In a somewhat surprising announcement today, AT&T is merging its WarnerMedia business with Discovery. And is billing it as a way for the combined company to better compete with Netflix and Disney.
WarnerMedia has one of the biggest studios in Hollywood, but has struggled to compete with the likes of Netflix and Disney. Discovery was a bit late to the streaming game with Discovery+ when it launched in January. But combining it with HBO MAX could make the combined service a lot more attractive.
The combined company, will be a separate company, which is currently estimated to be valued at $150 billion. It will be publicly traded, with AT&T shareholders representing around 71% of the company, and Discovery shareholders owning around 29%. AT&T stated that their shareholders will keep their AT&T shares, and also get a stake in the new combined company.
Of course, this deal still needs to be approved by regulators.
Why is AT&T merging with Discovery?
This merger reverses AT&T’s years-long plan to combine content and distribution in a vertically integrated company. While AT&T would still own the majority of this combined company, it is also going to be a separate company.
This move by AT&T shows that there needs to be some more consolidation within the streaming wars. As there are just too many streaming services out there right now, and most people aren’t going to subscribe to more than a couple of these. Making smaller players like Discovery+ tougher to gain subscribers. So this move helps both AT&T and Discovery.
AT&T says that Discovery’s president and CEO, David Zaslav would lead the new company. It would also have 13 board members, with seven appointed by AT&T and six by Discovery.
Zaslav stated that “it is super exciting to combine such historic brands, world class journalism and iconic franchises under one roof and unlock so much value and opportunity.” He also stated that the combined assets “are better and more valuable together.”
Keep in mind that AT&T owns CNN, HBO and Warner Bros, while Discovery owns the Discovery Channel, HGTV, Food Network, TLC, Investigation Discovery, Travel Channel, Turbo/Velocity, Animal Planet, and Science Channel. HBO Max currently has 64 million subscribers, and Discovery+ has 15 million subscribers. Combined, that would still be half the size of Netflix with its 208 million subscribers globally.