AT&T, Discovery Join Media Brands As Cord-Cutting Encroaches
May 17, 2021, 7:46 AM
FILE: The AT&T logo outside of AT&T corporate headquarters on March 13, 2020, in Dallas, Texas. (Photo by Ronald Martinez/Getty Images)
(Photo by Ronald Martinez/Getty Images)
NEW YORK (AP) — AT&T will join its massive media operations that include CNN, HBO, TNT and TBS in a $43 billion deal with Discovery, the owner of lifestyle networks including the Food Network and HGTV.
The new media company enters a streaming arena that has been flooded in the past two years with new players including those owned by AT&T and Discovery which operate HBO Max and Discovery+, respectively.
It is a major directional shift for AT&T which squared off with the Justice Department less than three years ago in an antitrust fight when it wanted to acquire Time Warner Inc. for more than $80 billion. That was a fight that AT&T won.
It’s not immediately clear what the new company would mean for customers, but it will likely allow the bundling of streaming services. For example, Disney offers its viewers Disney+, Hulu and ESPN.
A standalone streaming service for CNN is also a possibility.
The combined media company will be dwarfed in size by the rival streaming services.
HBO Max and HBO have a combined U.S. subscriber base of about 44 million, and Discovery+ has about 15 million subscribers. Netflix has more than 200 million subscribers worldwide, and Disney+ has over 100 million.
Still, some media analysts say by joining forces, the new company will be better able to compete.
“The new company will be able to join the upper tier of global (streaming) players: Netflix, Disney and Amazon,” Craig Moffett of MoffettNathanson told investors.
It’s the second time this year that AT&T has calved off a recent a major acquisition as navigates a rapidly evolving media landscape. In February the company spun off DirecTV for a fraction of the $48.5 billion it paid for the satellite TV service in 2015.
In the all-stock deal, AT&T will receive $43 billion in a combination of cash, debt securities, and WarnerMedia’s retention of certain debt. AT&T shareholders will receive stock representing 71% of the new company and Discovery stockholders will own 29% of the new company.
The new company will be in direct competition with Netflix, Amazon, Apple, Disney and Comcast, which are assembling a growing arsenal of original media content.
The combination announced Monday, the companies said, will able to invest more in original streaming content. It will house almost 200,000 hours of programming and bring together more than 100 brands under one global portfolio, including: DC Comics, Cartoon Network, Eurosport, Magnolia, TLC and Animal Planet.
Discovery CEO David Zaslav will lead the new company. The new company’s board will have 13 members, seven will initially appointed by AT&T, including the chairperson. Discovery will initially appoint six directors, including Zaslav.
The deal is expected to close by the middle of next year. It still needs approval from Discovery shareholders. AT&T stockholders don’t need to vote on the transaction.
_____
AP Business writers Anne D’Ínnocenzio and Michelle Chapman contributed to this report.
