The American telecommunications group AT&T will merge its subsidiary WarnerMedia with Discovery, creating a new entertainment juggernaut to better stand up to Netflix and other streaming giants.
This operation, which should close in mid-2022, combines two of the largest media groups in the United States, offering both traditional cable channels (CNN and HBO on the WarnerMedia side, Discovery Channel, HGTV, Food Network, and Eurosport Discovery side) and streaming platforms.
The wedding announced on Monday comes at a time when the American audiovisual landscape is increasingly dominated by the big names in streaming such as Netflix, Disney +, Amazon Prime Video or Apple TV.
Faced with this new economic model, without advertising but with subscription, several groups have already felt the need to strengthen their offer to keep their stature in the ruthless jungle of American entertainment.
AT&T, the first American cable operator and second mobile operator, launched its own HBO MAX streaming platform in 2020, and its own Discovery, called Discovery +, at the start of the year.
“The new company will be able to invest in more original content for its streaming services, improve programming options on its pay TV channels (…) and deliver more innovative video experiences as well as more choice for spectators, “said the two groups in a statement Monday.
HBO MAX had 61 million subscribers at the end of 2020 and Discovery + 15 million at the end of April, while Netflix had 204 million and Disney platforms (Disney +, ESPN +, Hulu) had 146 million.
The expected revenue of the new company is around $ 52 billion by 2023. Cost synergies of up to $ 3 billion per year are also expected. The new entity will be headed by Discovery boss David Zaslav.
– Failed bet –
On the other hand, the operation marks the failure of AT & T’s media strategy.
The ambition, guided by the previous boss Randall Stephenson, was to bet big on entertainment by creating a group offering both content production and distribution, for example to offer streaming series to watch on their mobile phones. .
The group had initially bought, in 2015, the satellite operator DirectTV.
He had, three years later, completed the purchase of Time Warner – the former name of WarnerMedia – for 85 billion dollars.
In addition to CNN and HBO, AT&T then got its hands on the huge Harry Potter and Batman productions via Warner Bros. studios, as well as on TNT, TBS and Cartoon Network.
But for Richard Greenfield, analyst at Lightshed Partners, AT&T has never managed to create the desired “synergies” between its various operations.
“In today’s media environment, you need to be large enough in a specific market to be both large enough and agile enough to adapt to technological change and carve out significant space in a platform-dominated landscape.” , he said in a blog post.
Under the leadership of the new CEO, John Stankey, AT&T had already sold the streaming platform specializing in Japanese animated series Crunchyroll to Sony at the end of 2020 and announced in February the sale of part of DirectTV to the investment company. TPG.
The merger with Discovery will also allow AT&T, which had a net debt of 169 billion dollars at the end of March due in particular to its numerous acquisitions in the media, to bail out its coffers a little.
The company will receive approximately $ 43 billion in cash and debt securities, and its shareholders 71% of the newly created entity. Those of Discovery will own 29% of the new group, according to a joint statement released on Monday.
On the stock market, the title of the two companies rose sharply in the first exchanges, AT&T taking 4% and Discovery 6.7%.
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