Please ensure Javascript is enabled for purposes of website accessibility
AT&T, Discovery Join Media Brands as Cord-Cutters Encroach
gvw_ap_news
By Associated Press
Published 3 years ago on
May 17, 2021

Share

NEW YORK — AT&T will join its media operations with those owned by Discovery, creating a new company in a $43 billion deal that will oversee CNN, HBO, TNT and TBS along Discovery’s Food Network, HGTV and others.

With the agreement Monday, AT&T is pulling back from a yearslong campaign to break into the streaming and entertainment sector, where big players are slugging it out with increasingly large war chests dedicated to premium and original content.

That 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 as it acquired Time Warner Inc. for more than $80 billion.

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.

Outsized by Existing Rival Services

The combined media company will still be outsized by rival streaming services.

HBO Max and HBO have a combined global subscriber base of about 63.9 million, and Discovery+ has about 15 million subscribers. That compares with Netflix, which has more than 200 million subscribers worldwide, and Disney+, which counts over 100 million.

In a call with investors, Discovery CEO David Zaslav said he believes that the standalone company could garner “200, 300, 400 million” subscribers at some point in the future, but there were no details regarding a timeline.

The deal is unlikely to mean changes for customers of AT&T, HBO Max and Discovery+ in the short term. WarnerMedia is continuing with its plans to expand the service, including a launch in Latin America in June, and a rumored $10-a-month ad-supported version of HBO Max expected to be announced this week.

A Bid to Control Both Sides of the Entertainment Process

It’s the second time this year that AT&T has calved off 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.

If the deal goes through, AT&T shareholders would own 71% of the new company, and shareholders of Discovery would own 29%. AT&T would get $43 billion in cash, debt securities, and WarnerMedia would retain certain debt.

AT&T first sought to acquire what was then called Time Warner in a bid to control both sides of the entertainment process: the broadband and wireless services that help deliver entertainment to homes, and the entertainment itself. It was able to bundle free HBO Max subscriptions with its phone service, for example. But the cost of maintaining a competitive streaming service became a burden.

“AT&T’s balance sheet allowed neither the aggressive investment required for HBO Max nor the 5G wireless push (nor, for that matter, for the consumer fiber business). Ultimately, they had no choice,” wrote MoffettNathanson analyst Craig Moffett.

Industry analysts say the need to succeed in both became too much.

“When they acquired Time Warner, the vision was to have this kind of mega company that will have a seamless backbone between the content side and the broadband side,” added CFRA analyst Tuna Amobi . “That vision clearly has not panned out.”

Deal Expected by Middle of Next Year

AT&T has a massive debt load, and needs to invest more money as it builds out next-generation 5G wireless networks —wireless is its core business. It said Monday that it plans to increase capital investments for 5G and fiber internet.

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 new company will be able to cut costs by $3 billion annually, the companies said, money that could go toward 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.

That likely means layoffs as the companies consolidate.

Discovery’s Zaslav will lead the new company with a board of 13 members. Seven will initially be 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 but still needs approval from Discovery shareholders. AT&T stockholders don’t need to vote on the transaction.

Shares of Discovery Inc. jumped 3 percent to $36.73 Monday. AT&T shares rose 4 percent to $33.51.

RELATED TOPICS:

DON'T MISS

Fresno Trustees Have Two Days of Homework This Weekend. What Is It About?

DON'T MISS

Opinion: Likelihood of Trump Seeing the Inside of a Cell Is Increasing

DON'T MISS

The Dog Behind ‘Dogecoin’ Has Died at the Age of 18

DON'T MISS

Plan Your Weekend With This Fresno Memorial Day Events List

DON'T MISS

Snow is the Resilient Maltipoo Who Is Ready for Her Forever Home

DON'T MISS

Dolores Huerta, Mayors Dyer and Ashbeck Oppose Tax Protection Measure. What Does it Do?

DON'T MISS

Fresno State Opens 2024 Mountain West Championship With Loss to Air Force

DON'T MISS

Arizona Doctors Can Come to California to Perform Abortions Under New Law Signed by Gov. Newsom

DON'T MISS

Second Flag Carried by Jan. 6 Rioters Displayed Outside House Owned by Justice Alito, Report Says

DON'T MISS

The Bodies of 3 More Hostages Are Recovered from Gaza by the Israeli Army

UP NEXT

American Airlines Retreats After Blaming a 9-Year-Old for Not Seeing a Hidden Camera in a Lavatory

UP NEXT

Portland Nurse Returns Home After Treating Gaza Burn Victims

UP NEXT

RNC HQ Evacuated: Blood Vials Addressed to Trump Prompt Security Alert

UP NEXT

Ex-Employee Kills 2, Injures 3 in Suburban Philadelphia Linen Company Shooting

UP NEXT

Search and Rescue Ongoing After Iowa Tornado; 1 Dead

UP NEXT

How the Beatles Empowered a Research Genius to Save Millions of Lives

UP NEXT

Petrochemical Company Fined $30M for 2019 Houston Explosions

UP NEXT

Biden Releases 1 Million Barrels from Northeast Reserve to Lower Gas Prices

UP NEXT

UN Security Council Rejects Russia-Backed Resolution on Banning Weapons in Space

UP NEXT

Why US Catholics Are Planning Pilgrimages in Communities Across the Nation

Plan Your Weekend With This Fresno Memorial Day Events List

2 hours ago

Snow is the Resilient Maltipoo Who Is Ready for Her Forever Home

2 hours ago

Dolores Huerta, Mayors Dyer and Ashbeck Oppose Tax Protection Measure. What Does it Do?

2 hours ago

Fresno State Opens 2024 Mountain West Championship With Loss to Air Force

3 hours ago

Arizona Doctors Can Come to California to Perform Abortions Under New Law Signed by Gov. Newsom

3 hours ago

Second Flag Carried by Jan. 6 Rioters Displayed Outside House Owned by Justice Alito, Report Says

4 hours ago

The Bodies of 3 More Hostages Are Recovered from Gaza by the Israeli Army

4 hours ago

California Supreme Court Weighs Two Cases That Could Limit the Ballot Initiative Process

5 hours ago

Documentary Filmmaker Morgan Spurlock, Who Skewered Fast Food Industry, Dies at 53

5 hours ago

Rapper Sean Kingston Arrested in California After SWAT Raids His Florida Home

5 hours ago

Fresno Trustees Have Two Days of Homework This Weekend. What Is It About?

Fresno Unified trustees will spend part of their Memorial Day weekend at a two-day workshop in downtown Fresno to learn about an initiative ...

34 mins ago

34 mins ago

Fresno Trustees Have Two Days of Homework This Weekend. What Is It About?

1 hour ago

Opinion: Likelihood of Trump Seeing the Inside of a Cell Is Increasing

1 hour ago

The Dog Behind ‘Dogecoin’ Has Died at the Age of 18

2 hours ago

Plan Your Weekend With This Fresno Memorial Day Events List

2 hours ago

Snow is the Resilient Maltipoo Who Is Ready for Her Forever Home

2 hours ago

Dolores Huerta, Mayors Dyer and Ashbeck Oppose Tax Protection Measure. What Does it Do?

3 hours ago

Fresno State Opens 2024 Mountain West Championship With Loss to Air Force

3 hours ago

Arizona Doctors Can Come to California to Perform Abortions Under New Law Signed by Gov. Newsom

MENU

CONNECT WITH US

Search

Send this to a friend