AT&T and Discovery to Create A New Media Giant

A new media giant is emerging in the US media industry with the Hollywood studio Warner Bros. and TV channels such as CNN, HBO and Eurosport.

US telecom giant AT&T confirmed the rumor on Monday, announcing an agreement with New York-based cable network and online services operator Discovery to merge their media businesses.

Initially, both the companies did well on the stock market, the operation then gave way to a certain scepticism: AT&T , which thus abandoned its ambition to become a big name in entertainment, ended up down 2.6%, and Discovery by 5%.

AT&T will benefit from the business with 43 billion dollars in cash, shares and the form of debt assumptions, as the company announced.

The shareholders of AT&T will also get a majority of 71% in the new company.

The TV and film business is undergoing a profound change with the advance of streaming services, which the corona pandemic has accelerated once again.

AT&T launched its streaming platform HBO MAX in 2020, and Discovery launched its own streaming platform called Discovery + at the start of the year.

Streaming platforms Discovery + have 15 million subscribers at the end of April, and HBO had 61 million subscribers at the end of 2020.

Rivals like Netflix had 208 million subscribers at the end of March 2021, and Platforms of Disney (ESPN+, Disney+, Hulu) had 159 million active subscribers at the end of April. Streaming also thins the revenues in the long, lucrative cable TV business in the USA. The Warner news broadcaster CNN, which can be seen on cable TV in the US, experienced an upswing with the election campaign for the White House last year, but viewership has recently declined again.

The operation will therefore create a new media giant likely to better compete with Netflix or Disney.

AT&T notably owns HBO or CNN, as well as the Warner Bros. movie studios. The transaction also marks a significant strategic turnaround for AT&T , which previously focused on convergence between telecommunications and media. It was only in 2018 that AT&T bought Time Warner for 80 billion dollars and renamed it WarnerMedia.

The company also owns the Hollywood studio Warner Bros. The company had borrowed heavily for the deal. According to Discovery, it operates channels in 220 countries, including Eurosport. This radical strategic evolution was made necessary by the rise of streaming, accelerated by confinements, at the same time when operators must also invest heavily in the deployment of 5G networks.

The Wall Street Journal had previously reported this and wrote that it was unclear whether the head of WarnerMedia, Jason Kilar, would stay on board. Jason Kilar's name did not arrive in the announcement on Monday. Current AT&T shareholders will own around 71% of the new set and those of Discovery 29%. David Zaslav, the current CEO of Discovery, will lead the new entity.

John Stankey, CEO of AT&T , said the agreement brings together two entertainment leaders with equal strengths in terms of content and positions in the new company. AT&T is best to become one of the global leaders in DTC (direct to consumer) streaming.

The combination will support the international launch and "fantastic growth" of HBO Max, which will benefit from Discovery's footprint.