Analyst Ups Warner Bros. Discovery Ahead of New HBO Max Unveil as Lawmakers Urge DOJ Investigation of Media Giant

Shares of Warner Bros. Discovery (WBD) are flat in early April 10 trading as the media giant readies the April 12 unveil of the new HBO Max, Discovery+ subscription streaming video platform — and contends with lawmakers looking under the hood at the company’s alleged anticompetitive behavior.

Investment firm Truist began coverage of WBD, arguing the stock has a 25% upside as it relaunches its direct-to-consumer offerings.

Analyst Matthew Thornton, in a note to investors, believes the new Max/Discovery streaming service will drive “renewed subscriber” growth and as well increase average revenue per user, due in part to the expected price increase.

“We expect renewed momentum in subscribers and ARPU with optionality around premium and [free ad-supported streaming TV] FAST tiers,” Thornton wrote.

Citing an internal survey, the analyst said Max is now the No. 4 SVOD platform in popularity after leader Netflix, Prime Video, Disney+ and Hulu.

Thornton remains bullish on WBD’s increased efforts to exploit the DC Universe superhero IP library — a strategy he contends would help the company narrow the gap to Disney’s Marvel Studios.

The optimism is interesting considering the superhero genre appears a bit tired, underscored by this year’s middling performance of Marvel’s Ant-Man and The Wasp: Quantumania, which, while generating more than $473 million in less than two months at the box office, remains the lowest-producing title in the franchise.

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Separately, Sen. Elizabeth Warren (D-MA), along with a small group of Democrat lawmakers, wrote a letter to the Department of Justice asking Attorney General Merrick Garland to investigate WBD regarding alleged anticompetitive policies.

“The antitrust laws seek to promote consumer choice, product variety, and

Specifically, Warren cites WBD’s decision to scale back on content production, and kill shows and movies, while hiking subscription prices.

“Warner Bros. Discovery has reduced the content available to consumers and will likely continue to limit consumer choice without adequate comp,” read the letter.

While WBD would argue the cuts are related to the economy and reducing its massive $50 billion debt load, analyst Thornton believes the company can achieve $12.9 billion in pre-tax income by fiscal 2024.

U.S. Congress Democrats Seek Further Scrutiny on WarnerMedia Sale to Discovery

More than 30 democratic members of Congress (from both the House and Senate) have sent a joint letter to the Justice Department seeking further scrutiny in AT&T’s planned $43 billion minority stake sale to Discovery Inc. Under terms of the sale, Discovery would assume operational control of WarnerMedia, which has assets that include Warner Bros. Pictures, HBO and Turner.

Congressman Joaquin Castro (TX), Senator Elizabeth Warren (MA), Congressman David Cicilline (RI), chair of the antitrust subcommittee, Congresswoman Pramila Jayapal (WA), chair of the Congressional progressive caucus, and 29 other Congressional members sent the letter to U.S. Attorney General Merrick Garland and Assistant Attorney General Jonathan Kanter urging the DOJ to investigate for possible violations of antitrust laws.

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In addition, the members are requesting Garland examine whether the proposed merger will reduce diverse content in a more consolidated and less competitive market.

“For far too long, Hollywood studios have excluded Latinos from opportunities in the industry, perpetuating dangerous stereotypes and inaccurate portrayals,” Castro said in a statement. “Latinos are nearly 20% of the U.S. population, one-in-five Americans, but we’re almost invisible on-screen and behind the camera. I’m deeply concerned that the proposed merger between Discovery and WarnerMedia will lead to concentrated exclusion, harming consumers and workers — especially Latinos who are already the most underrepresented group.”

“We must stop harmful mergers, and the Department of Justice should thoroughly investigate this proposed merger to ensure diverse content and workers are protected,” said Warren, a longtime critic of the U.S. corporate business culture.

AT&T, which acquired the former Time Warner for $85 billion, soon thereafter began looking for ways to reduce its debt load while maintaining ownership in select assets (WarnerMedia and DirecTV). The telecom’s CFO Pascal Desroches in September said he still expects the deal to close in the first half of 2022.