In confirmation of rumors doing the rounds in Hollywood, HBO Max owner AT&T and Discovery have announced a merger of their entertainment assets in a multi-billion-dollar deal.
The historic deal could potentially reshape the media business in general and the streaming business in particular.
A combined announcement from the companies was released early on Monday. It was made public that WarnerMedia’s premium entertainment, sports, and news assets and Discovery’s leading non-fiction and international entertainment, and sports businesses will create a premier, standalone global entertainment company.
AT&T and Discovery will hold a joint press conference at 7:30 am EDT and a separate call with investors will begin at 8:30 am EDT.
This agreement unites two entertainment leaders with complementary content strengths and positions the new company to be one of the leading global direct-to-consumer streaming platforms.
It will support the fantastic growth and international launch of HBO Max with Discovery’s global footprint and create efficiencies which can be re-invested in producing more great content to give consumers what they want.
John Stankey, AT&T chief
News of the merger is particularly hitting as both companies prepare to deliver their pitches to advertisers during the annual week of upfront presentations.
This year’s upfronts will be virtual with Discovery’s presentation set for Tuesday and WarnerMedia’s on Wednesday.
With early reports of the merger leaking out, the news came as a surprise on behalf of the telecom and media giant AT&T. Just three years ago, it had spent $85 billion to acquire the assets it is now willing to spinoff to Discovery.
Through its WarnerMedia unit, AT&T owns CNN, HBO, Cartoon Network, TBS, TNT and the Warner Bros. studio.
On the other hand, Discovery controls lifestyle juggernauts such as HGTV and Food Network, and unscripted channels like TLC and Animal Planet.
According to Bloomberg News, who first reported that such a deal was in the works, the idea is to combine Discovery’s reality-TV empire with AT&T’s vast media holdings, building a business that would be a formidable competitor to Netflix Inc. and Walt Disney Co.
The Financial Times had estimated that the deal could create a $150 billion dollar combined streaming service.
AT&T’s interest comes as part of a series of similar “housecleaning” deals under its current CEO John Stankey who wants the company to focus on its “core sector” of telecommunications.
The company has been funnelling big money into launching its 5G network while expanding its fiber-optic network.
The investment of billions of dollars has resulted in layoffs and sale of underperforming assets.
In December 2020, AT&T agreed to sell its anime video unit Crunchyroll to Sony for $1.2 billion. Other disinvestments include Puerto Rico phone operations, a stake in Hulu, and almost all its offices at New York’s Hudson Yards.
According to The New York Times, the combined entity coming out of the AT&T-Discovery deal could be the next media juggernaut. AT&T released its streaming platform, HBO Max, last year which comprises HBO programming and movies from AT&T’s Warner Bros. studio.
After initial stumbles, HBO Max has gained quite the traction, with blockbusters movies like Godzilla vs. Kong, Mortal Kombat, and Zack Snyder’s Justice League on its 2021 slate. It added 2.7 million subscribers in the first quarter to reach 44.2 million in total.
The Warner Bros. policy of premiering films on HBO Max at the same time they reach theaters has worked wonders for the platform.
HBO’s The Undoing became its biggest post-GoT success and Max Originals like The Flight Attendant had a devoted audience with its weekly episodes.
Meanwhile, Discovery, too, only recently launched Discovery+ which is home to a vast array of unscripted reality shows. Such a deal would only mean bundling of these two largely mutually exclusive content streams.
The merger announcement has confirmed a 71-29 sharing of control between AT&T and Discovery of the new company that will be created.
About AT&T
AT&T is the world’s largest telecom company by revenues. It was established in 1877 by Alexander Graham Bell, who obtained the first US patent for the telephone.
Source: Bloomberg
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