AT&T is merging its WarnerMedia assets with Discovery's.
Angela Lang/CNETAT&T confirmed Monday that it will spin off its WarnerMedia division -- home to all its Hollywood TV and film assets, including streaming service HBO Max -- and merge it with Discovery, the cable-network giant that specializes in nonfiction programming and reality shows. The deal is a seismic jolt to the media industry, creating what both companies hope will become a global entertainment titan to challenge Disney and Netflix.
Streaming was central to AT&T's and Discovery's rationale for fusing their entertainment operations into one. But this deal also casts uncertainty about the future shape of both HBO Max and Discovery Plus, the two companies' streaming services.
With the deal's closing expected to be a year away, HBO Max and Discovery Plus are unlikely to see meaningful change as services soon. With even the planned name for the combined company under wraps still, executives didn't articulate the shape of their streaming services to come.
"The combination will fully establish us as one of the leading direct-to-consumer streaming players worldwide," David Zaslav, the Discovery CEO who will be at the helm of the merged company, said Monday during a conference call. "We'll figure out exactly how to do it in each market, and we'll probably experiment in a lot of markets."
That leaves open a world of possibilities for both streaming properties, varying from the potential to combine them into a sort of HBO Discovery Max Plus uberservice, or keeping them separate with bundles that lower a customers' subscription bill if they sign up for more than one in a package.
WarnerMedia is AT&T's unit that oversees popular entertainment and news brands such as HBO, HBO Max, CNN, TBS, TNT and more. It was the product of AT&T's hard-won $85 billion takeover of Time Warner in 2018, at the time built on the premise that combining AT&T's distribution power as a telecom company with the programming assets of a media conglomerate would be stronger together. It was approved after alleviating regulators' concerns that the combined company could have too much power compared with competitors.
Monday's deal acknowledges that to compete, media companies must shovel mountains of spending into content and streaming to gain ground if they'll have anywhere to stand in the future of television and film.
For its part, Discovery is home to its namesake network, HGTV, TLC, Animal Planet and other nonfiction-focused networks. Internationally, Discovery also has assets and strategies in sports programming too.
Through the deal, AT&T would receive $43 billion in a combination of cash, debt securities and WarnerMedia's retention of certain debt, and AT&T's shareholders would receive stock representing 71% of the new company. Discovery shareholders would own 29% of the new company.
The deal was earlier reported by Bloomberg, which cited unidentified sources described as having knowledge of the matter.
HBO's regular channel and HBO Max, which launched in 2020, had a combined 44.2 million subscribers in the first quarter; it doesn't break out its streaming subscriber count. Discovery has 15 million streaming subscribers worldwide, most of them for Discovery Plus. Its linear networks reach far more.
That compares with Disney Plus' 103 million subscribers and Netflix's 207 million subscribers.
AT&T said the deal is expected to close in mid-2022, subject in part to approval by Discovery shareholders. The boards of both AT&T and Discovery have approved the transaction, and no vote is required by AT&T shareholders, the company said.
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AT&T's blockbuster Discovery deal puts HBO Max's future in a haze - CNET
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