AT&T, Discovery Merging Media Assets to Create Streaming Video Giant

AT&T and Discovery on May 17 announced a definitive agreement to combine WarnerMedia’s Warner Bros., HBO, Turner and CNN media assets with Discovery’s reality TV-based HGTV, Food Network, Animal Planet, Magnolia, Eurosport and international entertainment businesses to create a new unnamed standalone global entertainment company focused on streaming video.

Under the agreement, which is structured as an all-stock transaction and expected to close in mid-2022, AT&T would receive $43 billion (subject to adjustment) in a combination of cash, debt securities, and WarnerMedia’s retention of certain debt. AT&T’s shareholders would receive stock representing 71% of the new company; Discovery shareholders would own 29%. The boards of directors of both AT&T and Discovery already have approved the transaction. The deal, which must pass the federal regulatory approval process, would help AT&T significantly trim its massive ($170+ billion) debt load accumulated through the acquisitions of DirecTV and Time Warner, among others.

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Discovery CEO David Zaslav would lead the proposed new company with a management team and operational and creative leadership from both companies.

The companies expect the transaction will create substantial value for AT&T and Discovery shareholders by bringing together some of the industry’s top management teams, content creators, TV series and movie libraries. More importantly, the companies expect the deal to accelerate both companies’ plans for direct-to-consumer (DTC) streaming services for global consumers, which revolve around HBO Max and Discovery+, respectively.

The new company would have significant scale and investment resources, with projected 2023 revenue of approximately $52 billion, pre-tax earnings of $14 billion. The AT&T and Discovery combination expects to realize at least $3 billion in cost synergies annually, which typically translates into significant job cuts across both companies.

“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,” AT&T CEO John Stankey said in a statement. “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.”

“During my many conversations with John, we always come back to the same simple and powerful strategic principle: these assets are better and more valuable together,” added Zaslav. “It is super exciting to combine such historic brands, world class journalism and iconic franchises under one roof and unlock so much value and opportunity.”

One thought on “AT&T, Discovery Merging Media Assets to Create Streaming Video Giant”

  1. Hopefully, the new company will take advantage of all its combined assets and give consumers a decent choice of whatever content they want to watch. The current Discovery+ streaming service is only $5/month and not only includes content from their own channels like Animal Planet, Discovery Channel, DIY, HGTV, The Travel Channel, TLC, etc., but also includes content from A&E, History, and Lifetime as well. So if they simply added content from CNN, TBS & TNT for an extra $1 or $2, that would be a pretty great lineup of content for only $6 or $7/month.

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