under investigations by the Federal Bureau of Investigation and the Justice Department regarding the phone hacking scandal at Murdoch's British newspapers.
Last month, Rebekah Brooks, the most senior executive to have been charged in the investigation that led to Murdoch closing News of the World, was acquitted.
While Brooks' acquittal was good news for 21st Century Fox and News Corp., which is Murdoch's publishing company, other executives were found guilty. That could lead to News Corp. being found guilty of violating the Foreign Corrupt Practices Act, which would likely mean a significant fine.
At one point the hacking scandal was seen as having the potential to take down much of Murdoch's empire. News of the World was found to have hacked into the voicemails of crime victims as well as celebrities and the royal family.
Murdoch famously apologized while claiming no knowledge of the hacking. When he appeared before Parliament to address the matter, Murdoch called it "the most humble day of my life." His son James Murdoch, who had responsibility of the British papers when the hacking took place, was heavily criticized as well.
James Murdoch's future within his father's empire was cloudy in the aftermath of the hacking investigation but he is now a co-chief operating officer of 21st Century Fox and has direct oversight over most of the TV operations in the United States.
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