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AT&T has agreed to spin-off WarnerMedia and its competitor, Discovery, in a multi-billion-dollar deal to create a media empire with programming capabilities for globalization Compete with Disney and Netflix Streaming competition.
This move will make Disney the world’s second-largest media company by revenue, second only to Disney.Only three years after AT&T acquired the owners of CNN, HBO and Warner Bros for US$85.4 billion, it reflects the rapid pace of change in the American traditional media group. Try to reinvent yourself As a streaming service.
According to the proposed partnership, one of Hollywood’s most respected portfolios-a portfolio that includes Warner Bros. Film and Television Studios, HBO Networks, and cable channels including CNN will work with “Real life” output Discovery’s brands range from sports, wildlife to house renovations.
Discovery’s long-time CEO David Zaslav will lead the combined group, which will be 71% owned by AT&T.Executive Jason Kilar joined the company last year to accelerate the development of WarnerMedia Switch to streaming with HBO MaxNot mentioned in the combined document.
The enterprise value of the combined new company will be approximately US$132 billion, including US$56 billion in debt. The two companies stated that they expect to generate approximately US$3 billion in synergies each year and plan to invest in content and digital innovation.
This transaction is a frustrating retreat for AT&T. AT&T bet on one of the largest debts of American companies and become the world’s largest vertically integrated content and distribution company. “This should end the debate about the synergy between content and distribution,” said Jonathan Chaplin, an analyst at New Street Research, who called the deal a “complete submission.”
The spin-off is the latest in a series of unwise transactions by John Stankey. John Stankey took over as CEO last year to eliminate the expansionist legacy of his predecessor and refocus the company on its core business.This includes Sell 30% of the shares In DirecTV’s acquisition of private equity group TPG, the deal valued the troubled TV business at $16.25 billion, about one-third of the price AT&T paid six years ago.
The driving force for exploring cooperation is fierce competition between the world’s largest technology and media companies to catch up with Netflix and have the future of entertainment. In the past 18 months alone, Disney, Apple, WarnerMedia, Comcast, Discovery and other companies have launched streaming platforms with global ambitions.
Citi analyst Jason Bazinet wrote before the deal announcement that he could imagine “several other potential suitors fighting for discovery” or proposing a competitive merger with WarnerMedia . He wrote: “We do not exclude Comcast, Disney or ViacomCBS from participating.”
AT&T and Discovery included a huge termination fee in the transaction. If the transaction fails, they agree to pay $720 million or $1.8 billion, respectively.
The combined revenue of Discovery and WarnerMedia in 2020 is US$41 billion, while the turnover of Disney, the world’s largest media group, is US$65 billion.
Discovery’s low-cost factual program catalog has 80 online brands in more than 200 countries and regions, and may be a valuable addition to WarnerMedia’s own entertainment and movie library. At the same time, WarnerMedia’s financial scale and catalog quality will make Discovery one of the world’s four major streaming services.
Although the two companies bring complementary content and geographic footprints, the merger will require an arduous integration process, which may waste energy to build and sell separate streaming services. Discovery said in April that its streaming media business had reached 15 million subscribers, while HBO Max had signed up 3 million subscribers in the first quarter and reached 9.7 million retail subscribers by the end of March.
However, both companies are struggling to keep pace with larger competitors: Netflix has 208 million subscribers worldwide, and Disney Plus has attracted 104 million subscribers in just one and a half years since its launch.
This transaction is a victory for the two major shareholders of Discovery. They support Zaslav’s active development of streaming media, which will bring the future to the traditional TV group or make it more attractive to suitors. Billionaire cable television and media mogul John Malone and CondéNast owner Newhouse family’s investment vehicle Advance jointly controls approximately 45% of Discovery Voting rights.
AT&T’s stock rose 4.3% in early trading to $33.61, while Discovery’s stock rose 4.5% to $37.26.
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